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Budget 2024: Payout should be tax free up to Rs 10 lakh premium on life insurance products, says Sumit Rai of Edelweiss Tokio

1/8/24 9:00 AM

Budget 2024: Payout should be tax free up to Rs 10 lakh premium on life insurance products, says Sumit Rai of Edelweiss Life - The Economic Times (

Innovation in traditional plans could see hyper personalisation in the near future, leading to open-ended products with the ability to mix and match, Sumit Rai, MD & CEO, Edelweiss Life Insurance tells Riju Mehta.

What are your Budget expectations?
A lot of expectations continue to be what they were. The annuity double taxation is a big one because India is one of the largest grey countries and a part of the reason annuities are not doing as well is the taxation structure. You are taxing it at entry and exit. Another thing that the industry has been asking for a while is to let go of GST on insurance. Thirdly, if the Rs.5 lakh cap can be increased to, say, Rs.10 lakh, it would help.

How has the Rs.5 lakh cap on premiums impacted the sale of traditional plans?After the initial lull in April-June, these are broadly back on track. I don’t see an impact. If you look at the industry ticket sizes, they are pretty much where they were last year, and the sales are still growing. The Rs.5 lakh ticket sizes, in terms of the number of proposals, may have marginally declined, but even those are coming back on track.

What is the growth of traditional plans compared to term plans and Ulips?
The segment that is growing the fastest is the traditional plans, especially the non-par guaranteed policies, which are leading the industry. If the industry, on an average, is growing at, say, 14-15%, the non-par segment alone is at about 17-18%. Term has declined, and is probably 5.5% of the total sales, as it has become more expensive after Covid. With term, there is a bit of a challenge and friction at this point of time, but it will ease as experience improves. Ulips are also doing well, but a lot of the mid-size ticket which was going to Ulips has shifted to non-par. We have gone back to a situation where customers are finding a lot more benefit in guaranteed products.

Why did life insurance not grow as much as health in 2023?
Covid raised the consciousness for health insurance to a completely different and permanent level. Everybody agrees that hospitalisation is very expensive and they could lose all their savings in case of a hospitalisation. Earlier, like life, health was a push product, but suddenly it has become a bit of a pull product. The momentum is of a completely different order and it is largely because of the healthcare cost inflation. The one area we should have a regulator is healthcare because the costs are suddenly running away. The cost of health insurance, from 1920 to the present, has gone up by 40-45%. Fortunately for health insurance industry, the products have become price inelastic, because even after a price increase people will renew the policy since the cost of not renewing it is too high. In life, the area where there has been a dislocation is in term coverage both at individual and group level because we suddenly have a supply constraint. Today, there is effectively only one reinsurer and this has reduced the capacity of insurers to write term policies.

Won’t the proposed Bima Vistaar dilute the efficacy of insurance products?
Conceptually, it is a good, strong idea. When PMJJBY started, it increased insurance penetration. Maybe, along the way, insurers took a hit, but they have learnt how to manage the risk better. Bima Vistaar will be similar. It will have an upside because if the key goal is insurance for all by 2047, we are not going to be able to do it without something like Bima Vistaar. We need to make insurance more more affordable for all at base protection level. The challenge will be in its operational execution, given that different products will be coming from different manufacturers. But after the initial teething period, at a foundational level, it can provide insurance to all, and from a long-term perspective, it can lead to a significant expansion of non-Bima Vistaar products.

How is life insurance going to pan out in terms of innovation?
We truly believe in personalisation and this will see the implications in life business as well. Customers seeking hyper personalisation will lead to open-ended kind of products, with the ability to mix and match. Today, we have 3-4 different products for various types of goals, like buying a house or child’s education. So, instead of different products with different cash flows at different points of time, we can create one policy with a single cash flow for different goal requirements.

What are the implications of composite licence for customers?
At one level, the biggest implication will lie in personal lines of business. So life and health could be a great combination, but not if life insurance tries to sell fire insurance. They need very different mindsets and skills. As the world and coverage become more complex and specialised, trying to do everything under one roof will be difficult. This idea makes sense if a life company wants to do health, and vice versa, because these are complemetary products and can fulfill a customer’s needs throughout his lifetime. Under one roof, you could create structured products, which is not feasible under different roofs today.

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