All attention is now towards the presentation of the Interim Budget scheduled for 1 February 2019 as various industry players wait to see if their concerns are addressed. The insurance players in India are also looking forward to know if their expectations are met in the last budget to be presented before the general assembly elections.
In a country where despite large population, the number of people opting to seek insurance covers for life, health or any of their assets is still comparatively low. These service providers are looking for policy changes that will encourage and promote the purchase of their product and increase penetration across India.
Industry experts believe that awareness of insurance products is still relatively low among Indians with the life insurance sector contributing to less than 3 percent of the country's GDP. Demands like the introduction of a separate section under the Income Tax Act (either above or below the existing section 80C) for pure insurance products (term insurance) premium paid, and GST waiver on these as well as health insurance products are expected to boost their sales in a country where endowment policies are largely preferred. Currently, GST is charged at 18 percent on term insurance products.
Another insurance product that is suffering is the ULIP (only sold in India). This Unit-Linked Insurance Policy provides an opportunity to earn market-linked returns while providing life insurance cover and has failed to please the investors as it does not provide a guaranteed maturity amount (like endowment policies) and comes with a long lock-in period of 5 years (compared to 3 years in ELSS) along with GST implications. A fairly recent introduction in the market, the product is slowly gaining popularity but hasn't made significant sales.
Another area of concern for the insurance companies is the retirement products sold by them that are not largely preferred due to NPS (National Pension System), which remains an attractive alternative. NPS comparatively comes with higher returns but attractive tax benefits. An additional section for tax exemption on pension earned under NPS and deposits made towards it has made the existing pension products offered by insurance companies hard to compete with it. Players in the insurance business are expecting some incentives in this regard in the upcoming budget 2019.