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Posted on Oct 22, 09:24PM | IANS
Finance Minister P. Chidambaram Monday said the major challenge facing the non-life insurance sector is to increase its reach along with growth of investment.
Chidambaram met heads of public and private non-life insurers in New Delhi to discuss various issues faced by them.
The industry raised several issues bogging them, like the need to revise upwards the third party premium, particularly for commercial vehicles, capping the time limit for filing cases for vehicles' third party compensation, non-applicability of minimum alternate tax (MAT) for non-life insurers, tax on reinsurance premium, extension of tax benefits on retail products like home/personal accident insurance and other issues.
"It was a positive meeting. Basically we gave our views and suggestions. The finance minister heard the CEOs to understand the issues faced by the industry," G. Srinivasan, chairman and managing director, New India Assurance Company Ltd., told IANS after the meeting.
"We came out with a comfort feeling. For the first time, there was someone who spent so much time discussing issues with us and understanding there are problems faced by the companies," Amarnath Ananthanarayanan, CEO and managing director, Bharti Axa General Insurance Company, told IANS.
Addressing the CEOs, Chidambaram said there is significant room for growth as the penetration in the non-life insurance sector (premium to GDP) was just 0.71 percent in 2011, which is far below international benchmarks.
The CEOs said the sector faces major challenges because of regulated tariff, unlimited liability, non-jurisdiction restriction for filing claims and under-insurance, among others.
"We need to increase the third party premium on commercial vehicles. We also raised the problem of uninsured vehicles and the need to limit the time for filing a third party claim," Srinivasan said.
Regarding health insurance, industry experts suggested that a proper mechanism be put in place whereby an appropriate pricing mechanism for group health insurance is adopted, which takes into consideration existing incurred claims ratio, management expenses, medical inflation, cost of under-writing and other associated problems.
Srinivasan said the industry also raised the issue of non-applicability of MAT for non-life insurers, tax exemption benefits on retail products like home/personal accident insurance, exempting reinsurance premium from service tax net, tax on long term capital gains and others.