GST, tax reforms will boost growth, equity in insurance sector

& tax reforms for growth

One of the major concerns that has been brought to light is the disparity in capital gains tax rates between general insurance companies and other sectors under Section 112A.

This discrepancy places general insurers at a distinct disadvantage. To ensure a fair and competitive business environment, I propose that general insurance companies be granted similar tax benefits as other corporate entities.

This will create a more equitable playing field, enabling us to invest more in growth initiatives and ultimately benefit the policyholder.

Addressing the indirect tax landscape, the recent GST Council meeting has made significant strides in addressing several long-standing demands of the general insurance industry, providing substantial relief to the sector.

Notably, the drop in GST demands, amounting to over Rs. 18,000 crore, has been a significant boon. These decisions, influenced by the collective efforts of the General Insurance Council and industry players, underscore the power of advocacy and collaboration in addressing industry challenges.

High GST rates on insurance premiums have long been a deterrent for people considering insurance, leaving a substantial portion of the population—the "missing middle"—without coverage.

We must acknowledge that insurance is not a luxury but a vital service that provides financial protection. We should ideally reduce GST to 5% for .

To make health insurance premiums more affordable, offering health insurance to employees at government-negotiated rates would expand coverage and make it more accessible and affordable. This measure would help more people achieve financial security, thereby boosting the economy.

Additionally, a substantial increase in the 80D tax exemption limit for health insurance premiums would incentivise individuals to invest in their health security and reduce out-of-pocket expenses, thus boosting overall financial well-being.

If a reduction of GST cannot be envisaged, the possibility of giving a complete deduction on premiums paid towards health insurance can be looked at.

Universal health coverage: Addressing economic disparity

As insurers, our core responsibility is protecting individuals from financial setbacks from medical emergencies. A significant challenge hindering our nation's growth is the vast economic disparity.

Nearly 10 crore Indians grapple with poverty, unable to afford even basic healthcare. Imagine the transformative impact of bringing these 10 crores, or about 7% of our population, under the healthcare umbrella!

A proposed solution is establishing a universal health scheme to address the healthcare needs of this population, aligning with our commitment to inclusive protection and social well-being.

It's great to see many states adopting this well, like Maharashtra recently and many others like Gujrat and UT of J&K. Still, a lot more can be done in terms of the government and the insurance industry's collective effort to ensure that quality health care reaches every household in India.

Strengthening social security and mitigating risks

The rising concern of an ageing population necessitates adequate social security measures, especially in the form of health insurance. Removing the limit on deductions for health insurance premiums for senior citizens would significantly ease their financial burden.

The budget must also address measures for uncertainties such as pandemics and climate-related catastrophes. The financial toll of the pandemic, which cost about 12% of our country’s GDP, underscores the need for establishing parametric insurance and pandemic pools to mitigate such risks.

Additionally, insurance cover must be made mandatory for all SME and MSME sectors to safeguard them against substantial losses due to natural calamities.

By preparing for unforeseen events, we can ensure that a significant portion of the population remains financially protected, preventing a substantial impact on the economy.

Collaboration is key: a shared vision for a resilient India

The recent GST Council decisions providing relief to the general insurance industry serve as a testament to the power of collaboration.

The General Insurance Council's collective efforts and the Ministry of Finance played a pivotal role in addressing long-standing concerns. This instance highlights the importance of open communication and industry-government partnerships in navigating complex issues.

The government can create a robust financial ecosystem by prioritising tax reforms, universal health schemes, social security measures, and proactive risk management strategies. This ecosystem will empower our citizens to face the future confidently, paving the way for a financially secure and resilient India.

The onus lies in creating a resilient and inclusive financial ecosystem that protects our citizens and propels India towards sustainable growth. Let us work together to bridge the protection gap and unlock the full potential of our nation.

(The author is MD & CEO, Bajaj Allianz General Insurance)

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)