Budget Reactions: Life insurance gets costlier for older age, says Bharti AXA

By V Srinivasan, Chief Financial Officer, Bharti AXA Life Insurance

Increasing the Sum Assured to Premium Ratio to 10 times will promote long term contracts. It will also encourage customers to go in for higher protection. On the flip side, this will make life insurance costly for older age bands if they procure a product after age 45 since mortality rates go up.  Also, increasing the service tax rate by 2% would result in an  increase in cost of insurance  for customers. Lifting the 20% restriction in CENVAT credit and allowing 100% credit is a very welcome move as it enables insurance companies to recover the entire input service tax from the output service tax liability. Another point to note is the bringing of insurance companies within the ambit of Minimum Alternate Tax (MAT). This would result in insurance companies paying tax,  the moment they start showing book profits, though credit is available against future regular tax.