Budget may have negative impact on insurance

Union Budget 2020 remains a neutral but structural effort, even though the market had very high expectations from the government in terms of key announcements for insurance, real estate and health sector.

Introduction of new optional and lower direct tax slab for Individuals, and removal of exemptions and benefits will create higher disposable income in the hands of small taxpayers. This will support consumption and will also propagate insurance. However, with the optional approach there would be a negative impact on the attractiveness and spread of health insurance.

The allocation of `2.83 lac crore for agriculture sector and various initiatives proposed such as subsidy on fertilisers, warehousing, transportation, etc. will support the rural economy and have a positive impact on overall spending in rural sector.

We expect positive impact on crops and crop insuran-ce post lower rates of fertilisers. The same may be said for motor insurance.

Insurance industry was expecting FDI to increase to 74 per cent.

This would have allowed the sector to grow faster with additional capital and technical expertise. We hope this remains a focus area for the government in the future.

We welcome the move to widen the scope of the government’s flagship scheme – Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (ABPM-JAY), and the proposal

We welcome the move to widen the scope of the government’s flagship scheme – Ayushman Bharat Pradhan Mantri Jan Arogya Yojana and the proposal to set up a viability gap funding to allow empanelment of hospitals on a PPP mode to set up a viability gap funding to allow empanelment of hospitals through a public-private-partnership (PPP) model.

The time-limit for the project which qualifies as affordable housing projects is extended by one year thus incentivising to real estate sector to provide affordable housing space and accordingly enjoy tax holiday.

It would have been encouraging to announce mandatory home insurance to protect the existing households against various natural disasters frequenting.

A welcome step has been introduced under the budget whereby Deposit Insurance Coverage for a depositor has been hiked from `1 lakh to 5 lakh to protect the loss of hardearned depositors’ money. This will further enhance the social security among the middle-class and will help them rebuild their trust.

The government’s push towards the digital ecosystem has benefitted the general insurance industry significantly and we hope these measures will continue to support ease in insurance distribution.

(The writer is executive director and CEO, Reliance General Insurance)