As Budget 2025 approaches, the insurance industry is looking forward to reforms that can address critical gaps, promote financial inclusion, and drive growth in this vital sector. Here are some key expectations shaping the industry’s wishlist.
The 18% GST on insurance premiums has long been a deterrent to affordability, particularly for life, health, and term insurance policies. The industry urges a reduction in GST rates to make insurance more accessible for all demographics, particularly rural and low-income groups. Lowering GST would not only encourage wider adoption but also align with the government’s financial inclusion goals.
The demand for a distinct tax exemption under the Income Tax Act for term insurance premiums has grown. Currently grouped under Section 80C with other investments, a separate category would incentivize individuals to prioritize pure protection plans, bridging India’s significant protection gap.
Medical inflation has made health insurance essential, yet the tax deduction limit under Section 80D—Rs. 25,000 for individuals and Rs. 50,000 for senior citizens—remains insufficient. The industry recommends raising these limits to Rs. 50,000 and Rs. 75,000, respectively, to reflect rising healthcare costs and encourage higher health insurance uptake.
India’s insurance penetration remains low, with life insurance at 2.8% and non-life insurance at 1%. Budget 2025 could introduce initiatives such as incentivized first-time buyers and awareness campaigns to promote insurance across underserved regions.
Support for digital infrastructure, AI integration, and cybersecurity measures is critical to modernizing insurance operations. Policies promoting innovation can enable insurers to enhance efficiency, improve customer experience, and tackle fraud.
The Union Budget 2025 has the potential to usher in a new era for the insurance industry, fostering inclusivity, resilience, and growth.
