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The Confederation of General Insurance Agents Association of India has submitted a memorandum to Nirmala Sitharaman, the Finance Minister of India, demanding a decrease in GST on general insurance from 18% to 5%. The memorandum has also been submitted to the Prime Minister, chief ministers of all states, UTs, GST council, parliamentary standing committee on finance as well as stakeholders. The memorandum points out major reasons why the need for such a reduction in GST can be helpful for policyholders and IRDAI’s vision of ‘Insurance for All’ by 2047. They are listed below:
- Low penetration of general insurance: The penetration of general insurance stands at 1% in India for FY2022-23 against the global average of 4%. General insurance density, the ratio of premiums collected by insurance companies divided by the country’s population, is at $22 in India against the global average of $499.
- Rise in health insurance premium: The gross premium for health insurance has become almost double in the last 5 years due to the COVID-19 pandemic and healthcare inflation. A normal middle-class person has to pay up to Rs. 12 to 15k as premium for health insurance.
- Stagnation of share of health insurance premium among states: The same five states have been contributing to 65% of health insurance premium from FY 2018-19 to FY 2022-23. These states include Maharashtra, Gujarat, Karnataka, Tamil Nadu and Delhi. The continuation of this trend can hamper IRDAI’s ‘Insurance for All’ goal by 2047.
- Low health insurance renewal: The average percentage of renewal of health insurance in India stands at 65-75%. This makes it clear that a considerable number of people are unable to afford health insurance due to hike in insurance premium and high GST.
- Impact on tax benefits: The high premium rates can make health insurance unaffordable for the masses thus making the tax benefits given for health insurance under section 80D redundant.
