Cut In GST, Sops For Home Insurance Are Needed To Extend Reach

In view of the importance of insurance, the government can look at reduction in GST across insurance products. Currently, applicable GST rate for a majority of insurance products is 18 per cent.

This rate is levied on the premium paid by the customers and hence can be a dampener for them to opt for insurance. A reduction in GST will encourage purchase of this important financial tool.

With regard to reforms in public sector insurance companies, the merger talks of PSUs are now ongoing. This merger should not be looked at merely from a consolidation perspective. It needs to be thought-through well, wherein one or two vertical-focussed insurance companies can be created rather than just blindly merging them and be competitive to each other.

Ayushman Bharat is a robust scheme that should continue in some shape or format in all States, and some announcement on a National health scheme should be conceptualised to cover people from all strata. This will bring more people under the ambit of insurance.

The government should focus more on spending despite the fiscal deficit constraints. It needs to keep the fiscal deficit target aside in these troubled times and spend more money to kick-start the growth of economy. Divestment is another area the government is working on. It could raise funds by divesting in public sector enterprises and spending the proceeds on the productive side, especially for non-core PSU enterprises. Corporate tax cut was good, beyond our hopes. But the current situation is not just about corporate spending, overall demand in the economy is down. To spur demand, the government can look at easing the income tax limits so that there is more money in the hands of customers.

The importance of home insurance has not been appreciated duly by many yet. In times of natural calamities, most of these property losses are suffered by the lower strata of people. The government can introduce an affordable home insurance scheme in association with insurance companies that can cover losses to property during natural calamities. An index-based scheme (Parametric Insurance) can be adopted that compensates for the damage caused by catastrophic events.

Offering tax exemption for home insurance just like health insurance deduction under 80 D will encourage people to opt for it. There is also a need for banks to increase the limit of bank deposit insurance, which appropriately safeguards the account holders.

The writer is Managing Director and Chief Executive Officer, Bajaj Allianz General Insurance