Ashwani Nexus

  The recent removal of   Goods and Services Tax (GST) on individual life insurance policies has sparked debate: will the resulting cost reduction significantly boost sales, broadening the reach of life insurance? This question requires examining two distinct aspects: increasing the amount of coverage for those already insured and, more critically, bringing new people under the insurance umbrella. We must look beyond the immediate cost change (at least for now) for the customers   and consider historical trends and market dynamics to gauge the potential impact. Examining the Facts and Historical Trends 📉 To understand if cost reduction alone is the answer, we can analyze the recent history of the life insurance market using the facts avialable: Fact 1: Declining Number of In-Force Policies Over the past five years, the net number of life insurance policies in force has been declining . This critical fact indicates that, despite...

  The legal principle of uberrima fides , or "utmost good faith," is a cornerstone of all insurance contracts, particularly in life and health insurance. This principle dictates that both the insurer and the insured must act with complete honesty and transparency throughout the entire process. The insured individual is required to proactively and accurately disclose all material facts . These are details that could influence an insurer's decision to accept, modify, or decline a policy. The insured possesses crucial information about their health, medical history, lifestyle, and personal habits that the insurer does not. An insurer uses this information to properly assess risk and determine the appropriate terms of a policy, including premiums, coverage limits, and any exclusions. Failure to disclose a material fact, even if unintentional, can be considered a violation of uberrima fides . This breach of trust can lead to serious consequences, including the denial of ...

  The question of allowing Input Tax Credit (ITC) on GST expenses related to exempted insurance premiums is a significant one. While certain insurance premiums are exempt from GST, a compelling argument exists for granting ITC on the associated expenses. This would address several inconsistencies and financial burdens faced by insurers and, ultimately, policyholders. Arguments for Granting ITC Granting ITC on expenses for GST-exempt policies is supported by several key points: Premium Rate Discrepancy : When premium rates for individual life insurance were initially set, insurers accounted for the availability of ITC. However, with the current GST exemption, insurers must bear a significant portion of expenses that can't be offset, even on older policies with premiums at pre-GST rates. This creates an ongoing financial strain. Increased Distribution Costs : For both GST-exempt life and health insurance policies, the high 18% GST on di...

  As insurance industry professionals, we've had the privilege of witnessing its growth and evolution. The enduring strength of our industry isn't just built on policies and profits; it's founded on the deep trust and strong bond we've forged with millions of customers over generations. Today, our industry faces a crucial challenge. As discussions unfold regarding the impact of the GST-exempt status on individual life and health insurance policies , I want to share my perspective. Without the ability to claim Input Tax Credit (ITC) , there's a concern that insurance companies may be forced to increase premiums in the long run. My own preliminary back of envelop   calculations suggest this could lead to a modest rise in premiums: an estimated 3-5% for health insurance and 0.5-1.5% for individual life policies, these varying from company to company. While some propose solutions like providing ITC on renewal premiums or specifically on distribution costs—our lar...

  The Indian insurance industry is at a pivotal moment. While passing on GST relief to customers is a positive step by insurance industry, a significant challenge has emerged: the removal of Input Tax Credit (ITC) for business lines now exempted from GST. This policy shift is set to increase operational costs, directly impacting profitability and potentially leading to higher premiums. We delve into   strategic measures for insurers to mitigate financial   challenges emerging out of GST Exemption to Individual Health Insurance and Individual Life Insurance policies. The Financial Impact: A Looming Challenge The removal of ITC is projected to cause cost increases of roughly 3-5% for individual health insurance and 0.5-1.5% for individual life insurance . These figures will vary by company based on product mix, distribution channels, and operational efficiency. This cost escalation poses a direct threat to financial health, making it critical for insurers ...

  56th  GST council meeting decsion to give  exemption to  individual life and health insurance policies from the Goods and Services Tax (GST)has significant implications for both insurers and consumers. 🔶 Key Changes to Insurance Taxation The new rates create a clear division for insurance products: ▪️ GST-Exempt (No Input Tax Credit - ITC) Individual Life Insurance,Individual Health Insurance Policies: All premiums paid on or after 22 September 202,including riders. ▪️ Government Insurance Schemes: Remain GST-exempt. 🔶 Still Subject to GST (with ITC) ▪️ Annuity and Pension Policies(*Clarity required) ▪️ Group and Corporate Insurance policies ▪️ General Insurance Policies (excluding health) 🔶 Implications for Insurers The GST exemption presents a complex challenge for insurance companies. The immediate impact is the non-availability of ITC on a significant portion of their costs. This will likely increase their operational costs. Initial estimates suggest ...