The Indian life insurance market has been a mixed bag of rapid growth in some areas and lagging behind in several others. Rectification of the imbalance has been attempted by liberalizing the industry and opening it up to private participation. While the industry has grown in size, have we accomplished all that was envisaged?
For ages, life insurance has been treated as a cushion for savings and has always been given secondary importance as far as individual savings are concerned. Over the years, the life insurance business has attained success due to the tax saving provided by the state. It has been observed in several markets across the globe that the quantum of life insurance business is inversely proportional to the extent of social security that the state has to arrange for its population. This indirectly indicates that life insurance helps the government in carrying out its social responsibilities with lot of ease.
This could be one very strong reason for providing tax concessions to life insurance premiums; the other, of course, being the encouragement for long-term savings and as a result, the postponement of consumption, which would eventually add to the inflationary trends of an economy. While this explains the justification for the provision of tax concessions to life insurance premiums, it is sad to note that the life insurance business is actually driven by these and not by the factor of risk coverage that it actually provides. |
