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Below the Quote on Budget Expectation by Subhrajit Mukhopadhyay, Executive Director, Edelweiss Life Insurance

India’s insurance sector has grown at a robust pace in recent years and is expected to maintain this growth trajectory going forward. Aligned with regulator’s vision of ‘Insurance For All by 2047,’ the industry has been on a path of transformation and there have been visible efforts towards customer centricity, product innovation, and process optimization. These efforts have been supported by proactive regulatory reforms that promote transparency, accessibility, and ease of business for the industry. 

As the industry continues to undertake collective efforts towards improving insurance penetration, some key industry expectations from the upcoming Union Budget are:

1. The burgeoning annuity opportunity:

India’s vast ageing population underlines its burgeoning pension and annuity market. Annuity caters to the key dilemma of a pensioner, for a life-long pension at a steady, guaranteed rate and exposes the investors to a reinvestment rate risk especially in a volatile interest rate scenario. Annuities are the only solution, which provide complete protection from the perspective of living longer (i.e. outliving one’s corpus), by providing a regular flow of income throughout one’s lifetime, purchased in lieu of a single lump-sum amount.

Currently, annuity is completely taxed in the hands of the customer, which reduces the product’s attractiveness. Also, currently, tax incentive is offered for people to accumulate corpus in NPS under Section 80CCD (1b ). A similar incentive may also be extended to Annuities.

2. Making insurance affordable through tax incentives:

India’s infrastructure sector is poised for a significant growth and requires a huge investment to support that growth. Life insurance firms, with their long-term assets, can help spur this sector. The upcoming Budget may look at incentivizing investments into Life Insurance products to facilitate infrastructure and overall development of the country.

We also expect the budget to consider creating a separate section for tax deduction on premium paid towards life insurance which would be beneficial to the insurance buyer. This would also enable a more rational segregation of investor’s funds into long-term and short-term kitties. Additionally, the budget may consider rewarding insurance buyers with a lower GST rate.

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