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Interim Budget 2019 augurs to increase insurance penetration among the middle class

On the bright side, the Interim Budget puts more disposable income in the hands of the middle class, farmers and the workers in the unorganised sector and is expected to boost the economy with a spur in demand and consumption. 

IMPACT FEATURE
        Last Updated: February 11, 2019  | 18:43 IST
Interim Budget 2019 augurs to increase insurance penetration among the middle class

In the backdrop of the 2018 budget which had numerous announcements including regulatory changes specific to the insurance sector like, inclusion of mental illness in health insurance, changes in rules for motor insurance, and the successful merger of 3 PSU non-life insurers. The insurance industry had set higher expectations from this year's budget too, while the takeaways are eminently visible but could have included more sops.

On the bright side, the Interim Budget puts more disposable income in the hands of the middle class, farmers and the workers in the unorganised sector and augurs well for the economy as it will spur demand and consumption. This has been made possible by extending fiscal benefits. Income upto Rs 6.5 lakh is not taxable (upto Rs 5 Lakh total tax exemption + Rs 1.5 lakh under section 80C of the IT Act). Besides this, standard deduction has been raised from current Rs 40,000 to Rs 50,000. TDS limits have also been raised on various savings instruments.

The Interim budget brings good news for the farmers and the working class. Farmers who have faced the misfortune of natural calamities will receive 2-5% interest subvention under the insurance scheme. Besides, the Employees' State Insurance eligibility cover limit has also been raised to Rs 21,000 per month from Rs 15,000 per month.

Currently, the insurance penetration in India is 3.7% of the GDP as against the world average which is 6.31%. The life insurance sector in India is growing at 11% to 12%. General insurance is growing at 18% per annum. For standalone health insurance, the average growth rate is 35% per annum. The government's focus on insurance and social security continues in this budget too and the benefits for the sector are there, though indirectly with hope of greater penetration.   

Insurance companies are capitalizing on the growth opportunities by expanding their distribution network; product improvisation and amplification; use of AI and data analytics for sharper customer segmentation. Insurance companies are also undergoing digital transformation. That should improve customer experience, reduce costs and improves TATs (Turn Around Times).

The underlying long term positive story for the insurance industry continues, as we are witnessing an increase in the household income levels and the growing trend of nuclear families, coupled with a large number of people joining the workforce and an overall increase in financial saving as a sub segment of household savings.

By Mr. Abhijit Gulanikar, President-Business Strategy, SBI Life Insurance

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