Kolkata: The insurance sector is one of the most significant financial services sectors that in any modern economy. Unfortunately, insurance sector penetration in India has dipped for two consecutive years. While it stood at 4.2% during the Covid-19 period, it fell to 4% in FY23 and then went down to 3.7% in FY24, IRDA figures showed. Insurance penetration provides a measure for the popularity of insurance products in an economy. It is calculated as the percentage of total insurance premiums collected in any financial year against the country’s GDP.
Sharad Mathur, MD and CEO of Universal Sompo General Insurance has told the media that the insurance sector significantly contributes to financial resilience and and inclusive growth. “We can unlock the true potential of insurance, ensuring wider coverage, encouraging innovation, and building a secure future for every individual and business,” Mathur has been quoted in the media as saying. He mentioned points like tax reforms to help the insurance sector. However, one of the most significant expectations of this year is a mandatory basic term insurance for formal sector employees like EPF (Employees’ Provident Fund).
Mandatory basic term insurance like EPF
Industry experts are also pointing out that if a mandatory basic term life insurance coverage for all formal employment can be created, it can transform the insurance sector. It would be somewhat similar to the Employees’ Provident Fund (EPF) and can be implemented to cover the formal employment domain. “This measure could ensure financial security for dependents in case of an untimely demise, significantly improving insurance penetration,” said a spokesperson from ACKO Life Insurance. If this landmark decision is taken it will overnight expand the insurance sector and provide financial security for crores of common persons in India.
Two key tax incentives for the insurance sector
Most in the insurance sector are seeking an increase on tax deduction limits for life and health insurance premiums. First the incentives under Section 80C of the Income Tax Act — Industry experts are hoping that the finance minister increases the tax deduction limit under Section 80C of the Act. Currently, it has provisions for a maximum exemption of Rs 1.5 lakh in a financial year. Some are also hoping for a separate limit for term insurance and pension policies. The other demand lies centering the benefits under Section 80D of the same legislation. It delas with exemption on health insurance premium and the cap ranges from Rs 25,000 (general category) and Rs 50,000 (senior citizens). Insurance experts are almost unanimous that if the FM makes room for these changes, they can boost life insurance penetration.
“Insurance for all” is the slogan to be achieved by 2047. Undoubtedly, it’s a steep climb to achieve. As Union finance minister Nirmala Sitharaman rises to present Budget 2025 on February 1, among the insurance industry expectations is the introduction of a mandatory term insurance policy for formal sector workers like EPF. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
