Life insurance companies have so far not seen any significant pickup in high-value non-par policy sales after the government in the Union Budget 2023 decided to tax proceeds of such policies sold from April 1, 2023, a report by Business Standard stated.
In the Budget, the government announced that proceeds from high-value life insurance policies (non-ULIPs) will be taxed. The intention was to help plug the arbitrage that high-net-worth individuals (HNIs) use for tax-free returns on their insurance policies.
BS noted that following the Budget announcement many brokerages had reckoned that high-value non-par guaranteed products could see fire sales over the next two months (February and March). This was to avail tax benefits, which only go away from April 1.
However, the market daily informed that February did not see any significant increase in sales of such policies in the aftermath of the government decision. While insurers expected March to be much better, but with less than a fortnight left in the month, insurers are still saying that they have not seen any extraordinary growth in sales, it added.
Vighnesh Shahane, managing director (MD) and chief executive officer (CEO), Ageas Federal Life Insurance, told BS, “We have not seen extraordinary growth in the sale of high-value non-ULIP life insurance policies. This is because of the government’s decision to tax such policies. However, there has been some growth but that is mostly because the January–March quarter is generally busy for life insurers. Also, we have launched an attractive non-par product and that has also contributed to the slight increase we are seeing. Hence, we have not seen a huge pickup in sales as a direct consequence of the government decision.”
New business premiums (NBP) of the industry in February dropped by 17 percent primarily on the back of a sharp contraction in Life Insurance Corporation’s (LIC) premiums and private insurers seeing muted growth, stated BS.
It further highlighted that on an annualised premium equivalent (APE) basis, the insurance industry posted muted retail APE growth of 10.5 percent YoY for February.
