Mr. Nirakar Pradhan, Chief Investment Officer, Future Generali India Life Insurance Co Ltd

The Union Budget announced today addresses the twin concerns of reining in fiscal deficit and reviving economic growth. Fiscal deficit at 4.8% in FY14 reinforces commitment towards fiscal consolidation and seems to pacify rating agencies. Hike in plan expenditure by 30%, credit enhancement of corporate bonds by IIFCL (Govt. owned entity), 15% investment allowance for projects above Rs. 100 crore and announcement of new industrial corridors augur well for pick-up in investment cycle. Budget targets to shift savings from gold to productive sectors like equity market and housing. Overall, we feel, the Finance Minister has presented a pragmatic and balanced budget and not a populist one,  especially considering it’s a pre-election year.”

Dr. P. Nandagopal, MD & CEO, IndiaFirst Life Insurance

It is a positive budget from the insurance and BFSI perspective. On the big picture, the investments in education, skill development, infrastructure and rural development will have positive impact on the life insurance demand. On the specifics, while there’re no additional tax concessions as expected, the big announcement is the proposed open architecture for bancassurance through the broking route. In the long term, this would deepen the distribution reach of the banks in offering a wide range of insurance products. We need to check the details and also take steps to see the broking model does not result in excess distribution costs for the insurance companies which are already reeling under the pressure of thinning margins.

Mr. Miranjit Mukherjee, CFO & Senior Vice President-Finance, Tata AIG General Insurance Co. Ltd.

The Honourable Finance Minister has mentioned in his Union Budget speech the following:

1. Insurance companies will be empowered to open branches in tier II cities without prior IRDA approval

This move will accelerate the penetration of General Insurance into smaller cities and non metros. General Insurers will be able to offer insurance covers to customers in Tier II & III cities; whom we believe can gain much by protecting their home and assets from future unforeseen risks. The Regulator has always been supportive of the Insurance industry in its efforts to increase penetration and this move by the Government will aid the IRDAs objective.

2. Rashtriya Swastha Bima Yojana will be extended to cover autorickshaw pullers, taxi drivers, sanitation workers and rag pickers

We welcome this move of the government as it will augment the Governments objective of financial inclusion to the lowest strata of society. RSBY has been successful in ensuring that farmers and their family have a health cover; we believe that by widening RSBYs scope to include taxi drivers, rag pickers etc, the Government has done a commendable job in encouraging this segment towards a financially secure path.  We are a current participant in the RSBY scheme & we believe that Social schemes such as these will aid the estimated 40% populace in India who lack access to the simplest of financial services.

3. Banks will be allowed to act as brokers for selling insurance products of multiple companies

This is a significant development and we that this will benefit the Insurance Industry as a whole. Insurance broking is a specialized business and may require Banks to develop additional skills. This move by the government will allow Insurers to take advantage of the Banks distribution network. We feel that Banks promoting specific Insurance companies may not be interested in this development; however by allowing banks to offer products from more than one insurer will lead to customers making an informed choice based on variable factors, such as premiums, exclusions etc.

4. The Honourable Finance Minister has requested for support from the opposition on Insurance FDI

We are eager to hear on how the bill moves ahead in this session of the Parliament and hope to see greater clarity on the bill very soon

Conclusion: Overall the Union Budget has assisted the Insurance Industry to widen its reach and distribution network. Though the Industry had hoped for tax exemptions in health and other segments, the end-customer will gain through the wider reach of Insurance in smaller towns and through the Banks distribution network. By and Large the Fiscal Deficit  /CAD remains a concern and we will be eager to see how this Union Budget affects the same in the coming fiscal year.

Mr. Sanjay Sanghvi, Partner, Khaitan & Co.

Overall, the theme of the budget is directed towards growth momentum of the Indian economy as a long term measure and also providing stability and certainty of tax laws to boost investors confidence in India as investment destination. Tax on super-rich was perhaps the compulsion on the part of the Finance Minister to raise additional revenue for the Government to address fiscal deficit problems.  However the increase of surcharge by almost 100% on Indian Corporates as well as foreign companies is something which may not go well with corporate sector.

On more positive note, the Government has deferred applicability of GAAR by two years to 1 April 2016.  One would need to see the fine print of the Finance Bill in terms of the scenarios where GAAR would be applied based on recommendation of Dr. Shome Committee which reviewed GAAR provisions.

Mr. Ajay Bimbhet, Managing Director, Royal Sundaram Alliance Insurance Company Limited

“The overall budget looks to be responsible which signals positivity and growth. Keeping the financial environment of the economy in mind, the budget seems to be a realistic one.

Some of the key points from the Union Budget 2013 for GI industries are listed below:

• It is endearing to see an ease in increasing the accessibility and penetration in the non-metropolitans by empowering the insurance companies to open branches without having to get IRDA’s prior approval.
• Also, unlike the current bancassurance policy, banks now will be permitted to act as brokers for selling insurance products which could bring us greater opportunities of business. The move will create a healthy competition amongst the insurance companies while providing greater choices for the customers.
• Right impetus to SMEs and investments in infrastructure including industrial corridors will help in providing the required fillip to the economy and thereby greater penetration and business growth for the general insurance industry.
• Widening the scope of the Government initiated health scheme, RSBY to cover auto rickshaw pullers, taxi drivers, rag pickers, sanitation workers and mineworkers is a progressive step that will help in improving the quality of life. The addition of these groups will enable the urban poor population also to get benefited from the scheme. Further, improved allocation for healthcare and family welfare in FY14 is an encouraging move. Better healthcare infrastructure will facilitate hospitals to get funds for expansion and reach out to the millions in remote places.
• However, the increase import duty on luxury cars to 100% from 75% and hike in the custom duty may affect a few customers with higher insurance premiums.
• We look forward to seeing the Finance Minister referring to discussing the long awaited Insurance Law (Amendment) Bill 2008 in this session. The industry holds a lot of expectations as the bill, once passed, will certainly stimulate reshaping the growth in the sector and economy on the whole.”