Union Budget 2025: Wish list from the insurance sector

The Indian insurance sector witnessed a mixed bag of performance in 2024, as reflected by the one-year returns of major companies. Data available with ACE Equity shows that in 2024, General Insurance Corporation of India outperformed with a stellar 44% return, followed by ICICI Lombard General Insurance Company and ICICI Prudential Life Insurance Company, which posted impressive gains of 26% and 22%, respectively. Life Insurance Corporation of India registered modest growth with a 7% return. However, not all companies had a positive year. SBI Life Insurance (-3%), New India Assurance (-4%), and HDFC Life Insurance (-5%) struggled, while Star Health and Allied Insurance Company posted a significant decline of -11%. This disparity highlights differing market dynamics and investor sentiment within the sector.

Growth Drivers for the Industry

Ajit Banerjee, President and Chief Investment Officer at Shriram Life Insurance, emphasised the transformational journey of the insurance industry in India. Once viewed solely as a protection-oriented asset, insurance has evolved into a crucial economic pillar, aided by the post-Covid acceleration in digital adoption. The industry is now poised for further growth in 2025, driven by key reforms and increasing consumer awareness. Initiatives like broader health insurance reforms, digital platforms for effective product distribution, and targeted offerings for low-income households are expected to enhance insurance penetration.

Banerjee added that despite the industry’s growth trajectory we should also be mindful of the fact that there still remains low awareness and limited understanding of risks by the uninsured population, leading to an overall drop in the insurance penetration as a percentage of GDP from 4.2% to 3.8% in 2023. The Irdai is set to broaden insurance penetration in the country by leveraging major policies such as Bima Sugam, Bima Vahak and Bima Vistaar and take it to 4.5% by 2034, along with the coordinated efforts of the entire insurance ecosystem comprising of insurers, intermediaries, etc.

Budget 2025-26 Expectations

According to Banerjee, the upcoming Union Budget 2025-26 holds significant importance for the sector. Industry stakeholders are advocating for:

• Carving out a separate tax deduction for life insurance premiums under Section 80C to incentivise policyholders
• Revisiting income tax slabs and exemption limits to boost disposable incomes, encouraging higher investments in financial products like insurance
• The request for revising downward the GST rates on health insurance and term insurance products, which is pending before the GST council, will be a much sought after measure by both the insurer and the insured and would support in a big way in increasing the insurance penetration in the country