The COVID-19 pandemic has heightened the need for one product more than any other – health insurance. With healthcare in India being far more affordable than in developed countries, health insurance has never been a necessity thus far. While taking on a health insurance policy is common amongst corporate employees and the urban population, the pandemic has shown us why it’s necessary for every single Indian to take on a policy from now on.
Health insurance premiums in India come with a high GST rate of 18%, which, according to insurance companies, plays a significant role in the decision-making process of taking on a policy. In this upcoming budget, insurers are pushing for a rate cut on health insurance to 5% to make health insurance more affordable to the general population. Industry experts feel that this move will encourage more people to purchase health insurance and will protect themselves from paying huge medical bills out of their own pockets. At the current rate of 18%, the premium price payable is a huge deterrent.
In India, the insurance penetration is just 4.2% of the GDP, according to the IRDAI’s annual report 2020-21, compared to the global average of 7.4%. As of March 2021, non-life insurance penetration was at just 1%.
Health insurance companies also suggest that the government double the health insurance deduction taxpayers can avail, which currently stands at Rs.25,000. Further, they are pushing for bringing healthcare facilities such as diagnostic centres, wellness facilities, and speciality hospitals under the infrastructure category. This move will boost funding by large institutions, including insurance companies seeking and having regulatory obligations of investments in infrastructure assets.
Insurers are also pushing for a separate deduction for life insurance of a minimum of Rs.1 lakh, which currently is included under the Section 80C limit and is altogether capped at Rs.1.5 lakh.
The past two years have been hard for the insurance industry, which saw a massive surge in claims due to the COVID-19 pandemic. The industry has been asking for several direct and indirect tax measures to be considered in the upcoming budget to mitigate the impact of the pandemic and improve the penetration of insurance products.
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