Budget 2016: Plan to list general insurers on the stock exchanges

New India, Oriental, United India and National Insurance head for bourses; no word on listing of Life Insurance Corp.

Written by George Mathew | Mumbai | Published:March 1, 2016 2:41 am
BSE sensex Insurance is the only area left out of listing by the government so far. However, it has not indicated about listing of LIC, the largest life insurance company in India. (Source: Reuters)

Finance Minister Arun Jaitley announced Monday that general insurance companies fully owned by the government will be listed on the stock exchanges. The four such companies are New India Assurance, National Insurance, Oriental Insurance Company and United India Insurance.

“We are ready for the disinvestment as per the government plans. The company’s financials are healthy and business and market share of the company are growing in both the domestic and the international markets,” said G Srinivasan, CMD, New India Assurance which has an asset base of over Rs 60,000 crore and investment corpus of over Rs 40,000 crore as on December 2015.

Listing would provide the capital required by public sector general insurers and may also help other private insurance companies in price discovery before they plan to go for listing, said Shashwat Sharma, partner — financial services, KPMG in India.

Watch: The Big Picture Of Arun Jaitley’s Budget 2016

Insurance is the only area left out of listing by the government so far. However, it has not indicated about listing of LIC, the largest life insurance company in India.

Jaitley also announced a slew of measures in including health insurance plans for the poor, incentivising pension investment and tax breaks. The Budget has proposed to reduce service tax on single premium annuity (insurance) policies from 3.5% to 1.4% of the premium paid in certain cases.

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The Budget has proposed foreign investment in the insurance and pension sectors in the automatic route up to 49% subject to the extant guidelines on Indian management and control to be verified by the regulators. Service tax in life insurance business provided by way of annuity under the National Pension System regulated by Pension Fund Regulatory and Development Authority will be exempted starting April 1.

The Budget also announced a new health protection scheme to provide cover up to Rs 1 lakh for families with an additional top-up cover of Rs 30,000 for senior citizens. The existing RSBY scheme provides cover up to Rs 50,000 and the premium is shared 75:25 between the central and state governments. “The RSBY scheme has to be phased out and the new scheme as proposed will be launched,” said Srinivasan.

The budget has announced withdrawal up to 40 per cent of corpus from pension to be made tax-exempt. It also announced additional Rs 50,000 exemption for houses under Rs 50 lakh for the first home payers. “Measures such as withdrawal of up to 40 per cent of the corpus at the time of retirement to be tax exempt in the case of National Pension Scheme and Annuity Fund are great incentives for people to inculcate the habit of savings through pension schemes,” said Arjit Basu, CEO and MD, SBI Life.

Various measures proposed can contribute to increased disposable incomes and savings at large, said IndiaFirst Life Insurance MD and CEO R M Vishakha. “This will augur well for the insurance industry as this savings can be tapped by insurers,” she said. For instance, the increase in rent rebates under Section 80GG will result in increased disposable income which could be channelised towards improved savings, she said.

“Employers should seriously consider providing for NPS through the corporate model and encourage employees to subscribe to the NPS,” said Anil Lobo,

India Business Leader for Retirement, Mercer India.

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