Budget expectations 2025: Exploring reforms for the life insurance sector
This article is authored by Jude Gomes, MD and CEO of Ageas Federal Life Insurance.
As we reflect on the transformative journey of 2024 and look ahead to 2025, we are heartened by the steady growth of the Indian life insurance sector. With an 11 per cent Compound Annual Growth Rate (CAGR) over the past three years, the industry has reached premiums of USD 107 billion, cementing its crucial role in driving financial security and inclusion.
The Assets Under Management (AUM) of the insurance industry forms a formidable part of the Indian financial markets, highlighting its significant contribution to capital formation and economic stability. Beyond its economic impact, insurance plays a vital role in ensuring the well-being of society at large by fostering resilience and safeguarding livelihoods.
Despite global economic uncertainties, the sector has shown remarkable resilience by embracing technology and innovative distribution models to cater to a digitally savvy population. Looking forward, we anticipate the sector will continue to grow at 11 per cent to 13 per cent, fuelled by GDP expansion, urbanisation, and a rising demand for savings and protection products.
To further accelerate this growth and move towards the vision of 'Insurance for All by 2047,' we urge focusing on key reforms in the upcoming Budget:
Tax Relief for Annuity Plans
With the retirement savings gap projected to reach USD 85 trillion by 2050, simplifying or removing taxes on annuity and pension products, including those under the National Pension System (NPS), will encourage greater participation in retirement planning. Extending the Rs 50,000 tax exemption for NPS contributions to annuities and pensions will help millions secure post-retirement income.
Enhanced Tax Benefits for Life and Health Insurance
Many Indian families still face financial vulnerability in case of an untimely loss of a breadwinner. Offering a separate limit for deductions under Section 80C for insurance premiums will make insurance more accessible and attractive, helping bridge the coverage gap.
GST Reforms for Greater Access
Revising the GST on term life insurance policies will reduce the cost of essential protection plans. A ‘zero rating’ for schemes like Pradhanmantri Jeevan Jyoti Bima Yojana, smaller policies (up to Rs 2 lakh), and annuity products for NPS subscribers will expand access to insurance, ensuring inclusivity and sustaining growth.
Universal Digital Insurance Accounts
Establishing a government-backed Digital Insurance Repository System to store and manage all insurance policies on a single platform can simplify claims processing and policy management, improving transparency and trust.
Retirement Security Bonds
Introducing long-term Retirement Security Bonds that combine insurance and guaranteed returns, will encourage long-term savings with tax-free maturity benefits.
Flexible Microinsurance Framework
Implementing flexible microinsurance guidelines will encourage insurers to design products for underserved rural areas and informal sectors, supported by targeted government subsidies.
Incentives for InsurTech Innovation
Providing fiscal benefits to companies investing in InsurTech startups and AI-driven solutions will modernize underwriting, claims, and risk management systems.
Public-Private Partnerships for Insurance Awareness
Allocating funds to promote insurance literacy through joint campaigns involving the government and insurers, especially targeting Tier 2 and Tier 3 cities.
As we reflect on the past year’s achievements and challenges, these reforms inspire us to move towards a future where insurance is not just a transaction but a vital component of financial well-being for all, making a meaningful impact on lives.
Disclaimer: The opinions expressed above are of the author and may not reflect the views of DSIJ.