Road ahead for Insurance Sector post GST & Demonetization

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Road ahead for Insurance Sector post GST & Demonetization

Indian Insurance Market

Many case studies were published to mark the first year anniversary of demonetization. The bold legislature of November 8th, 2016, managed to strike a major blow to money hoarders and the parallel dark economy. Notwithstanding the impermanent torment and spending crush that the ordinary citizens experienced, economic and financial experts foresaw that there would be a few long-haul benefits for the economy and for the protection division. Even a year after of GST rollout, the two-fold tax collection on the sale of goods and services are wiped out. Undeniably to state, such wide-scale economic changes were bound to with assurity affect the structure, frequency, calculation of secondary taxations. Such moves paved the way for prompting an exhaustive rebuilding of the present Indian economic situations.

The GST and demonetization were primarily aimed to be a push for shifting the unorganized sector to the organized sector. All businesses, including the Insurance Industry, were influenced by the implementation of GST and demonetization. And evidently, the economics of the country did witness a fundamental shift in trends. But how does the mercantile landscape pan out to secure an accelerated growth in the Indian insurance sector?

“The Indian economy is going through a very interesting phase, where things have turned upside down over the past 2 years”

Seeing it from a much wider perspective, “the Indian economy is going through a very interesting phase, where things have turned upside down over the past 2 years”, says Mr. Mahesh Balasubramanian – MD & CEO, Kotak General Insurance. The macroeconomic parameters were all in favor of growth two years back – low petrol prices and lower interest rates, however, micro-parameters were in a slump. Fast forwarding to six months back, the economy has caught pace with the micro parameters, whilst petrol prices are inching towards the Rs 80 mark, and the interest rates are seemingly not getting any lower. There has been a fundamental shift happening in terms of the micro-economy. Almost 60% of the Nifty 50 have reported earnings which are in line with growth or probably outshone their expectations.

Another key takeaway from post GST rollout is that the number of tax filed has seen a significant jump. “If you look at the number of challans or the number of certifications, I think about 62.3 Lac registrations have happened compared to 56 lac during the same period last year. The GST is now settling at about Rs 1 Lac crores a month. It was about 94,000 in May, but 1 Lac in April, which is way above the average of about 85,000 last year”, says Mahesh.

Demonetization and GST rollout did set back the economy and posed as a cumbersome challenge for the initial phases. But any economy takes time to absorb and adapt to such wide-scale changes. With the uptake in terms of tax collection, the economy is recovering well from the holdups. Fundamentally, the road ahead for Indian economics looks good for the next 5 years. The upcoming 2019 elections will also play a major role in shaping the future.

Quoting Mr. Balasubramaniam, “In all this what happens is that when the shift happens from physical savings to financial savings, it is very good for the financial services business, because you will have a lot more mutual fund growth, savings coming into financial assets, and both general and life insurances will benefit a lot. A 1% increase in penetration in the insurance market, leads to about 13% reduction in losses, about 22% savings in tax-payers money, and a 2% increase in investment in the economy. So that’s the impact the insurance industry has in terms of fuelling this entire growth because loss mitigants come in, it saves taxpayers’ money.”

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