The Role Of Government In The Insurance Business In India
Insurance is an integral part of India’s financial system, and the government has a significant say in its evolution. The government plays a major role in regulating the insurance industry and protecting the interests of policyholders. The Government of India has introduced various reforms to ensure the safe and secure operation of the insurance sector. In this article, we will discuss the role of the government in insurance business in India.
Regulation of Insurance Business
The Insurance Regulatory and Development Authority of India (IRDAI) is an autonomous, statutory body established in 1999 with the objective of regulating and promoting the insurance and re-insurance businesses in India. It is responsible for issuing licenses to insurance companies, monitoring their activities and safeguarding the interests of policyholders. IRDAI also sets the guidelines for insurance products and services, disclosures and advertisements, and monitors the financial soundness of insurance companies.
Protection of Policyholders
The Government of India has introduced various initiatives to protect the interests of policyholders. It has set up the Insurance Ombudsman Scheme, which provides a platform for policyholders to resolve their disputes with insurers in a time-bound and cost-effective manner. The government has also introduced the Grievance Redressal Mechanism, which provides a platform for policyholders to file complaints against insurers if they have not received the promised service. In addition, the government has set up the Insurance Regulatory and Development Authority of India (IRDAI) to monitor the activities of insurance companies and ensure that they are following the regulations.
Tax Benefits on Insurance
The Government of India provides various tax benefits for insurance policies. The premium paid for life insurance policies are eligible for tax deductions under Section 80C of the Income Tax Act. Similarly, the maturity proceeds from life insurance policies are also tax-free under Section 10(10D) of the Income Tax Act. The government also provides tax benefits for health insurance policies. The premium paid for health insurance policies is eligible for tax deductions under Section 80D of the Income Tax Act.
Subsidized Insurance Schemes
The government has introduced several subsidized insurance schemes to ensure that every Indian has access to basic insurance cover. The Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) is a life insurance scheme that provides a coverage of Rs.2 lakhs at a nominal premium of Rs.330 per year. The Pradhan Mantri Suraksha Bima Yojana (PMSBY) is an accident insurance scheme that provides a coverage of Rs.2 lakhs at a nominal premium of Rs.12 per year. The government also provides health insurance cover under the Ayushman Bharat Yojana.
Promotion of Insurance Sector
The Government of India has taken various initiatives to promote the insurance sector. It provides incentives for insurers to operate in rural and underserved areas. The government also encourages insurers to launch innovative products and services to meet the changing needs of customers. The government has also introduced various initiatives to reduce the cost of insurance premiums. It has reduced the Goods and Services Tax (GST) on health insurance premiums from 18% to 12%.
The Government of India plays an important role in regulating and promoting the insurance sector. It has introduced various initiatives to protect the interests of policyholders, provide tax benefits and promote the insurance sector. The government is also encouraging insurers to develop innovative products and services to meet the changing needs of customers. The government’s interventions have strengthened the insurance sector and have helped it to become more accessible to people in India.