There is a need to reduce the GST rate on insurance products, especially health and term insurance, which is 18 per cent at present, recommended the Standing Committee on Finance.
The committee chaired by Jayant Sinha, in its report tabled in Parliament on Tuesday, said they are of the view that the high rate of GST results in a high premium burden, which acts as a deterrent to getting insurance policies.
The Committee, to make insurance more affordable, recommended that GST rates applicable to health insurance products, particularly retail policies for senior citizens and micro-insurance policies (up to limits prescribed under PMJAY, presently ₹5 lakh), and term policies may be reduced.
Although the insurance industry in India has shown dynamic growth in recent years, with total insurance premiums increasing with reforms instituted by the current government, the penetration and density of Indian insurance products are still low.
Comprising around 2 per cent of the global insurance market in 2020, the Indian insurance sector has a long way to go compared to the insurance sectors in advanced economies.
As per Swiss Re data, India ranked tenth in the global insurance business with a market share of 1.85 per cent in 2021 (1.78 per cent in 2020).
Insurance premiums increased by 13.46% in 2021
Total insurance premiums in India increased by 13.46 per cent (7.8 per cent) inflation-adjusted real growth) in 2021 whereas global total insurance premiums increased by 9.04 per cent (3.4 per cent inflation-adjusted real growth) during the year.
In the life insurance business, India is ranked ninth in the world in 2021. In the non-life insurance business, India is ranked fourteenth in the world.
Insurance penetration and density are two metrics, among others, often used to assess the level of development of the insurance sector in a country
“The Committee is, therefore, of the view that there is an imminent need to create mass benefits from having necessary insurance protection for diverse insurance products, not just life insurance,” the report read.
The Committee recommended that a campaign be launched to educate consumers about the benefits of different types of insurance products, claims paid during COVID families in the country, insurance claims during floods, and cyclones.
“This awareness campaign should be launched jointly by insurance companies and IRDAI and feature life, health, and general insurance products. Reputed and credible celebrities can highlight that they have purchased different insurance products such as for motor, home, and health and recommend that the general public should also purchase such products for their family’s security,” it added.