Insurance as of today is treated as a compulsion and not as an essential component. The thought needs to be re-classified. The government can do much in changing this perception and help increase the insurance penetration in India.
With the implementation of the Goods and Service Tax (GST) Bill, the Indian economy will witness positive strides. It will help create uniformity in the tax structure pan-India by removing several taxes and seamless tax credits, though with the added cost of compliances.
For the insurance sector, we hope to be in the lower tax rate (ie., 5% or 12%) considering the low market penetration and the large middle class component of the Indian population with plenty of available potential.
Talking about health insurance, the government should be applauded for their efforts in providing health insurance coverage for below poverty line (BPL) families. However more can be done for the salaried class.
Currently if one purchases a health insurance policy for self /spouse/children, he/she can claim a tax deduction of up to Rs 25000. When one purchases a health insurance policy for parents (a senior citizen), he/ she is eligible for an additional tax deduction benefit up to Rs 30,000. Given the rising cost on medical expenditures, it would be even more beneficial if they could provide further tax benefits under 80 D.
In recent years India has witnessed an alarming trend with regard to natural calamities. The same results in mammoth loss not only to life but property. The government’s role here, should be to help increase home insurance penetration to the lengths and corners of India – given that awareness levels are still low.
The government can look to create awareness campaign on the importance of insuring home and contents and can also like in the case of Motor Insurance, can look at making Home Insurance compulsory. Another step of encouragement would be to give tax benefits in this area. Also, when one takes a home insurance policy for either their owned or rented residence, the premium for the same should be eligible for tax deduction benefit similar to the once passed.
With the recent cyber-attacks on banks, the industry has witnessed an increased trend in buying cyber insurance to safeguard them against risk arising out of cyber-attacks. There is an equal need for introducing strong preventive mechanism and deterrents cyber attackers. The government can do its bit by taking necessary steps to curb cybercrimes through amendments to respective laws and acts to introduce strong punishments for cyber-crimes. As a preventive measure, it needs It needs to speed up the process of setting up advanced cyber security and e-surveillance agencies.
IRDAI has made e-insurance mandatory and with digitalisation it becomes easier for policyholders to maintain policy documents and availing an insurance policy online. This system will work even better if the government can announce incentives to boost online transactions.