Mar 01, 2013 12:22 PM IST | Source:

Give tax sops to consumers to retain savings: HDFC Life

Providing tax incentives to consumers would help retain domestic savings in India.

Moneycontrol Bureau

Providing tax incentives to consumers would help retain domestic savings in India.

The finance minister should grant separate sub-limits for insurance plans; this will help spur financial savings, which have been declining over the last few years, Vibha Padalkar, CFO HDFC Life told citing her expectations from the upcoming Budget.

On the taxation front, reduction in the service tax for single and first year premiums may be granted. Also, there is possibility overall reduction in tax rates.

Below is the edited transcript of Vibha Padalkar's interview

Q: Are you expecting any major announcements on FDI in insurance in the Budget?

A: With the Cabinet approving the proposal to hike the foreign investment ceiling in the Insurance sector to 49%, the Insurance Laws (Amendment) Bill is likely to be taken up for passing by Parliament. The regulator and the Government are keen to increase foreign investments in the insurance sector. However, whether this and other reforms actually happen in the current budget session depends on the agreement between the leading political alliances over the next few weeks.

Q: Do agree you that providing tax incentives to customers (like a separate sub-limit for long-term savings) will help spur demand for insurance products?

A: The share of financial savings has been declining over the last few years. Savings are reducing and a majority of those savings are moving to physical assets such as gold and real estate which has an impact on the macro-economic policies.

It is a paradox that domestic savings are used for importing gold even as foreign investors are investing their savings into our markets. Tax incentives to consumers such as separate sub-limits for insurance plans would help to retain domestic savings in India and give a fillip to financial savings.

Q: Are you expecting the Government to announce any major changes in the insurance tax laws for instance the corporate tax or service tax?

We expect reduction in the service tax for single and first year premiums. We also are anticipating the overall reduction in tax rates. In case of Income tax, life insurance premiums are expected to get separate limits of deductions u/s 80C, 80CCC in case of the individual tax assesses which will boost the Insurance sector.


Q: Do you see enough appetite for pension products in India? You recently launched two pension plans based on the new guidelines issued by the regulator. What has been the response so far?

HDFC Life was the first to launch the pension plans after the revised guidelines on pension. There is a clear demand out there for pension products and we are seeing this in the positive response.

Customers wish to secure the risk of living longer just as customers are increasingly buying protection plans to secure the risk of dying early. Our distribution partners and agents have been trained on these products over the last 3 months and are selling these to customers based on the need analysis done.

Q: Are you seeing any significant change in the consumer trends for insurance?

A: Indian consumers are positively disposed towards insurance purchase; they are risk-averse and consider insurance to be a low risk, high return product. Increase in average life expectancy would fuel need for pension and health products. Emergence of nuclear families has resulted in reduction in average household size and would increase need for protection products.

Today customers are becoming more tech-savvy and would be better adept at using digital platforms, financially more literate and more likely to move towards private players such as HDFC Life. Customers are now more aware of the kind of insurance plans they wish to purchase and we see increasing pull for products such as term plans.

We also see them purchasing products based on their different lifecycle needs. So we expect to see growth across categories - retirement plans, health, savings and investments among others.

Q: Mis-selling of insurance policies followed by delay in settlement claims has kept potential customers away from insurance products. Can tougher norms and strict action against such companies help to protect customers? What is HDFC Life doing to prevent this practice?

A: HDFC Life has built both preventive and detective checks and balances to reduce mis-selling. This includes most-important-document that explains the key product features, a pre-conversion & welcome call as well as a 30-day free-look-in for many policies are amongst some of the measures that we have introduced. We operate with stricter internal SLAs on service issues such as claims. We are constantly trying to ensure the right control mechanisms are in place to service our customer base.

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