Liberalisation of the insurance markets in 2000 was expected to inject a sense of new dynamism in the Insurers' community, making them pro-market and pro-insured/consumer. This expectation, unfortunately, is yet to be realised. Like any other monopoly - with only 16 investors controlling a market of Rs 20,000 crore of annual non-life insurance premium, the non-life insurers continue to be inward-looking, concerned with their individual short-term interests: and bereft of any new initiatives to develop the market horizontally, bringing more people in to the safety net of insurance covers. Insurance is continuing to rapidly grow mainly because of the high consumer demand for insurance, as in motor and health covers (50% of the market) - the growth sectors, and not because of any new sense of market dynamism or creativity displayed by the insurers. The penetration level of insurance calculated as insurance premiums collected (about Rs 20,000 crore) to GDP is low at about 0.6%; and is growing at a snail's pace. Liberalisation was resorted to expecting that the market would become more pro-consumer and would provide financial safety nets by innovating insurance covers to those with low incomes as well. These hopes are still in the horizon.

What consumers want in the Budget?

Since the insurer community has so far failed the consumers in these endeavors, it has become necessary for the latter to give expression to their concerns. This article is an attempt in this direction. The issues that will be discussed are three: service tax on premiums that individuals pay from their personal savings; inequity in giving income-tax exemptions to the rich at the expense of the not so well-off; and the urgent need to make investments in insurance market, at least partially, subject to market forces.

Service taxes: A wrong terminology:

The government is levying service tax of 10.2% from consumers for buying insurance protection. An insurer, in fact, delivers no service of any kind when a policy document is exchanged. The policy only contains a contingent promise of future delivery of a service, should an event described happen. 80% of the insured do not put insurers to this test. They keep the policy document as a sense of security and do not call on insurers for any professional service during the policy period.

Levying service tax, therefore, is unfair to the consumer in two ways: there is no service delivered or received and hence it is wrong to collect this tax as "service tax"; secondly, in a country where the premium penetration levels are low and the Govt. wants individuals, rich and poor, to buy more insurance covers, particularly health covers, to tax them for doing so is a punishment; and it does not have a social objective in mind. If the government wants to raise revenue from the insurance sector, in spite of the unfairness of the service tax levy, let them call it as premium tax and not make consumers believe that by buying a policy document, insurers have delivered a service to them!

Can the government at least exempt insurance covers bought by individuals from this levy, as they spend money to buy insurance from their personal savings. By calling it as premium tax instead of service tax, a sense of fairness is restored to the concept of service; and more importantly it will be a fitting recognition to this sector that when premium taxes will have to be raised next time, it will be done as a deliberate action by the government and not thorough an error in having called insurance buying as having purchased a delivered service.

Waive service tax for health covers:

Even if this proposal is not acceptable to the government they must exempt all health insurance covers from the service tax levy. The government is unable to provide primary healthcare; when an individual buys it from personal savings, he should not be further penalised by an additional 10.2% for having done so. This applies to the rural public as well. The continuation of the practice shows the government in a poor light. One can ask justifiably: why does the government want to make health insurance more expensive for the consumers, when they have failed to provide primary healthcare?