Prime Minister Narendra Modi's inspirational talk about bringing India under a universal social security umbrella, followed by the announcement of insurance schemes and increasing taxable limit for health insurance, during last year's Union budget has definitely raised the expectations of the insurance sector for this year's (2016- 17) budget. Awareness about insurance was adequately built by launching schemes like Atal Pension Yojana and Pradhan Mantri Jeevan Jyoti Bima Yojana. Undoubtedly, the stage is set. If this year's Budget can address some core issues of insurance and create an amenable environment for the sector to grow then it will not only boost the insurance sector but will also go a long way in achieving the dream of universal social security in India.
Problem: Hassling KYC process
Solution: Uniform and online KYC
Getting an insurance policy requires a long list of documents and their verification as part of the Know your Customer (KYC process. Again, buyers must repeat the KYC process for every physical policy they purchase. This long drawn and complicated process becomes a major buying deterrent for time-crunched people.
A buyer should be able to submit his KYC online; this can be used for buying or verifying practically anything.
The government should take a long-pending decision towards uniform KYC. A buyer should be able to submit his KYC online; this can be used for buying or verifying practically anything. This can be a path-breaking step for the insurance industry. Buying insurance will become hassle-free and consumer-friendly.
Problem: Insurance penetration
Solution: Adequate tax exemptions
The insurance sector suffers from the problem of low penetration in the market. People at large remain uninsured owing to the high cost of policies and lack of awareness around utility of insurance. Adequate tax exemption and tax holidays will help incentivize buying of insurance policies, given that the current exemption limit may not be sufficient to meet future requirements owing to rising healthcare and treatment costs. Today, if a 55-year-old were to buy a health insurance plan with ₹10 lakh insured for his family, he would have to pay more than ₹30,000 as premium. Enhancing health insurance coverage would mean increase in premium payout. The current tax benefit in this scenario would become null and void.
This Union Budget should focus on the digitization of insurance and ease of processes. Getting the insurance sector online is a must.
In last year's Budget, when the limit over health insurance tax exemption was increased, a marked increase in sale of health insurance was registered. This is a sign that positive reinforcement works to encourage people in buying policies and this behaviour will also create a domino effect, spreading the much required awareness about insurance. More such announcements are expected from this Union budget.
Problem: Catastrophic impact during a natural calamity
Solution: Give impetus to home insurance
Of late, there have been a series of natural calamities wreaking havoc in the lives of people, such as the floods in Chennai, Jammu and Uttarakhand. A house is usually the most expensive investment of a middle-class person and only home insurance can protect it against "acts of God". However, currently there is a lack of awareness about home insurance. Tax sops in home insurance will throw the spotlight on it and make it accessible.
Problem: Expensive policies and complicated claim filing process
Solution: Encourage online selling of insurance
Last year, we saw that the insurance policies sold online were not only cheaper but also more efficient. A lower spend on administrative and management costs was passed on to the consumer in terms of low-cost premium. Again, if more policies were sold online, and claims were filed and reimbursed online, then the insurance sector would modernize, become consumer friendly and fast -- all three major needs of today's times. This government has been emphasizing Digital India and this should reflect in the insurance sector too. This Union Budget should focus on the digitization of insurance and ease of processes. Getting the insurance sector online is a must.
The insurance sector awaits the Union Budget in anticipation of this year being a game-changer. Many reforms are required to make insurance both accessible and affordable for the masses. The government set the right mood in last year's Budget and now it should take it forward in the right direction.
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