IMPACT OF BUDGET 16

ON INDIAN INSURANCE
SECTOR

Insurance sector in India

In India we have both the public and private sector
organizations in Insurance sector, it has gone
through a number of phases.
The Life Insurance Companies Act and
1912 the Provident Fund

Nationalising the Life Insurance sector,

1956 LIC and GIC.
India allowed private companies in
2000 insurance sector in 2000, setting a limit
onFDIto 26%
2014

FDIlimit was increased to 49%

Where do we stand in Insurance?

By 2012 Indian Insurance is a US$72 billion

industry.

Indias life insurance sector is the biggest in

the world.

About 360 million policies with Compound

Annual Growth Rate (CAGR) of 12-15 per
cent over the next five years.

However, only two million people (0.2%) are

covered under Mediclaim.

In developed nations like USA about 75%

are covered.

The Indian insurance market is a

What the sector expected

from Budget 16?
And what the Budget 16
has given to them?

Expectations of
1)Growth in FDI: sector:
Insurance

The result of liberalisation of foreign investment

ceiling from 26 percent to 49 percent .

FDIs like AIA Group in Tata AIA Life Insurance Co Ltd,

Sun Life Financial Inc in Birla Sun Life Insurance Co Ltd
and Nippon Life Insurance in Reliance Life Insurance
already raised their stake from 26% to 49%.

More than a dozen foreign companies are expected to

raise stakes in their ventures during this year.

They are BNP Paribas Cardif, Insurance Australia

Group, Aviva Plc, Standard Life Plc, AIA, QBE Insurance
Group and Fairfax Financial Holdings of Canada.

2)Increase in Penetration:

Global reinsurance giant Swiss Re points out that

insurance penetration in India in FY15 was just
3.3 percent.

Significantly lower than the global average of 6.2

percent.

The penetration is expected to increase because

of the Prime Minister Narendra Modi's insurance
schemes,

The Pradhan Mantri Suraksha Bima Yojana

The Pradhan Mantri Jeevan Jyoti Bima Yojana.

3)Life Insurance needs separate

exemptions:
Insurance

sectors feels life insurance

needs a separate exemption, like NPS of
2015.

There

was a popular demand to increase

the tax deduction limit of Rs 50000 to Rs
2 lakh under section 80C of the Income
Tax Act.

4)To increase Mediclaim insurance

base in India:

Budget 16 Impact on Insurance

Sector:
1)Government owned Insurance companies to
be listed on the stock exchanges:
New India Assurance
United India Insurance
Oriental India Insurance
National Insurance
are the four public sector general insurance
companies.

2)Government is considering a proposal to

permit 49 per cent FDI through
automatic approval route :

A move with the view to attract more overseas

inflows.

Currently, FDI up to 26 per cent is permitted through

automatic approval route. For FDI up to 49 per cent,
the approval of Foreign Investment Promotion Board
is required.

3) New health protection scheme by the

Government:
Government

to provide health insurance of up

to Rs 1 lakh per family.

4).Exemptions in service tax on the insurance

policies:
Service

tax on service of life insurance business

provided by way of annuity under the National
Pension System regulated by PFRDA will be
exempted with effect from 1st April 2016.

For

effective implementation of this scheme a sum

of Rs 5,500 crore is provided by Finance Minister.

5)Annuity is the only option to get

exemption from tax on EPF:
Government

has proposal to tax 60 per cent of the

EPF corpus effective April-01 unless it is diverted
into an annuity plan.

Conclusion:
The Indian insurance market is a
huge business opportunity
waiting to be harnessed.
And Arun Jaitley has widened the
space for FDI and FII, and also has
considered to give taxation
benefits to it.

Thank You!