Budget – An Insurer’s Expectations

Jan 18

There are many expectations and speculations around the Budget of 2017 as the country is still reeling under the after effects of demonetization. It is expecting some populist schemes by the centre to raise the overall consumer and investor sentiments. What adds to these speculation are the impending state elections following the budget. To bolster the growth which saw a slowdown post demonetization, it is expected that the centre will come out with projects esp. infrastructure projects that will fuel growth. However, what will be critical is the methods that are deployed for quick implementation to reap faster benefits. We also expect the government to announce projects with shorter gestation periods to fuel the economic activity much faster. Both individuals and corporates are expecting that the government shall introduce changes in the income tax slabs by lowering the income tax rates buoyed by the increased reserves due to the currency roll back. Contrary to the popular belief, we expect that the Govt. will be able to meet the Fiscal Deficit target for FY 2017 set as per the FRBM Act (3% of GDP). Given that if the target remains unattainable, it will be an indication that demonetisation is hurting the economy.

This may be the popular sentiment around the budget however as an insurer we would expect the government to address the following two pressing issues the country has been facing lately. The first pertains to the rising health care costs that has made it very difficult for the general public to have an access to quality health care services. The second issue points towards the huge financial losses that people face esp. damages to their homes that arise due to incidents of catastrophes. In the last few years our country has witnessed a rise in catastrophic calamities like floods in Chennai, J&K, Uttrakhand and cyclonic damages caused due to disturbances like HudHud, Vardah etc. Here’s how the budget can possibly address these acute situations:

Mandatory Health Cover by Employers The Govt. should make it mandatory for employers, both in the organised & unorganised sectors to provide health cover to all their employees. Certain developed countries such as United States, United Kingdom and France have this regulation in place which ensures that a significant population comes under the ambit a health insurance cover. Currently, we have an Employee’s State Insurance scheme modelled for the organized sector however it remains limited to a certain segment of employees. Besides, a national health scheme by the government in line with the Pradhan Mantri Suraksha Bima Yojana (PMSBY) especially for those from the underprivileged sections of the society would ensure that a sizeable population is covered against unforeseen medical exigencies.

Index Based Home Insurance Scheme The centre should also look at affordable home insurance scheme in association with insurance companies that would cover losses to property due to catastrophic events. It should be an index based policy similar to the weather based crop insurance schemes, which will compensate for the damage caused by the natural catastrophe where the triggers of the Nat-Cat event will be predefined. This could be enacted state wise, with the states opting for covers that best suit their Nat-Cat exposures. The schemes can be implemented in association with insurance providers and the premium can be collected along with the property tax. For instance, a pre-decided amount of rainfall in a flood prone area or an earthquake of a certain magnitude in the earthquake prone parts of the country, if crossed, could trigger the property damage claim making the insurance company liable to pay. Having these pre decided terms will ensure transparency and physical survey/inspection will not be required, leading to faster relief to the affected.

These initiatives will ensure that citizens have access to good health care and their assets, a result of years of hard work, does not get wiped away, esp. at old age. Participation of insurance providers in these initiatives will ensure that the entire impact of catastrophic losses does not fall on the centre.