Page 15 - Insurance Times May 2022

Private Life Insurance

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bank informed BSE. The stake would
SBI research report bats for nil GST on insurance bring in resources that are expected to
premiums augment the capital base of the

Taxing insurance premiums at 18 per cent at a time when insurance private sector lender.
penetration in the country is merely 4.2 per cent is, perhaps, not the best In December 2020, IDBI Bank had sold
way forward. Instead, the goods and service tax (GST) on life, health, and a 23 per cent stake in an insurance
term premiums should either be reduced to 5 per cent or a "nil" rate so as to joint venture to Ageas Insurance
cover the maximum population of the country, SBI research said in its report. International JV for Rs 507 crore. This
"In India the insurance penetration is low; the introduction of tax in the realm raised Ageas stake to 49 per cent in
of insurance may not represent the best step forward. After Covid19 the insurance company.
pandemic's effect on the economy, it seems this is the right time to reduce
the GST rate to 5 per cent or "Nil" rate on Life/Health/Term insurance to Life Insurers to get annuity
cover the maximum population of India," the research note said. boost
Twenty years after India's insurance sector was opened up, unshackling the Life and general insurance companies
control of state-owned companies, as many as 50 private players have set up may see a divergence in their fourth-
shop. But India's insurance penetration needle has moved little. The overall quarter earnings as life insurers are
insurance penetration has increased from 2.71 per cent in 2001-02 to just expected to continue seeing robust
4.20 per cent as of 2020-21. Life insurance penetration has increased from demand for annuity schemes that will
2.15 per cent to 3.2 per cent during the period, while non-life insurance help offset declining revenue share
penetration has moved up by just 44 basis points to stand at 1 per cent as of from unit-linked plans (ULIPs). General
2020-21. insurers, by contrast, should report
tepid growth as business activity is still
The insurance industry has been advocating a reduction in GST rates on
weak.
premiums for a very long time, and more so after the Coronavirus (Covid-19)
pandemic. While there have been several calls from the industry to the "For life insurers, APE (annual premium
government for a relook at GST on premiums, there has not been much equivalent) growth may be moderate
development on this front. with modest VNB (value of new
business) margin unlike the third
IDBI Bank to sell entire The board of directors has approved to quarter, which witnessed stable
sell IDBI Bank's entire stake of 200 margins for insurance companies. ULIP
stake in life insurance arm million equity shares in AFLI to Ageas products are likely to be slower while
to JV partner pursuant to exercise of Call Option by annuity and credit life products are

IDBI Bank will offload its balance 25 Ageas. likely to have robust demand during
per cent stake in Ageas Federal Life The details of the sale would be the quarter.
Insurance Company (AFLI) to Ageas communicated once the share "Further, the demand for protection is
Insurance International NV. purchase agreement is executed, the also expected to remain subdued,"

The Insurance Times, May 2022 15