Insurance gets a booster shot
Union finance minister P. Chidambaram has infused new life into the insurance sector, and now it’s up to all the stakeholders to take it forward. What’s interesting about Mr Chidambaram’s agenda is that implementation is time-bound.
IRDA, the insurance regulator, has, for instance, got to come up with guidelines to relax investment norms in less than triple-A infrastructure projects by the end of November; while the Central Board of Direct Taxes and the Central Board of Excise and Customs have an October 10 deadline to come up with a tax structure that would lessen the burden on the sector caused by direct and indirect taxes, as well as service tax, which is now 12 per cent of premiums. If the service tax is reduced or removed altogether it will boost the corpus of the policyholder and increase his/her return. Once the IRDA and the tax authorities have given their suggestions, Mr Chidambaram has promised the government will take “appropriate decisions” soon after.
The life insurance sector has been languishing for the past two years, and more so after Union Budget 2012-13 made life insurance products relatively less attractive due to the forbidding taxation framework. People began to increasingly shift to mutual funds, public provident funds and other such savings platforms.
For customers and life insurance companies the new measures will be a boon. With a 15-day deadline for IRDA to approve a simple product and 30 days for a complex one, these firms will be able to plan launches better. Earlier it took over six months to get IRDA clearance. There will be a common charge/commission for both unit-linked insurance plans and traditional products, so it removes arbitrage possibilities.
One of the new measures that will increase the spread of insurance culture is allowing banks to act as brokers and sell the products of multiple insurance companies, rather than only one company that is permitted now. New companies that have no bank tieups will also benefit. The banking correspondents of major banks will also be able to sell insurance. Most significant is the suggestion that self-help and self-employed groups likes nurses, domestic workers and auto drivers should also be able to buy insurance. Mr Chidambaram surely has his hand on the pulse of the people, and has chosen areas that would help them.
It is now for the insurance companies, banks and IRDA to ensure that these measures, when finalised, are being implemented both in letter and spirit. One can only hope Mr Chidambaram’s positivity flows to all stakeholders so that the benefits of insurance get more transparent and inclusive.
Post new comment