The budget has made things more difficult for insurance agents as many money-back policies will be taxable from the next financial year.
An insurance agent could sell single-premium products and short-term endowment plans without much effort. But the road ahead is challenging. According to a new regulation announced in the Union Budget 2012-13, many money-back life insurance policies such as short-term endowment plans, limited premium payment and single-premium plans will not be able to offer tax benefits with effect from the financial year starting April 1, 2012.
Earlier, these products were an attractive buy for any investor looking for guaranteed returns combined with protection and tax rebate.
“Insurance companies will have to modify their products and re-launch them, because no investor would want to wait for 10 years to double their returns without enough benefits. Most investors are already avoiding these products; many agents are unable to complete their sale targets,” said Pradeep Agarwal, an IFA from Kolkata.
The budget has proposed to increase the sum assured (life insurance cover) to 10 times the premium paid from 5 times under the prevailing regulation for tax benefits. Hence, life insurance companies will have to make changes to their existing products that are not compliant with the new norms and file them with the insurance regulator for approval.
Insurers are aware of the fact that it will be difficult to sell such products in this scenario. Moreover, they are stressed as they have only two weeks in hand to modify the products and re-launch them.
“The ministry should be practical before announcing such rules. It is very difficult for us to act in such a squeezed timeframe,” said a CEO of a life insurance company.
Jaydeep Banerjee, another Kolkata-based IFA, echoed the opinion. “After the budget announcement, it is going to be really difficult to push such products as none of the investors would be interested. Who would want to invest in products that do not offer enough benefits?” rues Jaydeep.