Provide an impetus to the non-life insurance industry

Joydeep Roy, CEO of L&T General Insurance, says non-life insurance penetration as well as per capita insurance premium is very low and the industry has a very high potential to grow.

Given the current challenges, what, in your opinion, would make for a good budget? What measures or proposals would you like to see?

In the absence of incentives, individuals do not prefer investing money in pure insurance products like term insurance, home insurance and health insurance but will merely go for saving instruments, wherein they will get back the amount saved with interest but with very little insurance. From an Individual’s point of view, the government should consider giving more relaxation in income tax for insurance.

Protection of life should be encouraged by providing deduction from taxable income under Section 80C of Income Tax Act for individual savings made towards term insurance premium up to Rs 50,000 per adult in the family, in addition to the current limit for term products.

Similarly, savings made from current income for post retirement income security should also be encouraged by way of relief under Sections 80CC and 80 CCD, wherein contribution to pension funds up to Rs 1 lakh be allowed as deduction for taxable income.

Currently, Section 80D gives very limited relief to the extent of health insurance premium (Rs 15,000 for family and Rs 20,000 for children paying for parents). This should be increased to Rs 25,000 for these brackets and also introduce deductions of Rs 25,000 for senior citizens so as to encourage individuals and provide a boost to the health insurance industry. A minor modification in Section 80D will help more elderly individuals claim higher deductions on health insurance premium.

If the budget does not meet expectations, do you fear that business sentiment would once again fall?

Business sentiment is influenced by multiple interdependent factors including the budget, stock market performance, inflation, industrial production, bank rates, and overall economic growth.

Apart from this, privatization, rate cuts by banks, major fillip to certain industries and sectors, and infrastructure growth have a positive impact on the economy in the long term as these actions are inexorable and irreversible in terms of their impact.

As long as the budget provides a clear vision and direction for where India is headed in the global economy and is focused on financial and monetary reforms, business sentiment will not be largely impacted.

Specific to your sector, what could the current budget do to improve conditions?

It is a well-known fact that the non-life insurance penetration (premium as a percentage of gross domestic product) as well as per capita insurance premium is very low and the industry has a very high potential to grow.

As the non-life insurance industry contributes nearly Rs 1 trillion (a trillion is 100,000 crore) to the government in the form of investments in priority sectors like infrastructure, housing, government securities, etc., it is important that the scope of Section 80D be expanded to:

Include all non-life insurance premium paid (instead of only health insurance premium);

Extend the amount of relief up to Rs 1 lakh per annum, similar to life insurance and pension funds.

Tax relief for long-term insurance policies:

Car and Two-Wheeler Insurance

Long-term insurance product to cover both ‘Own Damage’ as well as ‘Third-Party’ liability can be mandated at the time of registration of vehicles, which would address the problem of uninsured vehicles. Also, renewal of third-party insurance for commercial vehicles should be made compulsory every year without which the annual ‘Fitness Certificate’ should not be given.

Home Insurance

For homes more than 500 sq. ft. of area, insurance should be made mandatory.

Even in cases where properties are insured at the time of taking the housing loan, more often, the insurance coverage is not subsequently renewed. The tax relief will encourage individuals to sufficiently cover their risks.

Health Insurance

Savings-linked health insurance products can be included under this category to encourage younger working population to divert their current savings to provide for their own future health, medical and hospital expenses.

Another provision (in addition to Section 80D provision) that will induce growth of this industry is to grant tax exemption on insurance premium paid in lump sum on all long-term policies. In order to discourage possible cancellation of all such long-term policies after claiming tax exemption, suitable provision to add back the refund premium as income and taxed accordingly in the year of cancellation can be included.

Which budget, in the recent past, do you remember as having been a good one?

The Budget has so far not provided any major impetus to the non-life insurance industry or the health insurance industry. However, in 2007/08, the implementation of deduction in respect of medical insurance premium under Section 80D being increased to a maximum of Rs 15,000 and in the case of a senior citizen, a maximum of Rs 20,000 was favorable and helped in bringing a greater focus on health insurance.

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