The upcoming Union Budget on 23rd July 2024 is highly anticipated by the Indian life insurance sector, following the recent election of the new government. The industry is hopeful that the budget will provide the necessary policy support to achieve the ambitious goal of ‘Insurance for All by 2047’ set by the IRDAI. This presents a critical opportunity to tackle key obstacles and pave the way for future growth.
Public notices advocating for universal access to insurance coverage.
Introducing a new classification: In order to promote individuals to invest in life insurance and provide incentives for long-term coverage, the creation of a distinct deduction category specifically for life insurance can enhance its attractiveness.
A significant portion of India’s population lives in rural areas, but the rate of insurance coverage in these regions is relatively low. Offering tailored incentives to insurance companies that cater to rural and underserved markets has the potential to bring about significant change. Implementing reduced GST rates for products designed for these segments, as well as government co-funding schemes for specific needs such as child education or critical illness, could help increase insurance penetration in areas where awareness about insurance is lacking.
Enhancing the range of microinsurance products and streamlining regulations could prove advantageous. Implementing tax incentives for microinsurance premiums and improving accessibility through local outlets such as kirana stores and self-help groups may boost inclusivity.
Boosting the significance of life insurance within the economy.
Life insurance is a significant long-term investment avenue, with assets exceeding Rs. 52 lakh crores, contributing significantly to India’s economic development. To further enhance its appeal as an investment option, the Budget may consider expanding the range of assets in which life insurance funds can invest, along with potential tax incentives, thereby increasing their competitiveness against other financial instruments.
The allocation of funds in the Budget for the development of digital infrastructure is essential to facilitate efficient insurance distribution and penetration, especially in rural areas. The promotion of insurance through public-private partnerships can harness the expertise of the private sector, while also ensuring affordability and broader outreach.
Enhancing regulations and expediting approvals have the potential to lower operational expenses for insurance companies and foster creativity. The Budget has the opportunity to tackle issues related to market unpredictability and establish a conducive atmosphere for newcomers and product advancement with regulatory backing.
Promoting life insurance as a prudent financial decision.
Emphasizing protection: Although it is crucial to prioritize wealth creation, the main objective of life insurance is to provide risk protection. The Budget may promote the creation of cost-effective term insurance plans that offer sufficient coverage, ensuring that protection against unexpected circumstances is within reach for everyone. Additionally, there should be consideration given to making protection compulsory for individuals starting their careers and assuming more responsibilities (with a minimum coverage of 10 times their annual income).
Streamlining and broadening current retirement plans such as the National Pension System (NPS) and promoting their combination with life insurance products can provide people with a complete retirement strategy. This will enhance financial stability and encourage long-term savings.
The forthcoming Budget offers a critical chance for the new administration to collaborate with the Indian life insurance industry and expedite its progress towards achieving ‘Insurance for All by 2047’. By tackling major obstacles, enhancing its economic importance, and establishing it as a crucial personal financial instrument, the Budget has the potential to lay the groundwork for a more comprehensive and stable future for the Indian populace.
Through the execution of these strategies, the government can establish a mutually beneficial scenario, nurturing a dynamic insurance sector while empowering individuals to strategize for their financial security with the aid of life insurance.
