What the insurance industry expects from Budget 2021
New Delhi: Union Budget 2021 is only a few days away and all eyes are on Finance Minister Nirmala Sitharaman as the economy need solid uplifting in the aftermath of Covid-19 and its ill effects on multiple indstries. Juggling between the fiscal damage and expectations of taxpayers, the government finds itself in a not-so-sweet spot.
Various sectors and industries are expecting reforms too from this Budget. The insurance industry is also making its suggestions to the FM. Here’s what the insurance industry is expecting from Union Budget 2021:
Parag Raja, MD and CEO, Bharti AXA Life Insurance said, “Life insurance plays an important part in individual well-being and social and economic welfare and protects us from most risks. The unprecedented times following COVID-19 have strengthened the bias towards protection policies which bring real insurance products to the customers and build a safety net for their families.”
“However, a large part of the population in the country still remains underinsured or uninsured. We expect this budget to spur penetration of insurance with a lower tax regime and higher tax free slabs in a crammed 80C and 80D limit where life insurance comes across to be grappling for space. Undoubtedly, the insurance industry needs a much-needed boost from the government in terms of policy incentives and relevant tax relaxations. This will also enhance insurance penetration and financial inclusion in the country,” he added.
Sanjay Tiwari, Director – Strategy, Exide Life Insurance says, “The past year has been extraordinary in ways more than one. Though the uncertainty spurred by the Covid-19 pandemic has improved insurance awareness, a lot will have to be done to increase insurance penetration which is still quite low in the country. Protection plans have finally gained traction but the Union Budget 2021 must look at enhancing this awareness further and positioning life insurance as an important aspect of one’s financial portfolio.”
“We hope the Union Budget will create a separate category to avail tax benefits for premiums paid towards life insurance. This will allow policyholders to diversify their investment into various life insurance products to meet their financial goals comfortably while also availing tax benefits. We also hope the Budget will address the high GST rate on protection plans which is a deterrent for potential buyers at the moment. While digitization has taken prominence with e-KYC and paperless documentation, we expect the Budget to do away with paper documentation completely. This will make purchase process and servicing of policies even more seamless,” Tiwari added.
Kamesh Rao, MD & CEO, Aditya Birla Sun Life Insurance stated that the importance of a safety net, in the form of insurance cover has gained immense prominence, especially in the past one year. Both, Insurance companies as well as policy holders are expecting that the upcoming budget will focus on deepening insurance penetration in the country. One such goal will be to secure one’s life after retirement. A large population in our country use pension products offered by life insurers to have regular income post retirement to lead a comfortable life.
From a social security standpoint, both pension products offered by life insurers and NPS are serving the same cause of building corpus for retirement income. While, investment in NPS offers additional tax deductions of Rs 50,000 under section 80CCD, life insurer’s pension plans do not enjoy this benefit, making it unattractive for customers.
Rao said, “The budget should announce measures to bring parity between pension products offered by life insurers and NPS. Additionally, life insurers offer annuities as retirement income, for which they generally invest the fund in government securities for long-term guaranteed return, which also plays a significant role in nation-building. Government should increase the supply of long dated (40-50 years) bonds for increased liquidity in the market. It should further develop the corporate bond market, where insurance companies can source long-term, credit worthy or enhanced corporate bonds, and generate better long-term yields for such annuity plans.”
“These measures will not only encourage long-term savings but will also promote capital formation. We are also hopeful to see an expanded bond market. This will generate better yields and thereby help customers to amass greater sum for their retirement and better social security,” he further said.