The Standing Committee on Finance of the Lok Sabha has recommended that insurance companies should be allowed composite licensing which will enable an insurer to offer both life and non-life insurance products, including health, motor and term policies.
This move comes in response to give a significant boost to the insurance segment of the country, which will help cut costs compliance hassles for insurers, resulting them to run different insurance lines under one roof.
The committee was chaired by Jayant Sinha, in it’s report tabled in Parliament on Tuesday said “The high rates of GST results in high premium burden, which acts as a deterrent to getting insurance policies”
The parliamentary panel has called for reduction in GST for health insurance and micro insurance products from 18 per cent at present.
The Committee recommended that GST rates applicable to health insurance products, particularly retail policies for senior citizens and microinsurance policies(up to limits prescribed under PMJAY, presently Rs.5 Lakh) and term policies may be reduced.
The report further read, “The Committee, is therefore of the view that there is imminent need to create mass benefits from having necessary insurance protection for diverse products, not just life insurance”
The Committee also recommended a campaign be launched to educate consumers about the benefits of different types of insurance products, claims paid during COVID families in the country, insurance claims during floods and cyclones.
Comprising around 2 per cent of the global insurance market in 2020, the Indian Insurance sector has a long way to go compared to other insurance sectors among advanced economies.
In life insurance segment, India is ranked 9th in the world as in the year 2021, whereas in the non-life insurance business, the nation is ranked 14th in the world.
The idea of composite license has been positively received by insurance companies. The industry anticipates that composite licenses will afford insurers the necessary economies of scale, while providing customers with the option to purchase multiple products from a single insurer, ultimately reducing distribution costs.
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