Higher tax benefits likely for health, accident covers
October, 23rd 2012
CEOs of general insurance companies CEOs met the Finance Ministry on Monday to deliberate steps to revive growth and improve penetration for the industry. Currently, general insurance penetration stands at 0.7 per cent as against the global average of 1.5-4 per cent.
According to Amarnath Ananthanarayanan, MD & CEO, Bharti AXA General Insurance, taxation, distribution, bancassurance and product approval were discussed. On the taxation front, health insurance policyholders could be in for a higher tax benefit under Section 80D. And this could be extended to other policies like home and personal accident also. Life insurance policies get a tax benefit of up to Rs1 lakh under Section 80C. We have asked for similar benefits for general insurance policyholders as well, says Ananthanarayanan.
KG Krishnamoorthy Rao, MD & CEO of Future Generali General Insurance says, "Insurance looks attractive because of tax benefits. Therefore, if tax benefits are provided to home and personal accident covers also, we would see a good offtake of these plans." The industry also suggested that the third-party motor insurance pricing should be freed or at least be risk-based, says Rao. Third-party motor cover refers to the mandatory insurance that car-owners have to buy to provide compensation for accident victims. Here, the rates are notified by the regulator after taking into account inflation, average claim amounts and expenses in servicing the claims. The insurers also asked for limiting the time for filing a third party claims and raised the problem of 90 million uninsured vehicles on the road.
Additionally, product approval has also been slow across the insurance industry. Hence, the industry wants the 'File & Use' mandate to be extended to the general insurers also. File & Use means that the industry can file certain standardised products with the regulator and within 15-20 days of filing the products, they can start selling the products. At present, the general insurers can use the products only on the regulator's approval. Recently, the insurance regulator and the Finance Ministry allowed life insurers to 'File & Use'.
The industry also asked for putting in a place a mechanism for better pricing of group health insurance, which can take into consideration existing claims ratio, medical inflation, management expenses, underwriting cost and so on.
The Finance Ministry is likely to come out with a 10-point agenda for the general insurance industry soon, in-line with the life insurers.