Union Budget 2019 India: Finance minister Nirmala Sitharaman, presenting the budget, proposed 100 per cent Foreign Direct Investment (FDI) in insurance intermediaries. Industry experts from the insurance sector say that the move will get the much-needed long-term capital to the sector and also bring in a professional advisory to help policyholders.
According to experts, even though it will help companies to have much capital to run their business successfully, it is also going to increase competition among insurance providers. However, for customers, it will open new options to explore. Naval Goel, CEO, and Founder of PolicyX.com says "With the growing competition and options, customers would be able to get cost-effective insurance products easily. Talking about the move, it will surely spur the investment."
Experts say, higher FDI in a capital intensive sector like insurance can help in deepening penetration of the sector, bring in the much-needed stable long term foreign flows and also assist in providing long tenure funding to infrastructure projects.
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Prashant Tripathy, Managing Director and Chief Executive of Max Life Insurance says, "The 100 per cent FDI proposed for insurance intermediaries, would help expand the reach of insurance and bring in greater professionalism through an infusion of global best practices in the country." He further adds, "The Union Budget aims at driving inclusion through various developmental schemes and government initiatives, especially for lower income groups of society across urban and rural areas."
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Generally, once the FDI limit increases in any sector it spurs growth and increases competition. For intermediaries, it will be a better environment for fundraising. Prashant Sharma, Chief Investment Officer, Aviva Life Insurance, says "With the increase in FDI, all types of insurance intermediaries like brokers, corporate agents, and most importantly web aggregators are likely to see increased funding activity.”
The first budget of NDA 2.0 has brought relief for the policyholders of Life Insurance Companies with revised TDS rates on net income. The new tax deduction rate is of 5 per cent on net income on policies where the sum assured is less than ten times of premium. Earlier it was 1 per cent on the gross payout. Sharma adds, "It is a significant step for industry players as now deduction is allowed on net income after deducting premium paid than on gross amount payout."