Budget 2016 -17 can transform the life insurance industry in the country. Life insurance Companies have played a major role in the development of the country. Life Insurance sector has supported the Government’s various developmental activities, be it in providing capital for infrastructure projects or through the implementation of Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY). There is a need for providing more impetus to life insurance companies for enhancing life insurance penetration in the country, especially when we do not have a social security system in place. To boost the number of people who will buy PMJJBY, the Government should look into increasing the death benefit beyond Rs. 2 Lakh. A benefit of Rs. 5 Lakh will get more people interested in buying the product. Appropriate safeguards and pulling needs to be in place to make this scheme sustainable.
To begin with, there is a need to increase 80C exemption limit from Rs. 1.5 Lakh to Rs. 2 Lakh, given the need to encourage financial savings. The TDS on policies bought by NRIs needs to be revisited given that many NRI are staying in the Middle East and cannot obtain tax residency certificates. In addition, the service tax frame work needs to be fine tuned especially the service tax charged on annuity policy should be removed.
Thinking on a long term basis, countries like Japan, Germany, Italy and France have already reached a stage where the number of senior citizens outnumbers the earning population. As healthcare facilities in the country improve, people in India are going to live longer. This will put pressure on both the earning population of the country as well as the Government to make provisions to support them. Hence it will be advisable if the Government incentivises people to think about retirement and pension plans. A tax break of Rs. 2 Lakh and an exemption of annuity should be provided for those opting to buy these plans.
Under the government’s Digital India initiative, it is expected that the pace of Internet adoption will accelerate. India should have half-a-billion Internet-connected citizens by the end of 2016. The increase in the number of people who will have access to the internet and their ability to do their own research and decide which product they need and should buy will revolutionise the insurance industry. Digital is transforming consumer behaviour and is driving insurance executives to reassess their business models. This is a huge opportunity for insurance companies as more and more people get comfortable using online and apps, insurance companies are becoming digital ready.
Digitisation would translate into our ability to reach the significant uninsured population in the country. The cost of reaching consumers, providing information and processing their claims seamlessly will reduce significantly, the benefits of which will be passed on to the policyholders. Further, the policyholder’s experience of using the product can be enhanced using digital and mobile platforms. The benefits of being able to enhance user experience digitally is that the policyholder will refer the company or the product to near and dear ones, encouraging people to buy the insurance products. In order to encourage this further, the Government should make provisions to provide impetus for insurance companies to provide more and more insurance products online and to do away with paper based record keeping. Government will have to put in place infrastructure for common KYC across the entire financial services industry. This would ease the process of on boarding of the customer.
The Government is in a great position to ensure that these recommendations don’t just stay on paper, but actually see the light of the day. It will be a proud moment for both the Government and for life insurance companies if one day when you ask the distant relative of yours who stays in a remote village in Meghalaya about how they are going to sustain themselves if they are not able to work on their farm due to ill-health and they reply saying that their insurance company will take care of them. Looking forward to the day.
Arijit Basu, MD and CEO, SBI Life Insurance
