The IRDAI has recently revised its guidelines regarding commissions on long-term motor insurance. This move aims to streamline the commission structures, ensuring greater transparency and fairness in the distribution of motor insurance products. By aligning the commission rates with market dynamics, the IRDAI seeks to enhance consumer trust and promote the adoption of long-term motor insurance policies, ultimately contributing to the stability and growth of the motor insurance segment.
One of the noteworthy proposals in the Union Budget 2024-25 is the reduction in the rate of Tax Deducted at Source (TDS) on life insurance policy pay-outs and insurance commissions. Starting October 1, 2024, the TDS on life insurance policy cover, including sums paid as bonuses, will be slashed from 5% to 2% by amending Section 194DA of the Income Tax Act. This change is expected to provide significant relief to policyholders, enhancing the attractiveness of life insurance products.
Similarly, an amendment to Section 194D proposes reducing TDS on insurance commissions from 5% to 2%. Effective April 2025, this reduction aims to benefit agents by increasing their net income, thereby incentivizing the procurement and renewal of insurance policies. These amendments reflect a positive step towards making insurance products more accessible and affordable for the masses.
However, despite these progressive steps, there remains a notable gap in the government’s approach to promoting the insurance sector. The neglect in reducing the Goods and Services Tax (GST) on health insurance policies is a missed opportunity. Lowering GST could make health insurance more affordable and widespread, addressing the urgent need for greater health coverage across the population.
While the recent regulatory updates and budget proposals bring welcome changes, a more holistic approach is needed to unlock the full potential of India’s insurance sector. IRDAI is eyeing Insurance for All by 2047. Though the vision is great but our country is severely lacking in steps towards consumer awareness and education. Unless we take some concrete step we will not be able to reach even near to the objectives.
