From income tax benefits for premiums on house property insurance, to crop insurance risk estimation using new technologies like artificial intelligence, there are various measures that the finance minister can introduce in the Budget, to give a boost to the insurance sector.
Here are some of the challenges in the insurance sector, and how the government can address them in the Budget.
Challenges of the insurance sector:
- Low compliance of mandatory insurance (for example, motor third party insurance), especially for old vehicles and two-wheelers
- Low insured risk due to property and contents being uncovered
- No regulation of healthcare sector thereby creating high uncertainty in health insurance
- Agricultural and crop insurance still dependent on age-old methods of risk estimation
- Long-term pension policies should get a fillip through tax incentives
How can the Budget address challenges in the Insurance sector?
- All “pucca” property should be mandatorily insured as per law. An income tax benefit should be introduced for the premiums paid for house property insurance, thus driving growth in this segment. This will improve penetration of insurance, broad-base the premium and the risk. This will also reduce premiums while ensuring people get their claims when natural disasters happen. Relief fund expenditure of the government will also decrease.
- There should be fiscal measures to get the procedures and medication of the healthcare sector to be brought under regulations of protocols, and generic medicine should be made the norm. It will make health insurance cheaper, and more practical without too many exclusions. The government provided Ayushman Bharat will also become more cost effective.
- Crop insurance risk estimation needs to be done taking advantage of modern technologies like drones, image processing and artificial intelligence tools. Along with that, cleaning/updating the data of government records of land and property will be required to get accurate results.
- While life expectancy is increasing, the investments in long term instruments and pension is decreasing. The Budget must look to plug the gap by introducing incentives for long-term investment. This will also bring long term retail money into government and Infrastructure projects.
How can common people benefit from the expected announcements
Everybody is expecting some relief in GST rates for insurance which is a high priority sector for the government. No country has become a developed nation without a solid base of Insurance which is stable and well regulated. The government should consider a GST relaxation in the micro-insurance area as well. If all the above measures are announced in the Budget by the government, then the overall insurance premiums will get cheaper, claims will be broad-based and the penetration of insurance will increase – thereby giving more avenues of tax realisation by the government in a constructive way.
Views are personal.
The author is partner & leader – PwC India.