Life Insurance Corporation of India’s share of new individual policy premiums has dropped to 54% in December 2015 from 72% in December 2013. The drop comes after amendments to the I-T Act restricted tax breaks on policies which didn’t have adequate life cover. LIC, however, continues to have a 70% overall marketshare in new premiums due to group policies.
While tax woes explain loss of interest in traditional cash cows for the corporation, the shrinking marketshare can be attributed to lack of a unit-linked insurance plan (ULIP) when the stock markets had recovered last year.Private players like ICICI Prudential made the best of a booming market. While LIC did launch a ULIP later in 2015, the markets had by then entered a downturn.
According to insiders, the reason for the continuing decline was the introduction of 194DA in the Income Tax Act from October 2014, which introduced tax deduction at source on policies that are not exempt under Section 10(10D) of the Insurance Act. Exempt policies are those where the sum insured is more than five times the premium. Sources said that a large chunk of the premium comes from those who buy life insurance for investment purposes. The amendments ensure that tax breaks are available for those who buy insurance for protection and not for those who are primarily looking at investments.
“Our growth in December has been faster than competitors. This has further improved last month and we are likely to close January with a near double-digit growth rate.I am very confident that the corporation will do very well in the remaining two months of the current financial year,“ said S K Roy , chairman, while speaking to newspersons at the launch of LIC’s e-Services. He added that the corporation was confident of achieving its target of Rs 31,000 crore during the current financial year.
According to top agents, tax issues were also hitting sales of annuities -policies where a regular stream of payouts are made at monthly , quarterly or annual intervals against a lump sum payment up front. “A high net worth client who purchased an annuity plan returned it in the free look period after he discovered that 3.6% of his investment was deducted up front as service tax,“ said a top agent.
Source : Times of India 4th Feb’2016