Budget Expectations 2022

Budget Expectations 2022: Affordability, reform need of the hour for insurance sector

There are high expectations that the government would take steps in the upcoming.

Union Budget for the financial year 2022-23 to increase the insurance penetration in the country.

Budget Expectations 2022

Despite the pan India presence of many insurance companies, the insurance penetration is very low in the country.

The reasons for low insurance penetration include high premium, high tax rates, lower adoption of technology etc.

There are high expectations that the government would take steps in the upcoming.

Union Budget for the financial year 2022-23 to increase the insurance penetration in the country.

Reduction of GST

The recent pandemic and natural calamities have emphasize the importance of health care and home insurance on the economy.

To further give a boost to health Insurance

its deeper penetration & following steps may be take:

  • GST on all health insurance products should reduce from 18 per cent to 5 per cent
  • Small ticket size Insurance products like micro insurance.
  • Products with smaller insurance limit (sum insured limits up to Rs 5,00,000) may be exempt from GST.
  • This will provide add to boost to these products by making them affordable and increasing penetration levels
  • Certain Health Insurance policies which got introduced during Covid (Corona Kavach & Corona Rakshak) should continue till March 31, 2023 and should totally exempt from GST
  • All Health Insurance policies for senior citizens should totally exempt from GST.

Stamp Duty on Life Insurance

Stamp duty needs to be completely exempt on term life insurance policies since these policies cover pure risk.

Are not investment products.

80D tax deduction limit

The limit of health Insurance under section 80D should be increase from Rs 25,000 to Rs 50,000.

Rs 1,00,000 for families and completely removed or raised further for senior citizens.

Pandemic Pool

The risk associated with the Pandemic is currently a top-of-the-mind issue for businesses and individuals.

Support from the Central government is require for the successful start of the Pandemic pool.

The government support can gradually reduce to near-zero levels.

As the pool becomes self-sufficient with an accumulate surplus over a period of 10 -15 years as we have seen in the case of the Terrorism Risk Pool.

Reinsurance capital is more likely to be available to the first few countries that start the pool.

Double taxation for reinsurance broking

Currently, GST is pay on reinsurance premium.

Again pay by the insurance broker on the reinsurance brokerage.

This should be remove and tax treatment is made simple.

NAT CAT protection

During the last 5 years, India has seen several extreme weather events that are set to multiply in the future.

Most of the assets damage during these events are uninsured.

The burden of reconstruction, support, and relief largely falls on the government.

Worldwide many countries have create government-sponsor NAT CAT pools.

Catastrophic Bonds (CAT Bonds) / Sovereign schemes as insurance financing solutions for catastrophic risk.

Which keeps the budget expense and allocations less volatile.

The government should consider insurance-base financing options.

The introduction of Instruments such as catastrophic bonds.

Natural catastrophic pools that will help the government save on unplan relief expenses.

Budget Expectations 2022

Relaxing Investment norms for Insurers

In the upcoming Budget, policy initiatives may lay down to relax investment norms.

Enable insurance companies to generate better returns for policyholders.

GST Input credit

Health insurance will get a big boost if corporates are encourage to offer Health Insurance to cover their employees.

For this, the employers should be allow to claim an input tax credit for the GST pay on group health insurance covers.

The current GST regulations do not have these provisions.

Privatization of Public sector general insurers

The government may announce certain capital infusion in the Public sector insurance companies for privatization better valuation.

The Finance Minister has already announce the intent to take one General Insurer for privatization.

More clarity is expect in the budget.

Emphasis on AI & Automation

For both insurance distribution and for faster claims management.

Emphasis on AI and Automation should be the focus area of the government through the regulatory channel.

 

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