Budget 2013: Extend tax concessions for general insurance policies, says KK Mishra, Tata AIG General Insurance Co Ltd

The Indian non-life insurance industry is expected to continue its strong double digit growth of close to 20% in 2013. Greater clarity is hoped to be gained on FDI norms in the insurance sector as the government mulls over introducing the Insurance Bill in the Budget session.

The geographically diverse populace remains an opportunity for the industry as a whole to increase its penetration levels which is currently at 0.7%. Distribution (reach) and awareness (knowledge of risk) amongst consumers continue to challenge the insurers. Persistent higher inflation and a slowing economy may force consumers to defer or avoid dispensable spends such as purchase of non-mandatory insurance coverage. Thus, certain amendments in the insurance distribution laws are welcome. We are hopeful for some bold steps on this front.

We believe that rural insurance is an important sector which presents considerable opportunity for the general insurance industry to penetrate deep and wide within the country.

Certain path-breaking incentives in the rural insurance segment in this budget can enable the industry to focus and grow more in rural areas not only as a mandatory requirement, but as an incentive to grow in a relatively untapped sector. Elimination of service tax on premiums charged for rural products and insurance detail meant for farmers could be considered. Further an increase in fund allocation by the government in rural health care schemes such as RSBY will enable the insurance companies to widen their penetration and reach into the remote rural sections.

The government’s role in terms of extending tax concessions for general insurance policies would encourage the Indian consumer to consider opting for higher protection for themselves, their family and for their hard earned assets.

To increase the penetration of home insurance, relaxation of taxation norms in the premium of home insurance policies could aid in boosting sales of the products in this segment.

GOI could also consider issues related to taxation of reinsurance as recommended by the Industry.

GOI could consider increasing the limits of tax exemptions under section 80D, given the high cost of medical care in the recent times. It is recommended that individual health insurance policies could be exempted from service tax. This move would allow larger number of individuals, especially from lower sections of the society to opt for a health cover.

Besides motor and health, we believe that the SME sector will show strong growth as increasing number of entrepreneurs are now aware of their risks and of the varied insurance solutions available. Insurance premium for covering small and medium enterprise risks could be exempted from service tax. This will greatly help the SME sector in insuring their assets. For other insurance products, perhaps a reduction in the service tax of 3-4% could be considered.

Also we hope that the government will announce a clear road map for the usage of AADHAR platform; not only for identification of individuals but also for a micro payment settlement gateway. This would help in bringing about a financial inclusion revolution in the country.


Aswift stride of economic liberalisation, privatisation and globalisation steers corporate leaders to be progressively cognizant of corporate governance and challenges them to ensure that the culture of compliance is getting permeated all through the organisation. Effective management of HR statutory compliances as an integral constituent of corporate governance affects multi-dimensional outcomes on workforce, their families, employers; extensively protects the interests of investors, shareholders and customers; positions the corporate with a competitive advantage and greatly impacts our economy. It is imperative to witness that most of today’s HR managers neither specialise in labour laws, nor feel confident to manage HR statutory compliances, because of its complexity resulted due to the following factors: Consistent changes in the realms of labour and employment including high-level of labour attrition; India’s complex web of legislations revolves around 50 central and 200 state enacted legislations; Periodical amendments in labour legislations, rules, regulations and schemes; Most recent changes in enforcement mechanism/procedures; Latest judicial pronouncements on matters concerning labour and employment. As a remedy, many of the corporate leaders started outsourcing the management of HR statutory compliances. Hence, managing HR statutory compliances has been emerging as a profession and profitable business vertical. During the compliance process, corporate houses need to share a lot of sensitive HR information/data with a compliance partner. While finalising the compliance partner, corporate leaders employ stringent analysis on the proven strengths of the compliance partner towards ensuring data security. Because of the following strengths, corporate leaders prefer to partner with a reputed market leader like us rather than associating with individual consultants or small regional players: 1) expertise in central and state HR laws; 2) pan-India presence with own resource and infrastructure; 3) IT-enabled process for generating voluminous statutory records that vary from state to state; 4) web-enabled MIS tracker on HR compliances and 5) easy and quick access to latest amendments in labour legislations, judicial pronouncements, notifications, updated minimum wages and legal opinion on current issues.

Budget 2013: Need to make insurance more affordable for common man, says Ajay Bimbhet, Royal Sundaram Alliance Insurance Company

Non-life insurance segment has a very high potential to grow. However, in the absence of incentives, individual prefer saving instruments. Therefore, there needs to be a concerted effort to make insurance all the more affordable and attractive for the common man, says Ajay Bimbhet, Managing Director, Royal Sundaram Alliance Insurance Company Ltd, in his pre-Budget expectations.

Mr Bimbhet lists a few recommendations on service tax, income tax and some other things related to general insurance products for the Union Budget 2013:


Measures to increase insurance penetration:

Service Tax:

a) Considering the abysmally low penetration of insurance in our country, there needs to be a concerted effort to make insurance all the more affordable and attractive for the common man. The government should consider waiving off service tax on insurance premium paid, or at least exempt health insurance products, RSBY, crop insurances, Senior Citizens Policy and long-term insurance products such as property and other exempt categories from the purview of service tax.

b) To promote insurance penetration, the government can consider giving SOPs to certain sectors like SME’s for providing health insurance cover to all employees.

Income Tax:

a) The government must consider incentivising people with increasing the limit of Section 80C from the current limit of Rs 1 lakh to Rs 2 lakh at least.

b) Further, given the high cost of medical care and to encourage more people to purchase health insurance, the limits under Section 80 D of Income Tax Act, 1961 should be raised to Rs 50,000 from the current level of Rs 15,000.

(Currently, under this section, health insurance premium paid in accordance with a scheme framed by any insurer approved by the Insurance Regulatory & Development Authority ( IRDA) can be deducted up to Rs.15,000 from taxable income. If the policy is taken on the health of a senior citizen, the limit gets enhanced to Rs 20,000)


Increase FDI limit:

With the Finance Minister’s discussions held on the issues concerning the regulatory environment in the financial sector, and passing of Insurance Amendment Bill in Lok Sabha, we are hopeful to see the increase in the FDI limits from 26% to 49%. Infusion of additional capital can fuel the growth of insurance companies, help them in further geographical expansion to more tier II and tier III cities, cater to the requirements of rural markets and help Insurers to augment solvency positions.

Reinsurance payments not to be liable for tax deduction at source:

As of today, the income tax department seeks deduction of tax at source for all premium cessions to reinsurers. General insurers, as part of their overall risk management, cede a part of the premium received by them to the foreign reinsurers apart from the national reinsurer (GIC Re). These foreign reinsurers generally do not have any permanent establishment in India and hence do not attract the provisions of Section 9 of the Income Tax Act (Income deemed to accrue or arise in India).

Withholding of tax would discourage the re-insurers and could also lead to a situation of the reinsurance prices hardening and impacting availability of reinsurance capacity. The budget should pave the way for Central Board of Direct Taxes to issue appropriate circulars clarifying that payments to reinsurers would not be liable to tax deduction at source.

Companies refuse to acknowledge high potentials, top talents

MUMBAI: High-potential development is a growing priority for organisations in India, but nearly 49% of them don’t inform high potentials about their status, according to a recent survey by Harvard Business Publishing.

The survey was conducted among 37 public and private sector companies in India, including multinationals across sectors such as technology, BPO, pharmaceutical, consumer goods. The survey asked companies about high-potential programmes, needs, and trends.

“Many people are afraid that by acknowledging top talent they may not be able to retain them. There are several risks about doing it,” said Ray Carvey, executive vice-president – corporate learning and international, Harvard Business Publishing. It also depends on local issues, culture of the company, people who run it, among other factors, he said. Companies that raise concern about the identification of high potential employees argue that while open acknowledgement can lead to a greater motivation among employees, it can also potentially disengage others in the team.

“We believe that it is more productive to say yes in acknowledging top talent… the transparency helps in greater engagement,” said Carvey, adding that several companies do it in a subtle and disguised way in the form of incentives, opportunities and other things rather than overtly expressing it.

To create a sustainable pipeline strategy, the organisation has to inform high potentials that they are considered so, the survey said. Though there are obvious fears that stop organisations from doing that, in the long run, it will help develop better leaders in a transparent way.

For 69.4% of the organisations, development of top-notch talent and leadership pipeline within the organisation was one of the biggest three HR priorities for next year, while a mere 2.8% did not see it as a top priority. However, 22% of organisations do not yet have a high-potential programme in place.

The survey also showed a shift in skills that high potentials need to be developed on, with a greater focus on strategic thinking and execution. Most companies use a combination of performance reviews and manager-led assessment to identify high potentials.

Whereas any involvement by a leader in grooming an organisation’s high potential is welcome, India is still far away from ‘Leader as Teacher’ culture, the survey said. Effective high-potential programmes have leaders conducting workshops, the report said.

Companies can develop high potentials and create a leadership pipeline through a mix of innovative action learning, assessments and blended learning methodologies, says Carvey.

More than 50% of organisations are expecting 20% to 60 % of their leadership pipeline being built internally, while about 38% organisations expect 60% or more.

Best practice suggests that a robust high-potential programme comprises 100-plus hours of learning per person and by using blended learning, these hours can be covered without taking too much time away from work, the survey report said.

Experts warn of sharp rise in health insurance frauds

NOIDA: Nine out of ten frauds in country’s insurance sector occur in the mediclaim policy segment and there is a need to adopt measures to reduce the trust deficit between insured and insurer, experts have said.

“In insurance industry, number of grievances received or number of frauds committed is an indicator of growth trend of particular segment. In entire insurance sector, 90 per cent of frauds and grievances come from health policies,” said Niraj Kumar, General Manager, Oriental Insurance Company.

He was addressing a seminar on health insurance at Amity University yesterday.

Kumar said if one has to draw two curves for health insurance segment, one indicating growth and second learning curve, it can be observed that the growth curve is ahead of learning curve.

This, he added, implies that industry’s main aim is only to sell and market health policies, but there are important takeaways in such shortcomings so that the level of mistrust between insured and insurer can be minimised.

Richard Kipp, Managing Director, consulting firm Milliman said, health insurance in India has increased tremendously over few years but India needs to be cautious in its growth vis-a-vis the US where growth has now become stagnant.

Neeraj Basur, Chief Financial Officer, Max Bupa Insurance Company said that there is lack of trust level among hospitals, third party administrators, insurance companies and customers.

The trust level has to improve and all stakeholders have to understand that it is the customer whose interest is the binding factor, he added.

R R Grover, Advisor, Amity School of Insurance, Banking & Actuarial Sciences, said there is an urgent need to address health insurance requirements of the urban poor.

Irda’s new mortality table for life insurers may lower premium

NEW DELHI: Insurance regulator Irda today released new mortality table for life insurance companies for fixing premium, which may lower payments towards new policies.

The table called Indian Assured Lives Mortality (2006-08) will be effective from April 1, Irda said in a circular.

The mortality table indicates the rate of deaths occurring in a defined population during a selected time interval, or survival from birth to any given age.

According to sources, Irda’s new table will lead to reduction in life insurance premium.

The new table is an improvement over the existing table as it is based on the latest mortality and claim experience of different life insurance companies.

The variation in mortality across regions and gender is incorporated in the latest table.

The existing table is based on LIC’s data alone for the period 1994-96.

There has been significant improvement in mortality rates across all ages, particularly in the young age, since 1996 and the new table will be useful for insurance companies in streamlining the pricing of policies based on latest data.

Top Performers likely to Get Higher Pay Hikes than Rest

Top-performing executives in India Inc are likely to walk away with a disproportionately higher share of increment payouts this year, more than ever before. Officials from a cross section of companies, including HDFC Bank and ICICI Bank in financial services, Ashok Leyland among manufacturers and Dabur, LG and Shoppers Stop in the consumption space, told ET reporters that they will reward top talent disproportionately more than other executives.
The annual salary increment survey by global human resource consulting firm Aon Hewitt, released on Wednesday, quantifies this growing gap between highflyers and the rest for the first time ever. Key talent will get an average 14.1% pay hike this year, while average increments across the board will be only 10.3%. However, these average numbers mask the sharp differentiation that is now creeping in between India Inc’s very best executives and all the rest.
At Ashok Leyland, for example, junior level top performers will get 25% increments, while the rest will get only 10% in the 2013 increment cycle. Compensation experts say that top talent can get increments as high as 15-18% or even more this year, while lesser performers will get only a 0-4%.
This sharp divide is emerging in a year when average increments, according to Aon Hewitt data, will be among the lowest in recent memory, a clear sign that employers are placing a premium on their bestperforming executives.
“So far, most companies only spoke about pay for performance,” says Muninder Anand, director-information solutions, at consulting firm Mercer. “Now, it is actually coming into play.”
Adds K Sudarshan, managing partner, EMA Partners: “Differentiation is key. One needs to differentiate between those who are good and those who have potential to grow further.” Companies in sectors that are doing well and in sectors that aren’t are both leaning towards rewarding outliers more. Says K Ramkumar, executive director human resources, customer service & operations from ICICI Bank: “The business environment has been challenging and any entity incurring a wage cost of over 10% could be termed as being adventurous.”
Within this constraint, the
bank will reward better performers more than the rest. “We have given out a much higher increment this year, because you need to keep your flock of best performers from being poached,” says Umesh Dhal, VP, HR and MS, LG India. The company is targeting a growth rate of 20% for 2013. Adds A Sudhakar, senior executive director-HR, Dabur India: “The company is doing well and so we will take care of our best performers.” Videocon Industries CMD Venugopal Dhoot says that the top 30% performers in the group will be paid a 20% hike this year compared to 15% last year. Average increments, on the other hand, will remain same as last year at 12%.
Aon Hewitt says that with salary budgets shrinking, organisations are creating sharp differentiation in salary increases between their key talent and the rest of the staff. Over the years, this gap is widening.