Budget 2025: Key Expectations from India’s Life Insurance Sector

The Union Budget 2025 is expected to change the overall life insurance sector with major reforms including GST reduction, enhanced tax benefits, simplification in foreign direct investment (FDI), technological changes, and many more. These reforms align with the IRDAI’s ‘Insurance for all by 2047’ mission.?

5 Major Expectations from India’s Life Insurance Sector in the Upcoming Budget

Here are the 5 transformations expected from India’s life insurance sector in Budget 2025:

1. Reduction in GST Rates

The decision to reduce GST rates on life insurance premiums has been pending for long. The discussions were postponed in the last GST Council meeting. It is expected that the decision to reduce the 18% GST on life insurance premiums will be made in this union budget session.

This move will make life insurance more accessible and affordable to the masses. Moreover, it is also beneficial for the insurance companies as it will reduce their administrative burden.

2. Separate Tax Benefits for Life Insurance

While making investments you always consider the applicable tax benefits. Currently, life insurance premiums are included under Section 80 (C) of the Income Tax Act, of 1969. A separate tax exemption limit on life insurance premiums will encourage more and more individuals to buy life insurance.?

The analysts are expecting a new limit or enhancement in the existing tax exemption limit on the life insurance premiums in the upcoming budget.

3. Ease in FDI Limits

The insurance sector is expecting ease in foreign direct investment (FDI) limits as it could bring more capital. The insurers can utilize this capital to expand the reach of their life insurance products into underserved areas and enhance their technology. Currently, there is a cap of 74% on FDI in the insurance sector, and easing it could attract more foreign capital.?

In the upcoming budget, the government can increase the FDI limit from 74% to 100%.

Xpert Insights

A survey conducted by Axis Max Life in 113 villages across India highlights that only 22% of the rural population owns life insurance products as compared to 73% in urban India.?

4. Technological Advancements

The world is advancing rapidly with the use of AI and technology in every sector. The widespread use of technology in the insurance sector can ease various complicated processes like underwriting, eligibility checks, fraud detection, etc. Moreover, it can improve customer satisfaction rates, drive productivity, and simplify operations.

5. Reduction in Entry Barriers

Ease in licensing and reduction in entry barriers in the insurance sector is expected in the upcoming budget. It will enable new players to enter the market and ensure fair competition leading to more innovation. The insurers can focus on creating customer-centric life insurance products that will increase the insurance penetration in the country.

India is ranked as the 10th largest insurance market globally and is expected to become the sixth largest by 2032. It is only possible if more and more customer-focused insurance solutions can be created.

In a Nutshell

In the upcoming budget, several reforms are expected that can transform the whole life insurance industry. These reforms are focused on making life insurance solutions more affordable and customer-centric.?

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