Make Retirement Planning More Attractive And Accessible

Create a more level playing field, fostering healthy competition within the insurance industry

Pankaj Gupta

FinTech BizNews Service   

Mumbai, January 30, 2024: As budget 2024 is round the corner, Pankaj Gupta, MD & CEO of Pramerica Life Insurance penned down budget wishlist for year 2024:

In 2023, the insurance landscape showcased resilience, adaptability, and innovation, particularly in the thriving Indian life insurance sector, which is experiencing a robust annual growth rate of 17% in Total Business Premiums. This growth is fuelled by increased awareness, innovative product offerings, and customer-centric initiatives that attract policyholders.

The Indian insurance industry has shown resilience by embracing digitalization in operations and distribution, coupled with a robust adherence to risk management principles. Currently, the Indian Life Insurance industry stands as the 10th largest globally, highlighting its growing significance on the international stage. The industry is poised to achieve a USD CAGR of around 12% until 2027, reaching approximately USD 170 billion.

The life insurance industry has been requesting for a distinct tax deduction limit, specifically for life insurance, with a special emphasis on the term insurance category, apart from the existing 80C provisions. This would serve as an incentive for individuals to invest in life insurance policies and promote a sense of long-term security. There could be an opportunity to also re-look at the taxation framework surrounding Pension and Annuity Products. An extension of the current Rs 50,000 tax exemption, applicable to the National Pension Scheme under Section 80CCD(1B), to encompass pension and annuity plans offered by insurance companies, could make retirement planning more attractive and accessible, encouraging individuals to opt for insurance-based pension and annuity products. These changes would also create a more level playing field, fostering healthy competition within the industry.

Furthermore, IRDAI's vision of "Insurance for All by 2047" signifies a deep commitment to revolutionize the insurance landscape. The focus is on enhancing the availability, accessibility, and affordability of insurance services for both citizens and businesses, marking a transformative era for the sector. A noteworthy stride in promoting innovation is the regulatory sandbox, providing companies with the opportunity to launch products in safe environment before a full-fledged launch. Working hand-in-hand with the regulator, the sandbox is paving way for a more agile and dynamic approach. Further, the impending launch of BIMA SUGAM in 2024 represents a pivotal step in modernizing the insurance industry.

From our perspective, we anticipate a year of ongoing change in insurance sector, characterized by technological advancements, enhanced focus on customer experiences and an increasing emphasis on environmental and social responsibility.

Looking at the economy more holistically, the enduring commitment to the 'Make In India' initiative of the government will help increase capital expenditure and also help improve long-term productivity. Capex as a part of total spending has risen from 12% in FY20 to 22% in FY24. With private capex recovery still in the incipient stage, the government is likely to persist in its focus on capex. We are expecting a year-on-year growth of 20-25% in FY25. The government is also giving due cognizance to fiscal consolidation, aiming for a fiscal deficit target of 4.5% in FY26. Following strong electoral wins in the recent state assembly elections, the focus is likely to be on continuing the path of fiscal consolidation and reducing the deficit to 5.2% of GDP in FY25. Given the robust 10.5% nominal GDP growth and a disciplined fiscal deficit standing at 5.2%, our internal projections indicate a Gross Government Securities (G-Sec) supply of approx Rs 15.5 lakh Cr in FY25, similar to the supply observed in FY24. Furthermore, the expected influx of around USD 25 billion (~Rs 2 lakh Cr) from passive global funds, stemming from India's inclusion in the Global Bond Index of JP Morgan, is likely to influence interest rates to decrease in the upcoming fiscal year.

Even though the upcoming budget is a Vote on Account and not a full-fledged budget, we foresee a continuation of the infra capex and self-dependency themes.

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