Budget 2020-21: Several industry experts expect the cap on foreign ownership in insurance companies to be raised in the upcoming Budget.
Budget 2020 Insurance: The life insurance industry is looking forward to the Budget 2020 with high expectations. Several industry experts expect the cap on foreign ownership in insurance companies to be raised in the upcoming Budget. Currently, the foreign direct investment (FDI) in insurance is capped at 49 per cent which according to many industry observers may be raised to 74 per cent. Earlier, the relaxation was provided only to the insurance intermediaries where the FDI can be up to 100 per cent. “Yes, there could be an increase in FDI in the upcoming budget 2020 as the insurance sector has seen the benefit of relaxation in FDI from 26 per cent to 49 per cent in 2015. So, the government is likely to increase the FDI in life insurance, which will enable other private players to go public,” says Rakesh Goyal, Director, Probus Insurance Broker.
With an increase in FDI limit, will there be any corresponding impact on the policyholders? The benefit rolling down to the policyholders may not be immediate and upfront. Capital inflow from abroad helps in technological advances and making the distribution channels more robust. “Increase in FDI means insurance companies will have more funds to come up with new products and enhance operations to provide a seamless experience. The policyholder will benefit in the form of new products and better customer experience. Ultimately, this increase in FDI, will help in securing more heads, propelling the goal of increasing insurance penetration in India,” says Goyal.
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Insurance is a capital intensive business and companies need to pump-in huge funds over several years before the returns start flowing for them. Innovative products require equally longer periods to generate optimum results for all the stakeholder including policyholders.
The industry also expects an increase in the limit of Section 80C of Income Tax Act, 1961 so as to give impetus to the insurance sector. Currently, under Section 80C, the limit of Rs 1.5 lakh a year includes insurance premium and investments made into PPF, NSC, ELSS etc. Further, the impact of tax especially on pure term insurance policies is seen as a dampener in popularising them as low-cost, high cover plans. “ The other expectations are reduction of GST in term life products and increase in the limits of 80C, which will attract more people to opt life insurance products,” adds Goyal.