It’s that time of the year again for the Union Budget ‘2016 to be unveiled. As the nation speculates on what’s in it for them, one clearly remembers the array of benefits the previous Union Budget ‘2015 provided for the insurance industry – enhanced tax deduction limit in the health insurance segment, benefits for pensioners, and introduction of personal accident insurance schemes being the significant ones. While these benefits induced people to buy insurance, there is demand for more exemption benefits this year, so that more people would be encouraged to buy insurance.
It is the government’s prerogative to introduce more reforms and schemes to increase penetration of insurance in India. Here’s my Union Budget ‘2016 wish list:
- The previous Union Budget ‘2015 saw reforms made under Section 80D, whereby premium paid upto Rs. 25, 000 and Rs. 30, 000 for senior citizens for health insurance plans were eligible for deduction. There is growing need to revisit this limit, especially in the interest of senior citizens and those looking forward to buy long term health insurance plan (2yr tenure). For instance, for a 52 year old man with a family of four, paying only Rs. 28, 584 as premium for a family floater plan whose sum assured is Rs. 8 lacs may seem perfect; however, with medical costs on an upswing, the Rs. 8 lac cover may not suffice. He will have to buy a higher plan and pay a higher premium in effect. The current tax exemption may not suffice for one opting for a higher sum assured.
- Home is a very important investment but the irony is that few people consider insuring their home and contents against natural disasters and unforeseen events. Even though the Uttarakhand and Chennai floods and the Nepal earthquake were an awakening, yet people still kept on procrastinating on the thought of insuring their homes. A home insurance not only safeguards your home but also its contents as well when disaster strikes. The government must introduce tax benefits on home insurance premium in order to encourage homeowners to protect their valuable investment.
- Buying insurance policy offline is cumbersome process considering that it typically involves endless paperwork, as part of the KYC norm. Moreover, one has to undergo this procedure every time they plan to buy more policy, irrespective of whether it is purchased from the same insurer. All this may discourage people from purchasing insurance in the offline mode. Uniform KYC norm requires urgent attention as it would simplify the process of buying insurance and claiming its benefits at the time of need.
- The government should pass a reform of creating a separate tax exemption limit of Rs. 1.5 lakh for life insurance premiums and pension plans each. Doing so will give rise to consistent and efficient long term savings, which is, currently, the need of the hour.
To sum up, the FM should take necessary steps to increase penetration in the insurance sector, with a particular focus on Life and Health insurance. Introducing reforms in this segment through tax incentives would not only encourage people to buy an insurance plan, but there would also be a considerable decrease in the number of underinsured population.