Effects of Union Budget 2021 on Health Insurance

The pandemic was an eye-opener for the insurance sector and it brought attention of the Indian government to the healthcare and insurance industry, and other related industries. Hence, the Union Budget 2021 was focused towards health insurance.

 

Indian insurance industry has been in need of change in policies for a while, the policies being:

 

• The need to increase tax relief limit for medical insurance premium under section 80D of Income Tax Act of India, or the need to keep insurance related tax reliefs as a separate part.
• Reintroduction of medical reimbursement, which was merged with the standard tax deduction back in 2018.
• Increase the FDI limit for insurance beyond 49%

 

Effects of Union Budget on Health Insurance

Among the stated changes or requirements in change of policies, the policy changes that were implemented/proposed through the Union Budget 2021 were:

 

• Increasing the FDI limit from 49% to 74%.
• Amending changes in the Insurance Act established in 1938, for the purpose of launching a new investment charter for investor protection and launching a securities market code which will include the SEBI Act, the Securities Act, and the Depositories Act.

 

While the latter of these is primarily for the purpose of providing safeguard from foreign ownership and control in the investment market, the former is for attracting foreign investors and companies to pitch in on the Indian insurance.  Let us now study the impact of Union Budget on health insurance.

 

Effects of 2021 Union Budget

 

1. What Does FDI Limit Increase Mean?

The Indian health insurance industry has been in dire need of investment and inflow, which is now being ensured through the hiked FDI. It will reduce the cash crunch for new entrants in the industry which can let foreign investors own the greater part of the company while retaining key rights as per provisions of the rule. This means a great opportunity for insurance companies in India to scale up and serve the pandemic-hit economy. This is surely one of the most positive effects of the Union Budget on health insurance.

 

2. Why are the Safeguarding Principles Important?

When more than 50% stake in a company is owned by foreign parties, there are multiple concerns with regard to key decision making, ownership rights, disagreements with government authorities, etc. There’s a reason why only the FDI for insurance intermediaries is 100% and not for insurance companies themselves. For the same reason, the Union Budget 2021 has also prescribed some key decision-making provisions to help Indian stakeholders retain rights in FDI deals.

 

Other Major Effects of Budget

One major effect of Budget 2021 on the health insurance sector that cannot be ignored is that the health overlay in this Budget has been increased by 137%. This will be invested in better hospitals, better health centers, better treatments, better facilities, etc. What this means is better offerings that can be given out by health insurance companies in India and thus this was the biggest news of the first post-lockdown Budget.

 

Conclusion:

With the noted impact of Budget 2021, the overall forecast of the Indian insurance industry seems very positive. It is probably the best Budget health insurance industry could have asked for. Another key factor to be noted is that the pandemic is expected to make people aware of the need for a comprehensive health cover and the benefits of health insurance. Hence, we can surely expect many more health insurance policies to be given out and many more lives to be safeguarded in 2021.

 

With so many new things happening in the industry, Indians are sure to have a wider choice when it comes to choosing right health insurance. You can zero in the health insurance plans by Niva Bupa, which provides comprehensive and robust coverage. What’s more, you can choose from a range of plans such as individual plans, family floater plans, wellness plans, top-up plans and plans for specific need.