Budget 2018 Wish List of Insurance Companies

With the finance minister all set to present the last full time budget before the general election in 2019, insurance companies are looking at the finance ministry with hope. Just like the common man hoping for a tax relief and other incentives, the insurance sector as a whole is hopeful that this year’s budget would take into account the difficulties being faced by the insurance sector and set the ball rolling for a better future both for the insurers and insurance policyholders.

Here is a sneak peek into this year’s budget wish list of most insurance companies.

No increase in tax rate for insurers
Ever since the news of a draft committee suggesting an increase in income tax rate for insurance companies from the current 14.3% to a proposed rate of 25% came out, insurers are hoping that the finance ministry will not consider such a tax rate hike. Any increase in the tax rate for insurance companies can mean impact on the embedded value as well as lower annual premium margins. Such a move is likely to put additional financial pressure on the insurance sector, which has just managed to recover from the GST oriented difficult periods.

Dedicated tax concession for policyholders
If there is one wish that tops the list for every insurer and policyholder, it is that pertaining towards tax concessions. Currently, the tax concessions of up to Rs. 1.5 Lakhs available under Section 80C are a tad overcrowded with no dedicated sops for life insurance. Life insurers are hopeful that the finance minister will announce an additional tax sop of atleats Rs. 50,000 per annum to ensure higher penetration of life insurance in the country. Some insurers have also pushed for tax sops on term insurance atleats if not on all life insurance products.

Relaxation in GST rules
Ever since the implementation of the Goods and Service tax or GST, the average costs for insurance products have witnessed an increase from 3 to as much as 18% on an average. Insurers believe that the one big way to ensure maximum insurance penetration for both life and health insurance is the reduction of premiums. There have been suggestions to waive off GST from insurance completely or atleats ensure there is no GST on pure protection instruments like term insurance or critical illness plans. With the government suggesting it is working towards a plan to ensure GST cut for health insurance, this is one wish that is likely to be fulfilled on February 1 once the finance minster reads out the annual budget in detail.

Incentive for home insurance
Over the years, there have been a number of incidents where natural calamities have created havoc and destruction of homes especially in coastal areas. Individuals who seek home loans and pay regular EMIs for their dream abode have been left with shattered homes in a matter of minutes. Insurers feel that it is time the finance ministry must emphasize on home insurance by offering a dedicated tax saving clause to ensure more home owners become aware of home insurance and can gain benefit from the same.

Level playing field for pension plans
Insurers feel the need for a level playing field between the National Pension Scheme (NPS) and those offered by private insurers. As a result the insurers have urged the government to offer tax exemption on maturity received from maturity of pension plans. As of now on vesting a policyholder can withdraw 1/3rd of the policy funds tax free while the remaining need to be converted to an annuity plan with taxable annuity. Unlike tax free bonds and PPF that offer no such taxation components, insurers are hopeful that such a tax exemption can ensure a rise in pension plans allowing higher investment in pension plans by the common man.

Conclusion: While it remains to be seen how many wishes of the insurance sector are entertained by the finance minister, the industry is hopeful of a positive budget that will help rejuvenate the insurance sector.

https://timesofindia.indiatimes.com/business/faqs/budget-2018-what-to-expect-from-the-insurance-sector-in-the-upcoming-budget/articleshow/62616430.cms

https://economictimes.indiatimes.com/news/economy/policy/what-insurers-anticipate-from-arun-jaitley-this-budget/articleshow/62635729.cms