Tax relief, healthcare integration key to lifting low insurance penetration
MUMBAI, Jan 20 (The CONNECT) — While the Union Budget 2025 delivered a significant boost to the non-life insurance sector by raising foreign direct investment limits to 100 percent, India’s insurance penetration remains stubbornly low at around 1 percent of GDP, pointing to the need for deeper structural reforms, Ashwani Dhanawat, Executive Director and Chief Investment Officer, Shriram General Insurance, said.
Dhanawat said the next phase of policy action must prioritise affordability, penetration, operational efficiency, and long-term resilience if India is to meet its “Insurance for All by 2047” ambition.
In health insurance, he called for an enhancement of Section 80D tax deduction limits to ₹50,000 for individuals and ₹1 lakh for senior citizens, along with full tax benefits for seniors holding standalone health policies, to help households cope with rising healthcare costs.
However, Dhanawat cautioned that affordable insurance alone would not be sufficient unless accompanied by affordable and quality healthcare delivery. He stressed the need for closer integration between insurers and healthcare providers through standardised treatment protocols, regulated hospital pricing, and a sharper focus on outpatient and preventive care, which accounts for nearly 70 percent of overall healthcare spending.
He also said government-backed schemes such as Ayushman Bharat should expand coverage to include outpatient care, diagnostics, and medicines to meaningfully reduce out-of-pocket expenses.
Turning to agriculture insurance, Dhanawat underscored the importance of strengthening the Pradhan Mantri Fasal Bima Yojana (PMFBY) through higher funding support and technology-enabled faster claim settlements to better protect farmer livelihoods.
In the motor insurance segment, he flagged the long-pending issue of “pay and recover” awards, which continue to strain insurer balance sheets. He proposed the creation of an ARC-like institutional mechanism to resolve such claims, saying it could unlock capital, improve recovery efficiency, and enhance sector stability without compromising claimant protection.
“These measures, taken together, can accelerate insurance adoption while reinforcing the sector’s financial health,” Dhanawat said, adding that they are essential to achieving inclusive and sustainable growth in the insurance ecosystem.
