Initially, the Insurance Regulatory and Development Authority of India (IRDAI) was in continuous touch and in talks with the council regarding the provision for reducing the GST tax on essential insurance items.
During the IBAI (Insurance Brokers Association of India) insurance summit in Mumbai, the Chairman Subhash Chandra Khuntia talked to the reporters and informed that IRDAI is continuously in contact with the GST council and has made a request to include property insurance in vulnerable (unsafe) areas.
In effect to this, the GST Council has reduced tax rates for third-party motor insurance of commercial vehicles from 18 percent to 12 percent.
Khuntia informed that tax reduction in other categories of insurance products has also been included in the proposal. He looked hopeful for the general insurance segment to come under the tax reduction umbrella.
When we look at the contribution of the share of insurance premiums in India’s GDP, (called insurance penetration), we find a marginal increase from 3.49 percent to 3.69 percent within a year.
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If we follow the Swiss Re sigma report, it reveals that the insurance density or premium per person for FY18 is at $73 as compared to previous year’s $59.7 whereas the Non-life insurance density contributed a 0.93 percent in FY18 as compared to 0.77 percent a year ago.
Insurers Should Make Provisions For IL&FS
The IRDAI Chairman Khuntia showed his concerns regarding the IL&FS matter and said that all the insurance companies that are in some way have exposure to IL&FS and its group companies would have to clarify for if they have become a non-performing asset (NPA) and the debts could not be written off.
As we have been known about the Bad past of the IL&FS group. The problem raised its head for the first time in June 2018 when the Group defaulted on inter-corporate deposits and commercial papers (borrowings) which amounted to Rs 450 crore. For the following three months the rating agencies downgraded its long term ratings.
The other Group companies who are in some way concerned to the IL&FS Financial Services also defaulted on interest payment on commercial papers for a number of times. Now, measures have been taken and a board has been reconstituted by National Company Law Tribunal having government nominees.
