Insurance companies hope the finance minister will be more generous in Budget 2016, than he was last year. And while tax exemptions remain their biggest priority, this year's wish list includes more measures to support and promote the government's pet insurance schemes.
India has immense potential as an insurance market. But it needs some serious support from the government if that potential is to be achieved, starting with more tax incentives for buying personal insurance policies. That's the crux of the insurance sector's wish list for Budget 2016.
Global reinsurance giant Swiss Re points out that insurance penetration in India in FY15 was just 3.3 percent, significantly lower than the global average of 6.2 percent.
Now this number could increase, thanks to Prime Minister Narendra Modi's insurance schemes, the Pradhan Mantri Suraksha Bima Yojana and the Pradhan Mantri Jeevan Jyoti Bima Yojana. But, players launching a scheme is not enough.
"See we have been telling the government that personal lines of business need a push and the tax breaks have always helped the Indian customers to go in a particular direction in the case of life insurance policies," says G Srinivasan, CMD, New India Assurance."So we have asked for a very small exemption. We have said that if this exemption is given, a lot of people will go for householder's policies, personal accident policies, which is today necessary for every individual," Srinivasan adds.
Currently, life insurance premiums are eligible for exemption under Section 80C of the Income Tax Act. Insurers like HDFC Standard Life feel life insurance needs a separate exemption, similar to that given to contributions made to the New Pension Scheme (NPS). Remember, 2015 saw an exemption of 50,000 rupees being provided to NPS contributions, over and above the Rs 1.5 lakh deduction limit allowed under the Income Tax Act.
Amitabh Chaudhry, MD & CEO, HDFC Standard Life Insurance says, "while last year he (the finance minister) made a major move in terms of giving a different category for NPS from a tax-saving perspective, we do believe that it is important that he, maybe, needs to carve out something similar for life insurance."
This is because, Chaudhry says, right now, the life insurance category is all mixed up and a lot of other things are allowed in it. So, separate provisions for life and pension schemes would be very helpful.
In addition, players feel the government must aggressively push its two insurance schemes to improve penetration. And one way to do this would be to enhance the insurance cover provided under these schemes from the current Rs 2 lakh. Service tax levied on life insurance products is also another sore area.
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