Insurance is an important social security tool that plays a crucial role in mitigating uncertain risks by providing financial support in case of any loss/ damage. However, the importance of this tool is not realised by many. It’s only when some unfortunate event occurs that people understand its significance. Hence, a few steps by the Government will help in making insurance a pull product and increase its penetration in the country.
GST rate reduction
Since non-life insurance is considered a dead investment by many as there are no returns, there is no motivation for people to opt for it. Also, most people look at premium rather than the coverage while buying a policy. Hence, GST rate of 18 per cent acts as an additional dampener as the cost of insurance goes up drastically. The reduction in GST rates on insurance premium will encourage more people to opt for it.
Importance to home insurance
With increase in the frequency of natural calamities, there is a dire need for people to realise the importance of having home insurance, the penetration of which is less than 1 per cent in the country. Today, there are many people who are not even aware that such a cover even exists, and some opt for it only because of loan requirements. Hence, a tax exemption can be provided to those opting for home insurance, wherein the limit for deduction under section 80C can be increased to Rs. 1,75,000, with a separate deduction made available for home insurance up to Rs. 25,000.
In order to further bridge the gap between economic loss and insured loss due to natural calamities, the Government should introduce an index-based insurance scheme (Parametric Insurance) throughout the country that can cover property losses due to natural calamities. Few States have implemented it so far, but there is a need to further institutionalise it and structure it for a better uccess rate. Under this scheme, compensation can be given for the damage caused due to the catastrophic event as per the pre-defined triggers for such events. The premium for the same can be collected along with the property tax and once the claim is triggered, the amount can be directly transferred to the beneficiary’s Jan Dhan Account linked to the home insurance policy.
Increase association with Government
Large scale collaboration between the Government and insurers can lead to increased awareness and penetration of insurance in our country. For instance, PMFBY has helped us support the backbone of our economy i.e. the farmers through crop insurance. Similarly, PMJAY scheme is evolving and looking at how PMJAY-SEHAT covers all citizens of J&K UT, this scheme should further enhance its coverage by not limiting it to specific strata of people, but should provide health insurance to all citizens of our country. Such an association would not only lead to the growth of our economy, but also of our society as a whole.
(The writer is MD & CEO of Bajaj Allianz General Insurance)
