The Indian insurance sector is facing challenges with a low penetration rate of 3.7%, which is lower than the global average of 7%. The Union Budget 2025 can play a crucial role in promoting insurance penetration and enhancing the financial well-being of millions. This can be achieved through measures such as increasing tax deductions under Section 80C, rationalizing GST rates, and fostering innovation through regulatory support.
The article suggests that the government can promote insurance penetration by:
1. Increasing the deduction limit under Section 80C to incentivize individuals to commit to long-term savings and policy adoption.
2. Allowing employers to claim tax benefits on premiums paid for group insurance policies to encourage companies to offer comprehensive coverage to their employees.
3. Reducing GST rates on life insurance premiums to make insurance more accessible to underserved markets.
4. Providing tax incentives to insurers for long-term investments in infrastructure projects, which can stimulate economic development and offer stable returns.
5. Expanding the regulatory sandbox to enable innovative solutions in the insurance sector, such as the use of AI, blockchain, and IoT.
6. Enhancing data sharing with a focus on security to enable the development of innovative products and enhanced customer engagement.
7. Establishing robust data governance frameworks to empower insurers to leverage data responsibly for risk management, personalization, and improving customer experiences.
Additionally, the article suggests that a stable macroeconomic environment, financial inclusion, and environmental, social, and governance (ESG) considerations are crucial for promoting insurance penetration. This can be achieved by promoting financial inclusion, expanding digital infrastructure, and offering tax incentives to insurers investing in ESG-aligned assets.
Overall, the author believes that these initiatives will not only boost insurance penetration but also contribute to building a financially secure and resilient India.