Mr FM! This is what the insurance industry want from Budget 2016

With the world economy heading towards a possible slowdown and India being one of the major economies having any real chances of growing at a faster rate, everyone will be looking forward to how this year’s Budget will address the issue of stagnating private investment in India. With proper fiscal incentives in place, the insurance industry (being one of the major sources of long-term funds for the economy) can play a bigger role in pushing up public and private-sector investment and thus, help in achieving government’s goal of putting Indian economy on a high-speed track.

Following is my wish list for 2016 Union Budget.

A uniform KYC

Unlike e-policy holders, offline insurance buyers have to undergo a lot of paperwork, as part of KYC procedures. In addition to this, insurers usually call for multiple KYCs for different policies and this act as deterrent for new investors to invest in insurance policies. Government must consider giving a strong push to uniform KYC and e-claims, irrespective of whether the policy is purchased online or offline. This would make the process of buying insurance policies and filing claims easier.

Revise tax exemptions

At present, premium of up to Rs.25000 paid for health insurance plans qualify for deduction under Section 80D. This limit rests at Rs.30000 in case of senior citizens. Tax exemption under health insurance plan should be revised as the current incentive is inadequate, taking into consideration the rising healthcare cost. Just to give you an example, a 55yr old sole earner in a family of 4 would easily spend upwards of Rs.30000 per annum for Rs.10lacs sum insured. Also, the current exemption does not provide incentives for those who buy long term health insurance plan. Increasing the income tax exemption limit in health insurance will encourage people to buy health policies with larger covers, and for longer tenure.

Tax exemption for home insurance

While catastrophic destruction caused by natural calamities such as Chennai floods and Nepal earthquake influenced people to think about getting their home and property insured, people continue to remain hesitant about getting their property insured and hence, end up procrastinating it. Home insurance enables people to deal with huge financial losses that they would otherwise incur in case of natural disasters. Introducing tax exemptions on house insurance premiums would encourage homeowners to insure their homes.

Make term insurance attractive

At present, term insurance products constitute just 0.4% of the total insurance products sold in India. Distributors find term insurance products unattractive as their payouts, as per current regulation, is just above zero percent. The cap on the payouts needs to be relaxed to make selling term insurance attractive for the distributors. This would go a long way in increasing the average life insurance coverage of Indians.

To sum up, as low insurance penetration is a problem area, the FM should increase tax incentives to encourage people to buy adequate insurance cover. This will also help the insurance industry to raise more resources for financing government’s physical and social infrastructure programs.

The article is authored by Alok Bansal, Co-founder and CFO of online insurance comparision portal Policybazaar.com.