In 2023, India's insurance sector has made remarkable strides, adapting to changing economic landscapes and evolving consumer needs. Embracing cutting-edge technologies like Artificial Intelligence (AI)/ Machine Learning (ML), the industry redefined insurance; making it more accessible and tailored to diverse Indian requirements.
However, in order to make “Insurance accessible for All by 2047”, the government and private players need to work in collaboration and make insurance available to every Indian citizen. This can be achievable, only when insurance is pushed to the masses, especially in the Tier 2, 3, 4 markets and beyond, where the actual insurance gap lies. Insurance, even today, has very little presence beyond the top 30 cities and around 700 million people in the smaller cities, face challenges with accessibility and financial capability,” Balachander Sekhar, Co-founder, RenewBuy said.
Below are some of the budget recommendations listed by RenewBuy’s Balachander Sekhar, which can help in insurance penetration across the country:
Insurance distribution is one of the key challenges in the country, and the new-age InsurTech companies have been increasingly contributing towards solving the distribution gaps.
While most of these companies are taking insurance to the Tier 2,3 cities and beyond, by harnessing technology and eliminating branch reliance; substantial input costs are incurred in developing the tech stack, improving cyber-security and upskilling insurance advisors and employees.
To support these efforts, the government should consider tax rebates, and lowering GST rates for the InsurTech distributors.
Health insurance is the need of the hour for any country and revising tax benefits for medical insurance premiums (under section 80D) could significantly benefit citizens.
Proposing an increase of tax deduction from INR 25,000 to INR 50,000 for those below 60 years and from INR 50,000 to INR 75,000 for senior citizens would incentivize and encourage people to invest in health insurance.
Also, expanding tax benefits for preventive health check-ups to INR 15,000 from the current INR 5,000 is crucial to encourage more proactive healthcare practices among citizens.
Recent reports indicate that India's senior citizen population stood at 149 million in 2022, representing approximately 10.5% of the nation's populace. Projections suggest a significant surge in this demographic by 2050, with an estimated doubling to 20.8%, totalling around 347 million individuals. Ensuring a secure retirement fund for this segment is crucial to prevent financial hardships post-60.
While urban areas show promising signs in retirement preparedness, smaller towns and cities exhibit a substantial gap in retirement savings. Annuity products stand as a critical avenue for post-retirement income.
Thus, it becomes imperative for the government to consider reducing or even eliminating taxes on these products. Such a move could incentivize more individuals to actively secure their financial futures, effectively addressing the pressing challenges associated with retirement planning.
About 55% of the entire vehicle population is uninsured, motor insurance being a mandatory product. The problem is more acute in products having lower premiums like 2-wheeler insurance where the uninsured population goes up to 70%.
Also, two wheelers are a more suitable source of commutation in the smaller towns and cities and a necessary product there.
The absence of coverage not only amplifies risks for individuals but also heightens the government's liability in unforeseen incidents, considering, road accidents rank as the second leading cause of fatalities in India.
Hence, the Government needs to consider reducing GST on two wheelers, from the current 18% GST rates.
The vision of "Insurance for All by 2047" demands strategic planning, especially in the upcoming budget. The government can pave the way for a more inclusive and secure future through insurance during Budget 2024-25, where insurance is made for affordable, incentivizing, and accessible to masses.