Written by Nitin Mehta:
Life insurance, a cornerstone of financial planning, plays a pivotal role in safeguarding the future of families across India. Acknowledging the importance of the financial cushion in unforeseen circumstances and to ensure that the families are not burdened with debt and can maintain their standard of living, the Insurance Regulatory and Development Authority of India (IRDAI) has set an ambitious vision of ‘Insurance for all by 2047’.
However, the high cost of life insurance premiums has often limited its accessibility to a select few.
To achieve this goal, it is imperative to create a conducive environment that encourages more people to consider life insurance as a vital financial instrument.
Let’s understand the various perspectives of investing in life insurance and its overall impact.
The Critical Role of Life Insurance
In our country, life insurance serves as a vital financial safety net. Whether it’s protecting the family’s income stream in case of untimely demise or providing funds for children’s education or marriage, life insurance offers a sense of security and peace of mind. For many families, it is the only financial asset they possess.
The Burden of High Premiums
Despite its significance, the high cost of life insurance premiums has been a significant barrier for many Indians. This is particularly true for low-income and middle-class families who struggle to allocate a substantial portion of their income towards insurance. As a result, a large segment of the population remains underinsured or uninsured.
Making insurance more affordable
Currently all kind of life insurance are subject to 18% GST which has transitioned from an earlier 15% service tax. This has impacted the premium amounts to some extent. Any efforts to minimise this amount can be a potential solution to make life insurance more affordable to wider audience
Alignment with IRDAI’s 2047 Vision
Making life insurance affordable aligns perfectly with IRDAI`s vision of ‘Insurance for all by 2047’. By doing this, more people can be encouraged to consider it as an essential financial tool.
This would not only benefit individuals and families but also contribute to the overall financial stability of the country.
Benefits of GST Rationalisation
Increased Affordability: Lower GST rates will directly reduce the cost of life insurance premiums, making them more accessible to a wider range of income levels.
Enhanced Accessibility: A decrease in premiums would encourage more people to consider life insurance as a viable option, especially those who were previously deterred by the high cost.
Boost to the Economy: GST rationalisation can have a positive impact on the economy as a whole. By increasing the demand for life insurance products, the industry can create more jobs and stimulate economic growth.
Improved Financial Security: By making life insurance more affordable, it can help ensure that a larger number of families are financially protected in case of unforeseen events.
Increasing the cost-effectiveness and accessibility of life insurance will contribute to achieving life insurance penetration goals and securing the future of the people.
(The author is the chief distribution officer – partnership distribution and head marketing at Bharti AXA Life Insurance)
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