With the Union Budget 2018 round the corner, the insurance industry – both life and general – has set its sight on Finance Minister Arun Jaitley, with the hope that its demands and expectations will be met this time. It is of the view that the government has to deliver a fine balancing act of stimulating economic growth, addressing rural aspirations as well as accelerating jobs without slipping too much from its path of fiscal consolidation. However, among other things, there is need for insurance benefits to be made available to the masses at affordable premiums, apart from increasing the limit of tax benefits for health insurance under Section 80D.
Industry players feel that firstly, the government should consider an upward revision in the present deduction limit of Rs 25,000 for a family and additional Rs 30,000 for senior citizens in case of health insurance. There is need for the tax benefit limit for health insurance to be revised because healthcare inflation is rising at an alarming rate of 15% annually where the average medical treatment expenses are increasing. The last revision took place in 2015-16, and before that revision took place after a large gap.
“Hence, it is vital to revise the limit of tax benefits for health insurance under Section 80 D, not just in the upcoming Union Budget, but on a fairly continual basis to be at par with rising medical costs and to encourage Indian citizens to buy insurance,” says Tapan Singhel, MD & CEO, Bajaj Allianz General Insurance.
Current and proposed exemption limits of health insurance:
Health Insurance Policy Premium & Section 80 D Tax Benefits | ||||
| Scenarios | Health Insurance Premiums paid for & Maximum tax deduction limits | |||
| Details | Self, Spouse & Dependent Children | Parents (whether dependent or not) | ||
| Current & Proposed — | Current | Proposed | Current | Proposed |
| No one in the family has attained 60 years of age | Up to Rs. 25,000 | Up to Rs. 30,000 | Up to Rs. 25,000 | Up to Rs. 30,000 |
| The eldest member in your family (yourself, spouse & dependent children) is less than 60 years of age & your parents (either mother or father) are above 60 years of age | Up to Rs. 25,000 | Up to Rs. 30,000 | Up to Rs. 30,000 | Up to Rs. 40,000 |
| The eldest member in your family (yourself, spouse & dependent children) has attained 60 years of age & your parents (either mother or father) are above 60 years of age | Up to Rs. 30,000 | Up to Rs. 40,000 | Up to Rs. 30,000 | Up to Rs. 40,000 |
(Source: Bajaj Allianz General Insurance)
Additionally, “a lower GST rate on premiums would make health insurance cheaper and affordable for all policyholders, especially senior citizens and pensioners. With regard to group medical insurance for employees, the GST component on premiums paid for the same should be eligible for input credit,” says Anuj Gulati, Managing Director and CEO, Religare Health Insurance.
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Insurance companies feel GST has made health insurance more expensive. With 18% tax rate on health insurance, access to quality healthcare has become harder for people. In India only 27 per cent Indians or approximately 35 crore people have health cover, according to data from the National Health Profile (NHP) released in April, while 100 crore Indians do not have any cover against serious diseases.
“Hence, it is imperative to have a universal healthcare scheme to give the citizens of India an easy access to standard treatment. Moreover, the framework for pricing offered by healthcare service providers also needs to be streamlined to make healthcare services available for all. It is mostly the financially weak who are worst hit at times of emergencies. A discipline in the pricing would ease the burden of crores of Indians,” says Varun Dua, Founder & CEO, ACKO General Insurance Company.
Expectations of Life Insurance Companies
Like general insurance companies, life insurance companies too have their expectations from FM Arun Jaitley as they believe that there is a larger social objective that the industry shoulders – providing financial protection to families in the wake of unfortunate incidents.
Therefore, “there is a pressing need to articulate a separate section under 80C exclusively for term insurance, similar to those available for NPS and health insurance. This is imperative in order to motivate people into buying adequate risk cover, thereby protecting their families and ensuring their future plans are secured,” says Harshad Patil, CIO, Tata AIA Life Insurance.
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Some other insurance companies say the life insurance sector holds strategic significance for the nation as it provides the first layer of financial security. Therefore, insurance benefits should be made available to the masses at affordable premiums. In fact, India has one of the highest protection-gaps in Asia with a penetration level of around 3%-4% in the country. With the imposition of Goods and Services tax (GST), the revised tax bracket of 18% on financial products has led to insurance products becoming dearer.
“While the implementation of GST has resulted in reduced tax rates for a host of products, GST has driven up the cost of doing business due to decentralized registration. Furthermore, since life insurance service for employees is a restricted item for input tax credit, retail consumers/policyholders and businesses fail to claim input credit. Thus, we urge the concerned authority to consider pure protection life and health insurance as an ‘essential’ service and therefore give these either complete exemption from tax, or subject them to low single digit tax only,” says Ashish Kumar Srivastava, MD & CEO, PNB MetLife.
Besides, there is also a need to build a framework of subsidies where insurers are encouraged to reach to rural areas. “Providing incentives to the technology-led digital channels either in the form of better remuneration or tax holidays, incentives to drive micro insurance and making insurance a mandatory element of individual tax planning are some of the ideas that should work. Softer, incremental changes should be replaced by disruptive focus on building insurance in the country,” says Premanshu Singh, CEO, Coverfox.
