IRDAI in talks with govt to trim GST on essential insurance products: Subhash Khuntia

GST

Insurance Regulatory and Development Authority of India (IRDAI) is in talks with the government to reduce the goods and services tax (GST) on essential insurance items.

Speaking to reporters on the sidelines of an IBAI insurance summit in Mumbai, Chairman Subhash Chandra Khuntia said these could include property insurance in vulnerable areas.

IBAI is Insurance Brokers Association of India.

The GST Council has reduced tax rates for third-party motor insurance of commercial vehicles to 12 percent from 18 percent. Khuntia said they have sought a reduction for other categories for insurance products as well.

There is a scope to improve insurance penetration, especially in the general insurance segment, he said.

The share of insurance premiums in India’s gross domestic product (called insurance penetration) saw a marginal increase to 3.69 percent in FY18 from 3.49 percent a year ago.

According to the Swiss Re sigma report, insurance density or premium per person stood at $73 for FY18 versus $59.7 in the previous year. Non-life penetration was at 0.93 percent in FY18 compared to 0.77 percent a year ago.

Insurers need to make provisions for IL&FS

Talking about the IL&FS matter, IRDAI Chairman Khuntia said insurance companies that have an exposure to IL&FS and group companies will be required to make provisions if it becomes a non-performing asset (NPA) and that it cannot be written off.

The first signs of trouble in the IL&FS group emerged in June 2018 when it defaulted on inter-corporate deposits and commercial papers (borrowings) worth about Rs 450 crore. Over the next three months, rating agencies also downgraded its long term ratings.

Among the group companies, its financial services arm IL&FS Financial Services also defaulted on interest payment on commercial papers on several occasions. Now the board has been reconstituted by National Company Law Tribunal with government nominees.