The Insurance Brokers Association of India (IBAI) has called upon the Ministry of Finance to implement further initiatives, beyond the recent revisions to the Goods and Services Tax (GST), aimed at increasing the penetration rates of health and life insurance across the nation.
GST rate cut can exempt individual health insurance premiums to a specific extent, according to the association. Large sections of India’s vulnerable and marginalised population still do not have insurance.
IBAI, to fill the same gap, has proposed rolling out the soft mandates that shall embed suitable insurance covers into financial products like Mudra Loans and Pradhan Mantri Awas Yojana (PMAY), ensuring small and marginalised borrowers are automatically brought within protection.
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“Our thought process is that a 1% direct debit from the borrower’s loan amount towards the insurance premium would be sufficient to create a 360-degree cover encompassing health, life, personal accident, benefit-based business interruption, and property insurance for the assets financed by the loan,” Narendra Bharindwal, President of IBAI, cited.
Bharindwal observed that people at the bottom of the socio-economic pyramid are highly vulnerable as they rarely purchase insurance voluntarily.
He also mentioned that “It has to be a soft mandate to ensure insurance reaches them because they will not buy on their own. Once they experience the benefits firsthand, trust will be built in the system and voluntary participation will follow.”
As per the estimates of IBAI, only 5.5 crore people are covered with health insurance policies at present.
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The associations recommended that the government not be required to propose subsidies towards insurance premiums. But the payment of premiums for vulnerable segments can be deemed as an eligible Corporate Social Responsibility (CSR) activity, permitting companies to channel CSR funds toward expanding insurance coverage.
IBAI has proposed to assist the Ministry of Finance, the Insurance Regulatory and Development Authority of India (IRDAI), and other stakeholders with data, research insights, and coordination support.
Post 56th GST Council meeting, the appeal has arrived where the government has declared a full GST exemption on individual health insurance premiums that comes into force from September 22, compared with the previous 18% tax rate.
