Page 53 - Insurance Times March 2023

that the segments at risk generally have lower profitability, 80C of the Income Tax Act has reduced, owing to a shift in
but the impact on growth will also compel insurers to the customer segment, but LIC's dependence on this has
compromise a bit on margins. In the immediate term, non- remained fairly high.
par guaranteed products could see a fire sale over the next
two months. "Overall, it would be interesting to see how "LIC's ticket size is one-fifth of that of the private sector at
insurers deal with distribution cost and opex (operating around Rs 15,000 and hence, LIC could have a target
expense), as they attempt to keep their products competitive. segment buying a policy for 80C exemption benefits and
On net, we see a 10-12 per cent reduction in the medium- could get impacted a bit more," said Suresh Ganapathy,
term margins, coupled with moderated terminal growth and associate director, Macquarie Capital in his report.
higher cost of equity," they pointed out.
"We don't agree with the argument that the new taxation
Meanwhile, analysts reckon there has been a structural shift regime is more lucrative than the old taxation regime, which
in the government's stance when it comes to exemptions allowed purchase of insurance products and claim 80C
provided to insurance. The big push towards the new taxation exemptions. We believe many people buy insurance
simplified tax structure, which is devoid of any exemption, because of taxation benefits at maturity which aren't
in this year's Budget is also expected to have a negative withdrawn except for high-ticket policies. Also, there are
impact on the insurance sector. Over the years, the several other items in 80C and insurance exemption is not
dependence of life insurers on the exemption provided under the main aspect driving the purchase," he further said.

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46 March 2023 The Insurance Times