homepersonal finance NewsBudget 2023 expectations | Reduce GST on insurance premiums to make it more affordable, say experts

Budget 2023 expectations | Reduce GST on insurance premiums to make it more affordable, say experts

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By Anshul  Jan 13, 2023 5:02:03 PM IST (Published)

As we draw closer to the Budget 2023, the insurance policyholders are expecting a reduction in insurance premiums and an increased affordability of policies, especially in the medical cover segment.

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The  It is one of the critical challenges that our industry faces in making insurance products more affordable and accessible to a wider range of people. One way to address this issue could be by reducing the Goods and Services Tax (GST) on these products, experts say.
"Rising medical inflation has resulted in many insurers increasing the premium on health insurance products this year. To reduce the premium cost and make health insurance purchase more affordable for policy buyers, insurers have been requesting the government to reduce the current 18 percent GST rate from health insurance products," said Krishnan Ramachandran, MD and CEO at Niva Bupa Health Insurance.
Echoing the same view,  Roopam Asthana, CEO and Whole Time Director at Liberty General Insurance, said that health insurance is in high demand but often considered too expensive for many individuals and families. So, a reduction in GST should be done.
"Additionally, we need to find ways to incentivize the investments that insurance companies make in creating awareness and distribution of insurance products so that they can reach the hinterlands of the country where they are most needed. By making these changes, we can ensure that insurance is available to everyone who needs it, regardless of income level," Asthana added.
GST rate rationalisation from the current rate of 18 percent on term products may also help make it more affordable for the masses, who are keen on buying protection-oriented products like life insurance.
"India’s infrastructure sector is struggling as the traditional financiers, with their shorter-term sources of funding, are reluctant to extend loans, lest it skews their asset-liability balance. Life insurance companies with their long-term assets can help spur the country’s infrastructure sector, and consequently, its GDP growth. The government should consider this aspect as well, for incentivizing investments into life insurance products that will facilitate infrastructure and overall development of the country," said Subhrajit Mukhopadhyay, Executive Director at Edelweiss Tokio Life Insurance.
Current GST rate on different insurance policies
The GST on health insurance is 18 percent. In case of life insurance, GST applies differently on different life insurance products.
For term insurance plans, GST applies at a standard 18 percent on premium payments. For Unit-Linked Insurance plans (or ULIPs), GST is also charged at 18 percent. This covers GST costs for premium payments as well as charges for fund management. In case of endowment plans, GST is applied differently. For first year premiums, GST is levied at 4.5 percent while for the subsequent years, it is levied at 2.25 percent. For life insurance in the form of single-premium annuity policies, GST is levied at 1.8 percent.
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