Budget 2023: What can the insurance and fintech industry expect from FM Sitharaman?

Expectations for the insurance sector from budget FY2024

Mr. Ankit Agrawal, CEO & Founder InsuranceDekho said “With the upcoming budget, we expect implementation of reforms that will boost the Indian insurance sector. We expect the government to relax the minimum capital requirement on ₹100 crore which makes it easy for companies to start an insurance business. We also expect the implementation of a composite licensing regime, which will make it easier for insurance companies to sell non-life and life insurance products through a single licence. This move will fuel competition and better utilization of the distribution network, contributing to the insurance sector’s growth.”

“On the customer front, the tax deduction limit according to § 80D ( ₹75,000) and section 80C ( ₹1,50,000) can be increased to increase insurance demand and improve penetration. The current 18% GST on insurance premiums makes a policy expensive and less accessible to common people. The government should reduce GST to 5% or cancel it. This reduction will make insurance affordable and accessible. Likewise, on the agent front, the TDS exemption limit on the insurance commission can be increased from ₹15,000.Finally, passage and implementation of the Insurance (Amendment) Act 2022 will also be a welcome move for the sector.” Ankit Agrawal further added.

Yogesh Agarwal, Founder & CEO, Onsurity said “The insurance regulator along with the government has taken some significant steps over the last year with an aim to improve insurance penetration across the country. In the upcoming budget, the government should look at providing GST credit to SMEs sponsoring the cost of insurance and wellness for their employees This will further increase and motivate SME employers to provide adequate health care to their employees and in turn reduce the burden on the government to provide necessary health care to the country’s missing middle . Health and wellness has a direct impact on productivity and loyalty which in turn affects the country’s GDP. In addition, the government should also review the skyrocketing medical inflation and its impact on low-income households due to high out-of-pocket expenses.”

“Composite license is another aspect that the authorities should push for, because this will benefit both the industry and policyholders. It will give insurance companies the necessary economies of scale and customers the opportunity to buy more products from the same insurance company, which in turn reduces distribution costs (40% – 50% of the premium), which is one of the biggest costs of running an insurance business. . For policyholders, this will reduce the burden of excessive documentation and remembering renewal timelines,” Yogesh Agarwal further added.

– From an insurance perspective, there are many expectations for the upcoming budget. A wide range of other financial products, such as Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS) and insurance, take up most of the 80C limit. A separate section should be dedicated to insurance, especially term insurance. If we need to further improve the penetration of life insurance in India, there should be a push for term insurance plans. Even the limit of 80C has not been increased for many years now, it would be great if the limit was raised to ₹2.5 lakh per annum. Coming to non-life insurance is the limit for health insurance ₹25,000 which I feel is a bit lower, it would be great if it can be increased to ₹50,000. Currently, annuities with investors are taxed, resulting in lower returns. It can be a big relief for the investors if the annuities are tax free,” said Rakesh Goyal director of Probus Insurance broker.

Fintech sector expectations from Budget FY2024

Mr. Mandar Agashe, Founder MD & VC of Sarvatra Technologies said “There have been several incentive schemes announced by the government in recent budgets that have helped promote digital payments, especially Unified Payments Interface (UPI) based payments. This in line with the government’s “Digital India” initiative aimed at financial inclusion. We expect the momentum to continue in the upcoming budget. Serving the unserved and underserved is the mission that should continue with UPI 2.0’s recent products like UPI 123 and UPI Lite, the two most crucially the products that will help penetrate the semi-urban and rural regions of India due to the ease of accessibility. offering to those who cannot afford smartphones but use feature phones and want to shop digitally. At the gram panchayat level or at village level self help groups (SHGs) can also promote the use of offline payments through UPI.This will help UPI to grow very fast.When SHGs start nner to use offline mode of payment through UPI, the trust of the general public will start to build. If such SHGs are given incentives to make digital payments, it will be a big change for the last mile village.”

“The government may consider improving the payment acceptance infrastructure in the underserved regions of the country. This can be done by giving an impetus to Aadhaar Enabled Payment System (AePS) terminals, which will take payments to pockets where customers may not yet have a smartphone and debit card. The upcoming budget should also focus on expanding the footprint of digital payments worldwide. We commend the recent initiative of NPCI to extend UPI payment facility to NRIs using their international mobile numbers. Currently, NRIs residing in 10 countries including Singapore, Australia, Canada and UK will be able to avail this offer. We hope that by the end of this year, almost all countries with good NRI populations will join UPI. The Union Budget 2023-24 can accelerate the pace of UPI going global as well as make it interoperable with global payment networks. Initiatives to take the BBPS platform to other nations may also be considered,” said Mr. Mandar Agashe.

Kumar Shekhar, Vice Country Manager, Tide India said, “Today, the Indian fintech market is predicted to reach $200 billion by 2030, surpassing the rest of the world in fintech adoption. Highlighting the huge growth potential of the industry unlocking the doors for financial inclusion across India; the government has also shifted its focus towards the game-changing industry – Fintech. The RBI interventions made in the Indian fintech ecosystem to maintain a necessary balance between innovation and security have helped India emerge as one of the most favorable markets for several fintech organizations.”

“In the same vein, we expect the Honorable Finance Minister to unravel the budget for 2023 with business-friendly tax policies that encourage smaller fintech companies/startups by giving exemptions in GST up to a certain limit of income. This will in the long run reduce the tax burden, and the challenges faced by the startups is facing in its nascent phase.To holistically increase the development and growth of the fintech and financial industry in the country, we look forward to the central government’s support to bring changes that create a push for fintech incubation centers across the country that will subsidize basic facilities such as internet and office space on rent or give them a line of credit to help them avail collateral-free loans with the first year interest-free etc. This will further help create efficient, robust technological infrastructure that seeks to contribute to nation-building,” Kumar Shekhar said.

“India is working hard to increase financial inclusion and digitize its population rapidly across the country, including tier 2, 3 and 4 cities. The current fintech ecosystem is committed to the same and primarily leverages UPI to facilitate this. We looks forward to the government’s clear guidance on how the costs incurred by the current financial industry due to UPI services can be compensated.To further strengthen the fintech ecosystem in India, new guidelines compensating the UPI transaction costs for the fintech industry will be a significant development that provides driving force for the growth of the entire industry. Although there has been significant adoption of UPI, it still has a long way to go for universal adoption and the structural revision should be decided with that in mind,” Kumar Shekhar further added.

Monish Anand, CEO & Founder, MyShubhLife said “Fintechs can certainly do with tax relief in the upcoming budget. We hope for reduction in start-up taxes, perhaps without GST before a certain scale of business is achieved. While ensuring the right level of regulation, relaxation of tax norms will to some extent allow the fintech industry to increase its reach and operate more efficiently to provide seamless credit to borrowers.As for the FLDG (First Loan Default Guarantee) model, there needs to be more clarity on that.We want that the government reconsiders and looks at a reasonable cap on the FLDG models.The government also needs to expand the criteria for tax relief to start-up employees to reduce the burden of taxation on ESOP sales.Overall, the Fintech industry could do with more assistance from the government for liberalization of both direct tax and GST rates.”

Disclaimer: The views and recommendations above are those of individual analysts or brokerage firms, and not of Mint.