Page 82 - Life Insurance Today July - December 2020

At present, tax exemption under Sec- Life insurers register 32% surance among consumers amid a
tion 10 (10D) is based on the premium pandemic. Also, the surge in demand
to actual capital sum assured ratio. increase in new business for term products, as well as
Because of this, life insurance policies premium income guaranteed products, helped in
with a higher premium due to age fac- Life insurers reported a 32 per cent recovery.
tor, occupational/lifestyle diseases etc.
jump in new business premiums (NBP) Experts see the demand increasing as
gets treated as taxable. And, policy- in October, helped by healthy growth life insurance is becoming a "pull prod-
holders who need insurance cover are in single premiums and group non- uct rather than a push product". They
denied tax relief due to higher premi- single premiums. This comes after the expect Q3 to be better than Q1 and
ums, ICAI noted. industry saw a 16 per cent rise in NBP as good as Q2, if not better.
To provide relief to such policyholders, in the September quarter.
the ICAI has suggested the govern- Life insurers, 24 in total, earned NBP Bharti AXA Life Insurance
ment that the "tax exemption should of Rs 22,776 crore in October, com-
not be linked based on premium to pared to Rs 17,271.86 crore in the reports 10% rise in re-
sum assured ratio." newal premium
corresponding period last year. In Sep-
Instead, "all LIPs with policy term of tember, NBP was up 26.47 per cent at Bharti AXA Life Insurance said it has
10 years or more should be exempt," Rs 25,366.32 crore. registered a 10 percent increase in
ICAI said. renewal premium at Rs 594 crore in
The numbers are in sharp contrast
ICAI added that tax exemption based with the decline in business seen by in- the first half of the current fiscal year.
on policy term will help in medium to surers in the initial days of the Covid- The company's renewal premium
long term investments. 19 pandemic. In Q1FY21, NBP had stood at Rs 541 crore in April-Septem-
Currently, any sum received under life plummeted more than 18 per cent ber of fiscal year 2019-20, Bharti AXA
insurance policies not exempt under due to the pandemic-induced Life Insurance said in a release.
section 10 (10D) are taxable. ICAI says lockdowns imposed across the country The COVID-19 crisis and subsequent
that the deduction of only premium to curb the spread of Covid-19. disruptions hit the company's new
while computing the net income/loss LIC led the growth in October, with its business premium income, which stood
after surrender/withdrawal of policy NBP up 36 per cent at Rs 15,548 at Rs 318 crore in the half-year ended
doesn't take care of inflation resulting crore, compared to Rs 11,422 crore in September 30, 2020 as compared with
in higher taxability. the same period last year. The private Rs 415 crore in the same period dur-

To solve this issue, ICAI suggests that insurers, on the other hand, saw their ing 2019-20, it said.
life insurance policies should be NBP grow 23.5 per cent to Rs 7,228 Annualized new business premium was
treated as a capital asset falling within crore, compared to Rs 5,849.71 crore at Rs 207 crore in the first six months
the definition of "property" under in the year-ago period. of financial year 2020-21. Total pre-
Section 2(4) of the Income Tax Act. In the first seven months of FY21, NBP mium income fell moderately to Rs 912
"Indexation benefit (for premiums has gone up a marginal 3.13 per cent crore in April-September period of this
paid) will take care of inflationary im- to Rs 1.47 trillion, compared to Rs 1.43 fiscal from Rs 956 crore in the first six
pact- resulting in parity with other trillion in the corresponding period a months of previous financial year, the
capital assets," the Institute said. year ago. While private insurers' NBP insurer said.
grew almost 6 per cent in the April- The ongoing pandemic notwithstand-
The ICAI has also suggested that insur-
October period to Rs 43,937.59 crore, ing, the company recorded a surge of
ance companies should be allowed to
LIC's NBP grew 2.13 per cent to Rs 25 per cent in its assets under man-
carry forward and set-off unabsorbed
business losses for an indefinite period. 1.03 trillion. agement at Rs 7,987 crore in the first
Currently, there is a limit of 8 years for The industry bounced back as insurers, half of 2020-21 as against Rs 6,404
carry forward and set off of business especially the large ones, managed to crore in the corresponding period of
losses. ICAI said that this limit is "not digitise their selling process, capitalis- the last fiscal, it said.
sufficient". ing on the increased awareness of in- "The spread of COVID-19 pandemic

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82 July - December 2020 Life Insurance Today