Budget expectations: The upcoming Union Budget for 2025, scheduled to be announced on February 1, is anticipated to bring forth reforms to bolster the expansion and reach of the insurance industry in India. Given the sector's upward trajectory in recent times, industry experts are optimistic about initiatives that could promote financial inclusivity and stability.
Insurers are expecting additional tax exemptions for protection and health insurance products, and adjustments to the new tax regime in this year’s Union Budget. These measures are expected to enhance affordability and boost sector growth and penetration.
“Health insurance has emerged as a crucial safety net for Indian families, shielding them from unexpected medical expenses. According to the IBEF report, India is the 4th largest general insurance market in Asia and the 14th largest globally. Data from IRDAI’s annual reports reveals that health insurance has grown steadily at approximately 25% annually over the past three years, highlighting its importance in protecting households. As India advances toward financial inclusivity and universal healthcare, Budget 2025 offers a pivotal opportunity to further strengthen the health insurance sector. Anticipated policy measures include enhancing accessibility, simplifying tax benefits, and encouraging innovation in insurance products,” said Naveen Chandra Jha, MD & CEO, SBI General Insurance.
Section 80D of income tax
With healthcare costs increasing at a rate of 12-15 percent, having a health insurance policy is essential. Therefore, it is imperative to consider raising the section 80D deduction limit for health insurance premiums paid under the old regime.
“Given the rising healthcare costs and the need for higher sum insured cover, the government should reduce tax burden by increasing the limits under Section 80D of income tax for premium paid for health insurance to Rs 50,000 for all and Rs 1 Lakh for senior citizens. This is crucial for achieving the government's vision 'Insurance for all by 2047’ and would substantially reduce the financial burden on families investing in their health and financial wellbeing,” said Srikanth Kandikonda – Chief Financial Officer, ManipalCigna Health Insurance.
“India last witnessed an enhancement in the deduction limit in 2015-16. It is best if the limit for medical insurance is linked to inflation and gets revised automatically every year or once in a couple of years. Also, the benefits need to be extended to the New Tax Regime,” says Anup Rau, MD & CEO, Future Generali India Insurance.
Insurance for All
The upcoming Union Budget for 2025-26 has the potential to bridge existing gaps in healthcare and create a more inclusive and fair healthcare system. Enhancing health insurance coverage through programs like Ayushman Bharat, with a focus on incorporating comprehensive patient care and life-saving treatments like dialysis, will play a crucial role in alleviating the financial strain on patients and their families.
"Initiatives such as BimaSugam, designed to achieve the goal of ‘Insurance for All’ by 2047, are expected to receive regulatory and fiscal support to address the protection gap. Additionally, the budget is likely to focus on expanding access in underserved regions through government-private partnerships, targeted subsidies, and advancements in digital infrastructure. By fostering a conducive ecosystem, Budget 2025 can empower insurers to contribute to a healthier, more secure India, aligning with the vision of a Viksit Bharat,” said Jha of SBI General Insurance.
Term insurance
Experts think the Centre should contemplate creating a distinct deduction for term insurance premiums. Notable measures like augmenting tax deduction limits within Section 80C for life insurance premiums or establishing a separate limit exclusively for term insurance and pension policies can be seen.
“Key interventions such as increasing tax deduction limits under Section 80C for life insurance premiums or introducing a separate limit exclusively for term insurance and pension policies, can significantly boost life insurance penetration. Implementing mandatory basic term life insurance coverage for formal employment, akin to the EPF, will ensure financial security for dependents in case of untimely demise,” says Sandip Goenka, CEO, ACKO Life Insurance.
Retirement planning
The insurance sector is eagerly awaiting potential tax breaks on annuity and pension offerings, including those affiliated with the National Pension System (NPS), in order to stimulate increased retirement savings.
“With the retirement savings gap projected to reach $85 trillion by 2050, simplifying or removing taxes on annuity and pension products, including those under NPS, will encourage greater participation in retirement planning,” says Jude Gomes, MD and CEO, Ageas Federal Life Insurance.