Coming down heavily on excessive tax on insurance, Nilesh Sathe, a former member of the Insurance Regulatory and Development Authority of India (IRDAI), has said that 18% GST on the premium is “atrocious”.
Insurance is a must as there is no social security cover available to the public, the Business Standard quoted him as saying. Why should insurance premium be taxed while all essential commodities are out of GST net, he said speaking at a function. Such a heavy tax on premiums does not exist anywhere else in the world, he said.
Sathe pointed out that there is no GST on banking or MF services. He rued even the premium for purchase of annuity attracts GST.
He further pointed out government-owned insurance companies were not capitalised immediately when required and vacancies in the regulator are also not filled fast enough. All this show government’s “apathy” towards the insurance sector.
The regulator has been without a head for the last five to six months.
Insurance penetration will increase when income grows, Sathe said, adding that India’s young population, near absence of social security and higher life expectancy are factors that will fuel insurance growth. Nearly 40% of the population are not insured and the thumb rule of having 6 times the annual income as insurance is not adhered to.
Insurance will get a further fillip when the level of education increases, he said.
Despite incurring losses in some cases, insurers settled over Rs 50,000 crore worth of claims last year, he noted while stressing that technology is a game-changer.
Sathe said insurance companies must share the data among themselves, and must have a common database, particularly about frauds, rejection, and suspicious claims.