The Indian insurance industry is at an inflection point. Having shown a considerable improvement in almost all areas over the last few years, the industry is all set to play a major role in bridging the vast “protection gap” that exists in the country today. A workforce that is increasingly getting younger, higher life expectancy, greater awareness, better disposable income and savings will drive demand for almost all insurance products, especially motor and health insurance.
Amid this, the insurance sector – growing at a healthy pace – is also bustling with activity; higher growth rate, new product launches, newer distribution models, increase in capital infusion, and new players entering the market. The most notable achievement in recent times has been the launch of mass insurance plans like Pradhan Mantri Jeevan Suraksha Bima Yojana (PMJSBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Pradhan Mantri Fasal Bima Yojana (PMFBY). Ayushmann Bharat has also helped raise awareness on the crucial need to cover the risks of working class and under privileged categories
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Having paved the way for growth so far, we hope the government will utilise the forthcoming Union Budget to incentivise the end users for enhanced insurance awareness and penetration. These steps are critical as it falls within the purview of legislature and administration. First of all, the industry is hoping a tax rebate cap for medical insurance under Section 80D to be increased further from Rs 25,000 to Rs 50,000 for self, and from Rs 50,000 to Rs 75,000 for dependent parents. This will be a huge relief for those who are struggling to meet rising healthcare costs.
The second incentive will be the abolition or at least a substantial reduction in GST on all personal lines of products - from the existing 18 per cent to 5 per cent. Alternatively, the government may consider making all personal lines – health, accident and home - GST exempted to make the insurance affordable and available to a larger populace. While GST remains outside the purview of the budget, the government may find some innovative steps to improve the penetration of the personal lines.
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The third incentive is highly critical given the recent incidents of building collapses and fire. The government must bring in regulations making it insurance mandatory for housing societies (With just 1 per cent home insurance penetration, the gap is alarming), Acts of God (AOG) insurance by municipal corporations and townships. Considering the growing incidences of NatCat across the country, the government could consider a universal CAT cover, which is funded by the government for the BPL category from the National Disaster Relief Funds while for all others, the premium could be built into their property taxes. This will seed ‘social insurance’, which will help achieve a reduction in uninsured losses, making available capital for the reconstruction and free the government from footing relief bills during natural disasters. This would help in minimising the protection gap and increase the overall insurance penetration.
The author is MD & CEO of SBI General Insurance
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