With the 2019 interim Budget just around the corner, India’s insurance sector has its wish list ready for the big day. The industry is expecting the finance minister to dole out tax sops to make certain insurance policies more attractive and announce fund allocation in government sponsored schemes, among others.
With the launch of the Ayushman Bharat-National Health Protection Scheme (AB-NHPS), PM Narendra Modi-led government pushed health insurance policies to more than 10 crore vulnerable families last year and provided insurance coverage of up to Rs 5 lakh to poor families. As the flagship health insurance scheme enters its second year, the insurance industry awaits further clarity on fund infusion and ways in which the government would want to enhance the coverage under the government's flagship scheme.
Some industry experts have also sought a mandatory home insurance scheme in association with insurance companies that covers loss to property due to catastrophic events. The premium amount of the scheme could be deducted from the home loan EMI or as a component of property tax. The suggestion of new home insurance scheme comes in light of the recent natural catastrophes in Kerala and the Northeastern part of the country, which saw the uninsured losses mainly belonging to the lower strata of the society.
Industry experts have also sought for a provision, which would make it mandatory for all employers to provide health insurance to all employees.
Along with the new schemes, certain reports also suggest that the government may announce recapitalisation of state-owned general insurers, which includes National Insurance Company, Oriental Insurance Company and United India Insurance Company.
The idea behind the recapitilisation plan is to shore up the capital base of the PSU general insurance companies and improve their solvency before they could be merged and listed on the exchanges. According to the insurance regulator IRDAI guidelines, the insurance companies are required to maintain a solvency of 150 percent. At the end of the first quarter of the current fiscal year, only Oriental Insurance and New India Assurance were compliant with the norms while other insurers such as National Insurance and United India reported solvency ratios of 143 percent and 121 percent, respectively.
In the last year’s budget speech, Finance Minister Arun Jaitley had announced the merger of three general insurance companies - United India Insurance, National Insurance and Insurance and Oriental Insurance to create the largest non-life company but with lower solvency ratios, the merger plan is likely to hit a take a back seat.
The life insurance industry is mostly seeking tax sops from the Budget to make certain kind of policies more attractive. Some life insurers have sought a separate section under the Income Tax Act, which gives rebate on premium paid towards pure protection policies. This separate section will be over and above the exemption under 80C of the Income Tax Act which already exists.
Life insurance industry also wants the finance ministry to provide tax exemption to pension received from pension products and make pension plans eligible for tax exemption.
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