The optimistic growth rate projected for the economy is good news for general insurance, which is dependent for its growth on the growth of manufacturing sector. The Budget has projected increased investments in infrastructure including highway development projects, which should help in generating premium for the general insurance sector.
We need to wait for more details on the service tax negative list to see whether some of the aspects like payment of health insurance claims to hospitals are likely to attract service tax. Increase in service tax by 2 per cent would increase the insurance cost for the customers. Apart from this the budget appears to be neutral for general insurance sector.
For the health insurance segment, the tax exemption on preventive medical tests upto Rs5,000 would help increase preventive health check ups, creating premium opportunities for the segment by attracting first time buyers into the health insurance market.
The upper limit for the 20-per cent tax bracket has been increased from Rs8 lakh to Rs10 lakh. This will increase the investible income for this income class, creating opportunities for insurers to pitch their products to them.