Union Budget 2018-19: A comprehensive overview of insurance sector

In the aftermath of the Union Budget 2018-19, experts from the sector highlight how factors like increase in per capita income and demographic factors such as growing middle class, young insurable population, growing awareness along with initiatives made by the government would be additive to general insurance growth in the years to come

The Union Budget 2018-19 puts a lot of thrust on launching new and enhanced initiatives to uplift the lives of rural India and farmers with income generation and comprehensive health protection. Rural and the farming community are the backbone of India. Hence, the launching of new schemes for the agriculture sector is an integral and prudent decision taken by the government, pronounces experts from the insurance sector. Globally, developed as well as developing nations are all living on the edge of natural and man-made catastrophes. The dangers facing all
of us are climate change and rise of communicable health diseases. Both these threats are not subjective and can occur to anyone at any point in time.

These inevitable threats can only be managed through financial tools such as insurance, maintain experts. Insurance– be it general insurance
or life insurance– empowers individuals to regain the continuity from disasters with help of finances provided by the insurance policies they hold, point out these experts. “What the Union Budget has provided is the mass awareness of the insurance product to a country like India where the majority of the population remains uninsured.

The fact of providing Universal Health Coverage (UHC) will trigger the need to understand the scope of coverage and shall draw interest from all sections of the society to get them covered under the plan. The government, on their part, will ensure that the UHC plan reaches out to a maximum number of citizens using distribution platforms like the Common Service Centers (CSCs), which have been set-up in the rural hinterland to extend all government schemes under one roof,” says Rajiv Kumar, MD and CEO, Universal Sompo General Insurance.

He further adds that though this promising announcement of providing UHC is at a nascent stage, the implementation and monitoring will need robust processes. So that it can benefit the larger section of the society. “The involvement of the above plan will need support from varied stakeholders across geographies and industries,” he adds.

NATIONAL HEALTH PROTECTION SCHEME

The government plans to launch a flagship National Health Protection Scheme to cover over 10 crore poor and vulnerable families (about 50 crore beneficiaries) providing coverage up to Rs 5 lakh per family per year for secondary and tertiary hospitalisation. This will be the world’s largest government-funded health-care program. Adequate funds will be provided for smooth implementation of this program later in the year. “This is likely to significantly improve awareness about health insurance in general public and hence may help improving penetration of health insurance in India in coming years.

At this stage, the government has set aside Rs 1,200 crore for the scheme but additional funds will be made available going forward,” says Rajive Kumaraswami, MD and CEO, Magma HDI General Insurance Company Ltd. The scheme is likely to be launched either on August 15 or October 2, 2018, he added.

MERGER OF THREE PUBLIC SECTOR GENERAL INSURANCE COMPANIES

National Insurance Company Limited, United India Assurance Company Limited and Oriental India Insurance Company Limited will be merged into a single insurance entity and will be subsequently listed. “This is a positive for the general insurance industry as it will help reducing competition and improve pricing, especially in Commercial Lines, Group Mediclaim, Marine, among others. The listing of the merged entity
will bring further transparency in the sector,” says Kumaraswami.

RELIEF TO SENIOR CITIZENS FOR MEDICAL EXPENSES

The limit of deduction u/s 80D for health insurance premium and/ or medical expenditure has been raised from Rs 30,000 to Rs 50,000. Also, if the medical premium is paid for more than one year, then the same would be allowed as deduction on proportionate basis for those years and not in the year of payment itself. “This is a big positive for the health insurance industry. Income tax deduction acts as a major driver for health insurance in India.

The current limit was not sufficient in many cases especially if parents were also covered in the health insurance,” says Kumaraswami. The limit of deduction under Section 80DDB for medical expenditure in respect of certain critical illness has been raised for all senior citizens to Rs 1 lakh from the existing limit of Rs 60,000 in case of senior citizens and Rs 80,000 in case of very senior citizens. As this is only for medical reimbursement and not for medical insurance, this move will not have any impact on the industry, points out Kumaraswami.

THE ROADMAP AHEAD

In India, insurance is not bought voluntarily but requires a lot of concerted efforts to sell a policy, highlights Kumar. “Especially health insurance, which is seen as redundant due to the mindset of the buyer who rubbishes the fact about the possibility of a health emergency being diagnosed in their lifetime. The mere fact that critical illness and health emergencies are being diagnosed at an exponential rate due to poor lifestyle and dietary patterns. This should wake-up people from their slumber and make them understand the need to be financially covered for life continuity. At the other end, medical inflation is on the rise.

Medical treatments are getting expensive due to advancement in medical technology. UHC will work towards fighting medical uncertainties with confidence without compromising on treatment,” he adds. In the long-run, the beneficiaries of the above scheme will be more empowered to
counter medical threats and won’t have to rely on moneylenders for the financial support for initiating treatments or postponing the treatment. The proliferation of smartphone devices and wide usage of cheap internet data will be leveraged by the government and insurance companies to educate masses about the process of making insurance claims to avoid complexities.

The Boston Consulting Group estimates digital payments in India will exceed USD 500 billion by 2020, up from USD 50 billion in 2016. “There is immense potential and with the Indian consumer adopting technology rapidly and the government driving digital payments, there is a much greater probability of converting this potential into reality. We invest in India by adapting technology that has been successful in other parts of the world and is suitable to the Indian market. We also innovate and build in India, which itself is a hub of payments innovation right now,” says
Deepak Chandnani Managing Director, Worldline South Asia and Middle East and Managing Director, MRL PoSNet.

The government has also started working with various stakeholders on capping certain medical devices and treatments. This will ensure that the insured is not overcharged for treatments. Technology and mobility solutions will provide the fulcrum to the insured in customer servicing and educating the masses.

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