I had high expectations of the Union Budget 2016/17 and hoped it would solve some of the core issues in the insurance sector. When Finance Minister Arun Jaitley unveiled the new Budget on 29 February, it was clear to see the government's focus on rural employment and infrastructure, along with the driving goal of doubling farmers' income in five years. While this is a commendable aim, the crucial insurance sector was relatively neglected, with minuscule reforms compared to last year's Budget, which saw an enhancement of the tax deduction limit in health insurance, benefits for pensioners and the introduction of personal accident insurance schemes.
While expectations were that there would be an increase in tax exemption limits for health insurance to accommodate spiralling healthcare costs, the Budget saw a new and different focus in the healthcare segment. Keeping in mind the poor and economically weak sections of society, it proposed to launch a new health protection scheme with ₹1 lakh as the sum insured. Here, senior citizens aged 60 years and above stand to benefit more as there would be an additional top-up of ₹30,000 to their cover.
The Budget proposed to launch a new health protection scheme... but the plan so far lacks clarity in terms of its features, premium amount and reach.
However, the downside is that the plan so far lacks clarity in terms of its features, premium amount and reach. Despite this, most people are hopeful that it would be universal in nature. For the economically weaker segment to leverage this plan, the premium must be affordable; alternatively, the government could bear the costs so that it can be part of a social security initiative for this disadvantaged segment.
To make this policy much more effective and to extend its reach and penetration, I believe that the government must ensure that the scheme is secured through a strong underwriting process and a dependable claims mechanism. This would help protect the insurers from risks that could arise due to fraudulent activity. With reports that a whopping 30% claims were made by those insured under the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) scheme in the first month of purchasing the plan, the proposed health scheme could face similar challenges.
In another announcement, the 'Niramaya' Health Insurance scheme has now been exempted from service tax. It was currently being levied a service tax of 14%. The premium amount for this policy has been ₹250 for families earning less than ₹15,000 per month and ₹500 for families earning more than this amount on coverage of ₹1 lakh. This is a welcome relief for those suffering from or having dependents with autism, cerebral palsy, intellectual disabilities or multiple disabilities.
The government could have easily introduced a tax concession on home and property insurance given that the last few years have witnessed a spate of natural calamities...
However, the proposal to reduce service tax for single premium annuity plan is largely a no-gainer as very few buy such plans -- most policies bought are regular premium ones. The proposed listings of public sector general insurance companies such as New India Assurance, National Insurance, Oriental Insurance and United India Insurance was also on expected lines as the government has been unlocking valuations for the PSU sector companies.
To sum up, though the insurance industry saw minor reforms in the health segment, it fell short of expectations. The government could have easily introduced a tax concession on home and property insurance given the fact that the last few years have witnessed a spate of natural calamities such as the Uttarakhand and Chennai floods which caused massive destruction to homes and other property.
With some gains in increasing the penetration of insurance to disadvantaged sections, this year's Union Budget does raise hopes on the social security front. However, the finer details are unclear and the overall picture fails to impress.
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