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.