As we arrive in 2024, we are in a very competitive space when it comes to the insurance sector. This comes on the backdrop of a transformative year, the entry of new companies, and shifts in consumer behavior.
In line with the IRDAI’s vision of ‘Insurance for All by 2047’, there is a need to reconsider the GST rate of 18 per cent on health insurance policies in the upcoming Union Budget, thereby improving the affordability for our citizens.
As we arrive in 2024, we are in a very competitive space when it comes to the insurance sector. This comes on the backdrop of a transformative year, the entry of new companies, and shifts in consumer behavior.
There's a push to boost insurance coverage in the country, currently standing at four per cent.
The positive news is that more Indians recognize the importance of obtaining life and health insurance, influenced in part by the impact of COVID-19.
As insurance firms continue to grow and contribute to the Indian economy, industry leaders have outlined their budget expectations.
The reduction in the prevailing GST rate has been a long-standing demand from the industry.
“In the upcoming budget, we would like the government to consider reducing the GST rate from 18 per cent to 12 per cent.
Also, currently, health insurance premium paid by employers is treated as an expense and does not get input GST credit.
While it was temporarily allowed during the pandemic, the Government should consider making it a permanent feature to encourage big corporates as well as the Ministry of Micro, Small, and Medium Enterprises (MSMEs) to offer health insurance to their employees,” says Krishnan Ramachandran, Managing Director (MD) and Chief Executive Officer (CEO), Niva Bupa Health Insurance.
Says Ritesh Kumar, MD & CEO, HDFC ERGO General Insurance: “In line with the IRDAI’s vision of ‘Insurance for All by 2047’, there is a need to reconsider the GST rate of 18 per cent on health insurance policies in the upcoming union budget, thereby improving the affordability for our citizens.”
“A critical reassessment of the existing 18 per cent GST rate becomes imperative, to reduce premiums and provide customers with better pricing,” adds Mayank Gupta, Co-Founder & Chief Operating Officer (COO), Zopper, an InsurTech company.
“There have been lots of changes in regulations in the past year. As India is a low insurance penetration country, the government should remove GST on health insurance to enable deeper and wider penetration of insurance,” says Naval Goel, founder and CEO, PolicyX.com, an insurance web aggregator.
“The insurance business has long asked for the GST on insurance products to be lowered. This would help a lot of customers in the country. The 18 per cent rate that is in place now is too high, and we assume that it will be changed,” says Rakesh Goyal, director, Probus Insurance Broker.
“The upcoming 2024-25 budget will be a defining moment for the insurance sector. Despite its interim nature, our industry is poised for substantial considerations.
India’s expanding economy, growing middle class, innovation, and regulatory support are driving the insurance market growth. However, gaps still exist.
Hence it would be imperative to increase access to insurance to smaller tier two, three, and four cities where the insurance distribution is low,” says Gupta.
Says Tapan Singhel, MD & CEO, Bajaj Allianz General Insurance:
“First and foremost as an insurer our job is on the protection side. When we look at our country’s growth, it is important to also look at the factors that are pulling our country’s growth down.
In India, about seven per cent of the population which is about 10 crore people fall below the poverty line because they can't afford health expenses.
To bring 10 crore people above the poverty line will cost about 1.2 per cent of the GDP. Hence, I feel we must look at a universal health scheme for our citizens.”
“Another pertinent issue is adequate social security for the country. The ageing population is a rising concern and health insurance and subsequent tax exemption for them is required.
On the taxation front, I want to emphasize that insurance is not like a luxury commodity, and taxing it heavily makes it difficult for people to get financially protected.
We should see insurance as a necessity that everyone should afford.
Making health insurance mandatory for employers, like in developed countries but at the same time it should be at the rate at which many state governments offer health covers, making it more affordable, which can help more people be financially secure, which can further boost the economy,” says Singhel.
“The budget must address uncertainties like the next pandemic and climate-related catastrophes.
We must remember that the pandemic cost 12 per cent of our country’s GDP and in the last year itself we saw eight catastrophic events that incurred huge losses.
If you look at the Sikkim or Chennai floods, only a fraction of the losses were insured leaving a significant 85-90 per cent of the population financially unprotected which brings down the economy.
Compared to developed countries, if a loss happens, the economy moves up because about 95 per cent of the population is insured. We must have parametric insurance, and pandemic pools in place to deal with such uncertain events.
How do you encourage the social security issue and how do you address these broader concerns that are going to impact the economy and the country are the big issues that should be addressed in the budget,” says Singhel.
Parametric insurance enables the development of quick and transparent claim settlements for natural disasters or deviations in weather conditions beyond agreed-upon values.
Unlike traditional insurance, which compensates based on the damage suffered (indemnity-based insurance), parametric insurance pays out when a specific event occurs.
“We also expect some changes to be made to pensions so that the insurance business and the NPS are treated the same,” says Goyal.