What the insurance industry hopes from Budget FY 2021-22? I Details Explained by Edelweiss

Subhrajit Mukhopadhyay, Executive Director, Edelweiss Tokio Life Insurance highlights that against the backdrop of the coronavirus pandemic, which has affected world economies – both developing and developed alike – the upcoming Budget for the financial year 2021 – 2022 will be keenly watched.
 
The year 2020 has raised the prominence of social security and financial protection. With the increasing financial burden of Covid 19 healthcare being felt across states, people have recognised the criticality of financially provisioning for such unforeseen events. Consequently, life insurance has become among the sought-after instruments for managing individual wellbeing as well as enabling socio economic welfare. 
 

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Rising to the need of the hour, the insurance industry has assiduously supported its policyholders and first-time buyers, despite multiplicity of challenges and a tough economic environment in the last year. From appropriately required income plans to an insurance solution specifically for Covid 19, the industry has innovated to match the evolving customer needs.
 
In the medium term, this pandemic is likely to leave a lasting impact on insurance demand as more families seek financial protection. The upcoming Budget is likely to mirror this sentiment, with the government laying a higher emphasis on protecting lives and livelihood.
 
There are some factors that might be under consideration as a part of the Budget roadmap as the Covid 19 pandemic has heightened the urgency for easy insurance access.
 
Rationalisation of GST Rate:
 
Since financial protection has become more crucial than ever, the government may consider reducing the GST rate applicable on insurance from 18% currently to 12% or even lower. A lower GST rate could further bolster the demand for insurance, contributing to an improved insurance penetration.
 
Low insurance penetration in focus:
 
What has emerged as a concerning fact is the low life insurance penetration in India. Among the lowest in the world, India’s insurance penetration stands at only 3.7%, much lower than the world average of about 6%. While the government has made strides in bringing more people in the fold of insurance through various public schemes, India remains a scarcely penetrated country.
 
Given the context of low penetration and an increased need for insurance amid a pandemic, the government might focus on incentivising insurance purchase especially for first time buyers and women.
 
Annuity:
 
Annuity provides for a key requirement of a pensioner, for a life-long pension at a steady, guaranteed rate. Annuities also provide 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.
 
Life insurance sector can drive GDP growth:

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, and consequently, the country’s GDP growth. The upcoming Budget should look at incentivizing investments into Life Insurance products to facilitate infrastructure and overall development of the country.