Budget 2012 Impact on Insurance Industry in India

Budget reactions from Insurance Industry…..

 

“The increase in service tax will not impact us and also many other insurers. We net out the service tax – collected on the premium and paid on the services availed. For us the service tax paid is higher than what we collect from our policy holders,” Vibha Padalkar, CFO at HDFC Standard Life Insurance Company Ltd

“For a long time insurers had absorbed the service tax to be paid by their agents. However, many are now passing on the service tax burden on their agents either fully or partially,” R. Krishnamurthy, managing director (Insurance and Financial Services) Watson Wyatt a consulting company

“From a general insurance perspective there is very little the budget offers. For this sector, we were expecting more reforms especially on the enhancement of the 80D Income tax benefit with a lot more increment for senior citizens as well as removal of service tax for micro-insurance, senior citizen policies and women centric policies,” Amarnath Ananthanarayanan, CEO & MD, Bharti AXA General Insurance

“The life insurance industry will have to shell out Rs 800 crore from the hike in service tax. They would save Rs 40 crore from exemption of service tax on rural policies,” said S B Mathur secretary general Life Insurance Council. However, the good news for the sector is that policies sold in the rural sector will be exempted from service tax, but the market is insignificant to make a substantial advantage.

According to Bhargav Dasgupta, MD, ICICI Lombard, the tax break of Rs 5,000 for preventive health check-ups will help in bringing a greater focus on preventive health care.

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Union Finance Minister Pranab Mukherjee proposed amendments to three key banking and insurance laws.Presenting General budget 2012-13, Mukherjee said the official amendments to “The Pension Fund Regulatory and Development Authority Bill 2011”, “The Banking Laws (Amendment) Bill, 2011” and “The Insurance Laws (Amendment) Bill 2008” will be moved in the current session of the Parliament. 

The Finance Minister said that these amendments are based on the recommendation of the Standing Committee on Finance that has gone into details of the above bills.