Insurance sector expects unburdened passage to enhance adaptation

Union Budget 2017 will see a departure from a lot of things - tradition for one (instead of February 28 or 29th in the event of a Leap Year or the last working day of the month, it will be tabled in Parliament on February 1), merging the Railway Budget with the total budgetary outlay, and likely giving up of the distinction between the plan and non-planned expenditure. This has been mooted ostensibly to ensure that the entire exercise is advanced; schemes, programmes, annual spending plans and tax proposals will be now rolled out April 1st onwards, instead of June. This would also impress upon not just the Centre but the states, companies, even households and individuals to finalise their savings, investment and tax plans within the new cut-off. With new rules and new era introduced, come responsibility extraordinaire. Thus will be the case with Union Finance Minister Arun Jaitley as he walks in to the Parliament House on Wednesday with his budget proposal. Coming close on the heels of the ground-breaking demonetisation, expectations from him will be of a unique, lofty nature indeed. For the insurance sector the expectations are around better implementation and continuity of reforms, in order to keep the channels encouraging in the immediate aftermath of demonetisation. Jan Dhan accounts, UPI and Aadhaar integration seem to have cleared the ground for a digital and cashless economy. In other words, the digital revolution can impact value proposition of insurance services too. Going digital for distribution within the sector is an opportunity not without its own set of challenges. Primary among the gaps is that less than 3.5% of India's population is insured. To put insurance on a fast-track mode, there has to be parallel digital infrastructural betterment across the market, by leaps and bounds, to ensure O-to-O just does not merely mean offline-to-online but online-to-online too. There are signs of the government passing the responsibility to individuals and companies, in consideration of the online space too. Post demonetisation, insurance purchases made through portals of public sector insurers were incentivised -- 8% discount for life insurance products and 10% for general insurance. Such stimulants are required for other channels of distribution too, the likes of brokers and web aggregators, in order to boost their significant contribution and influence larger adaptation of insurance. PolicyBazaar has been spearheading digital insurance since 2008 and we have seen just how much of battling nay-sayers is required not just in India but also other mature markets such as Europe. It is not just about ingraining the benefits of online insurance but also the transparencies involved. Improving penetration is a dedicated onerous task that the digital aggregators took up when there was no market by the name and only sustained efforts made it live. Last year's tax reforms included cheaper house rates, increase in tax exemption on the rent paid and income tax benefits for small businesses and start-ups. Laudable, because that's what the market required -- increasing urbanisation putting an exponential demand on housing, rising rents because of skewed housing supply and an environment of emerging businesses. Similar is the case with healthcare that the government must look into. There's enough people requiring help but the supply of specialty institutions and expects are at premium. Thus, medical interventions for chronic ailments such as arthritis, heart diseases, cancer, kidney, respiratory and neurological disorders, and diabetes, cost anything between Rs 40,000 and Rs 50,000. The deduction allowed under Section 80D is Rs 25,000 for self, spouse and dependent children and Rs 30,000 for parents, dependent or not. A relook is imperative here to increase the deduction limit for parents to Rs 50,000, given that chronic and critical ailments are most prevalent among those of advanced age. At the same time, with increase in life expectancy - it's above 68 years in India, as per the WHO World Statistics 2016 - the maturity age limit needs to be redefined to minimum 65 years from 55 years under the Pradhan Mantri Jeevan Jyoti Bima Yojana. Another insurance area that the government cannot ignore and must urgently address is taxation post Goods and Services Tax. Under the GST, a four-tier tax structure is in the offing, with most products and services coming under the standard 12-18% tax slab. Insurance products invite a 14% service tax today. With 0.5% cess each for Krishi Kalyan and Swachh Bharat initiatives, total service tax applicable to insurance products is 15%. Considering the really low and inadequate penetration of insurance the current tax structure will at best be a discouraging factor, with or without the digitisation. There's a need for perceptional change towards insurance protection and security; added burden of tax would only make such needs inaccessible to the population at large. Not exempting insurance from taxes would add to the challenges of projecting value of protection insurance and term products.