Tax saving continues to be a big pull factor for people buying life insurance policies, especially in the last few months of the financial year. Insurers, however, remain upbeat about sales even in the light of the recent Budget proposal under which income-tax assessees may give up deductions for a lower I-T rate.

Industry data reveal a sharp jump in the sales of life insurance policies in March, compared to December.

Last fiscal, the premium collected by life insurance companies more than doubled in March 2019 to Rs 37,459.36 crore, compared to Rs 18,237.84 crore in December 2018.  The number of policies and schemes bought also more than doubled in March 2019 to 55.39 lakh, against 25.15 lakh in December 2018. ( See Chart )

life-inusranceJPG

Sales of life insurance policies

 

Data for the previous financial years also reveal a similar surge in life insurance policies towards the end of the financial year, especially in March, as many people suddenly decide to save tax through long-term investments in the Section 80 C window.

Sales unaffected

Insurance companies and agents say that traditionally, February and March are the biggest months for policy sales, as customers have to give proof of investments for tax saving; this year is no different.

“February and March are always busy months as people want to buy insurance policies to submit in office as proof of investments for tax saving purpose,” noted an LIC agent. “The Budget proposal to remove Section 80C deduction for those availing lower income-tax slabs, however, is unlikely to affect sales as many people may choose not to use the lower tax slab.”

Related Stories
Even without Sec 80 C, life insurance is a must-have
A chunk of the insurance market consists of savings/investment products. Though Section 80C benefit is gone with the new tax regime, maturity proceeds under Sec 10 (10 D) still remains exempt from tax
READ NOW

January this year, however, saw a drop in the premium collected from life insurance at Rs 20,623.01 crore, compared to Rs 25,079.79 crore in December, although the number of policies rose to 46.91 lakh.

Emkay Global, in a research note, said that after the moderate growth in life insurance sales last month, it expects better growth in the consecutive months and the Budget proposal will not impact sales for private insurers.

“We believe private insurance players are unlikely to see any significant shift in premium growth due to the recent announcements made in the Union Budget 2020 (tax savings sale dropping off under the new tax regime), given a diversified product suite and evolving distribution ecosystem,” it said.

Proposal in Budget

Budget 2020-21 proposed doing away with all tax exemptions and deductions for those opting for lower personal I-T rates. Accordingly, taxpayers opting for the lower slab will no longer have the benefit of claiming deduction of up to ₹1,50,000 under Section 80C for life insurance premium as well as Section 80D for health insurance premium payments.

Life insurance companies have, however, stressed that the proposal will not have much impact on sales.

comment COMMENT NOW