Budget 2018: Life Insurance is a key as well as popular segment in India. The insurance industry in the country is undergoing multiple disruptions in its functioning, according to reports. Recently, a committee constituted by the Irdai had suggested host of changes in the life insurance sector. The Modi government in the upcoming Union Budget 2018 should enhance deduction of Life Insurance Premium under Section 80C of the Act, FICCI says. “Section 80C of the Act basically provides for a deduction up to Rs. 150,000 for investments made in various savings instruments such as mutual funds, bank deposits along with long term savings in life insurance plans, pension plans, etc. Various other expenditures like tuition fees etc. have also been included. Due to such inclusion, share of investment for allowable deduction is reduced to large extent,” the Industry body says. In order to encourage growth in the life insurance segment, FICCI has recommended that the union government should increase the limit of deduction for life insurance premium by creating a separate limit for deductibility of life insurance premium to the extent of Rs. 200,000 along with an overall enhancement in the investment limit under section 80C of the Act to at least Rs. 300,000.
Recently, the insurance regulator had notified the IRDAI (Non- Linked Insurance Products) Regulations, 2013 and IRDAI (Linked Insurance Products) Regulations in February, 2013. However, it was observed that there is a need to review the regulations due to changing market and economic environment, Insurance Regulatory and Development Authority (Irdai) said. In January this year, it constituted an eight-member committee to make recommendations on the amendments required in the regulations.
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The committee in its report among other things has recommended that the investment norms “should undergo significant change” with a view to improving the returns generated by the funds while taking account of the risks inherent in the various asset classes. The panel has suggested to “lower the mandatory proportion of ‘G-Secs’ in the Life Fund and the Pension and General Annuity Funds and allow for higher exposure in alternative higher-yielding assets (like equity or property) or high rated corporate bonds” to help insurers generate a high gross return on investments so that insurance savings products can compare favourably in the financial savings space. The report, on which Irdai has sought comments till December 28, further said along with existing avenues like NPS, EPF,PPF, multiple other avenues will be required to reach the untapped working population.
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Notably, at least four insurers — ICICI Lombard, Birla Sun Life, PNB MetLife and HDFC Life — are already using advanced technology for either customer support or sales. As per the report, the insurance sector has grown fairly well in the past one year, with both life and non-life sectors recording higher than previous year premiums. The average growth rate for the industry has been around 10-12 per cent. However, the growth for the health sector has not been at par with life and other non-life streams.