Budget 2021-22: Insurers seek greater push to health cover, reduction in GST

A greater push to health insurance, reduction in Goods and Services Tax (GST), and a separate deduction for home insurance top the wish list of the general insurers in the upcoming Budget 2021-22.

There are also expectations of broader healthcare reforms that can augur well for the health insurance segment, which has been in the limelight, thanks to increased awareness driven by Covid.

According to Mayank Bathwal, CEO, Aditya Birla Health Insurance, health insurance was growing even before the pandemic. However, the pandemic has reinforced the essential nature of having a safety net for healthcare costs. In this situation, it is necessary to have health insurance as every family today faces questions on their preparedness coping with unforeseen and emergency healthcare costs, he said.

To give a further push, the industry is expecting some positive action by the government in the upcoming Budget. "Given the global focus on health, we anticipate that this year's Budget will have a larger thrust on health reforms," said Bathwal.

As family health insurance premiums versus the tax benefits are skewed, it becomes important to increase the limits defined for mediclaim premium tax deduction under section 80D of the Income Tax Act to ₹1,00,000 ( ₹50,000for self and spouse, in addition to ₹50,000 for parents).

"Further, allowed dependent relationships should be re-looked. It is also crucial to reintroduce the medical reimbursement with a higher limit of ₹50,000 tax deduction, which got merged in standard deduction during the finance budget 2018," said the Aditya Birla Health Insurance chief.

Tapan Singhel, MD & CEO, Bajaj Allianz General Insurance, expect more traction on the Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (PMJAY).

"Looking at the way PMJAY scheme is evolving (case in point is PMJAY-SEHAT in J&K UT), I feel that the scheme should further enhance its coverage by not limiting it to specific strata of people, but should be provided for all citizens of our country," he said.

This, coupled with reducing the GST on insurance premiums and increasing the tax exemption cap limit under 80D, will encourage more people to opt for health insurance.

"These measures will not only help people access quality medical treatment but also better their lifestyle, thereby increasing the life expectancy of people in our country even further," Singhel added.

Given India's low insurance penetration and that insurance is intended to provide financial support against sudden human or economic loss, the government should lower the applicable GST rate on insurance premiums.

The non-life companies are mandatorily participating in pooling arrangements such as Terrorism Pool, which should be exempted from GST. In the case of the insurance business, investments or transactions in securities are governed by the Insurance Act and Regulations framed thereunder to protect the policyholders' interest over the long term.

Hence, the insurance industry feels that provisions of inclusion of transactions in securities in 'exempted supply' should not apply to insurance companies, said Ramandeep Sahni, Chief Financial Officer, Bajaj Allianz General Insurance.

A separate deduction for home insurance is also needed, feel industry experts. "Given that most individuals exhaust their 80C limits through investments/savings, the limit for deduction under section 80C should be increased to ₹175,000, with a separate deduction made available for home insurance up to ₹25,000," Sahni added.