INSUBCONTINENT EXCLUSIVE:
Mumbai: Stocks of insurers, life insurers in particular, were hot cakes for investors on Dalal Street till Friday
Finance Minister Nirmala Sitharaman changed that at one stroke in the Union Budget.
The government unveiled a new, optional income-tax
regime in Budget, offering lower income-tax rates for not availing any exemption, something that worked as life blood for the life insurance
industry for long.
That left domestic life insurers into a state of shock
With dividend income no longer tax-exempt, margins and embedded value (EV) will now get affected.
Over last two sessions, shares of ICICI
Prudential Life have slipped 12.94 per cent, while peers HDFC Life and SBI Life have fallen 5.66 per cent and 8.19 per cent
Budget sent a strong message to the insurers to shift their sales pitch away from tax-exempt instruments and towards savings and protection
premium enjoys tax advantage currently, but the risk lies in the part which is largely motivated by tax benefits - lower ticket-size
the alternate personal tax system does not benefit individuals with incomes more than Rs 15 lakh or the ones who are claiming a large part
pay-savings products with less than Rs 50,000 ticket size as a proxy of tax-motivated insurance purchases, ICICI Prudential Life - HDFC Life
are better placed.
As a percentage of absolute new business, this segment constitutes around 20 per cent for SBI Life vs around 5-10 per
cent for ICICI Prudential Life and HDFC Life.
Many felt the provisions were not as harsh as perceived, even as longer-term risk loomed
Monday.
JM analysts said given the long-term nature of insurance products catering to both savings and mortality risk cover needs of
exemptions in the medium- to long- term, which if implemented can be an overhang for the insurance sector as tax benefits remain among the
business volumes of life insurance companies
The limit of 80C was stable at Rs 1 lakh between FY2005-13 and increased to Rs 1.4 lakh in FY2014, not keeping pace with rising income
adversely impact the sale of life insurance companies, as typically Q4 of every financial year is business-heavy owing to an increased focus