Tax saving continues to be a big pull factor for people buying life insurance policies, especially in the last few months of the financial year, even though insurers remain upbeat about sales in the light of the recent Budget proposal.

Industry data reveals a sharp jump in sales of life insurance policies in the month of March compared to December.

In 2018-19, the premium collected for life insurance companies more than doubled in March 2019 to ₹37,459.36 crore compared to ₹18,237.84 crore collected in December 2018. The number of policies and schemes also doubled in March 2019 to 55.39 lakh, as against 25.15 lakh in December 2018. (See Chart)

Sales of life insurance policies   -  Source: Life Insurance Council

The data for previous financial years also reveals a similar surge in life insurance policies towards the end of the financial year, especially in March, as many people suddenly decide to save tax through long-term investments in the Section 80 C window.

Sales unaffected

Insurance companies and agents say that February and March are the biggest months for sales of policies, as customers have to give proof of investments for tax saving and this year is no different.

“February and March are always busy months, as people want to buy insurance policies to submit in office as proof of investments for tax saving purpose. The Budget proposal to remove Section 80 C deduction for those availing lower income tax slabs is unlikely to affect sales, as many people may choose not to use the lower tax slab,” noted an LIC agent.

In January 2020, there was a drop in the premium collected from life insurance at ₹20,623.01 crore, compared to ₹25,079.79 crore in December, although the number of policies rose to 46.91 lakh.

Emkay Global, in a research note, said that after the moderate growth in life insurance sales in January this year, it expects better growth in the consecutive months and the Budget proposal will not impact sales for private insurers.

Proposal in Budget

“We believe private insurance players are unlikely to see any significant shift in premium growth due to the recent announcements made in the Union Budget (tax savings sale dropping off under the new tax regime), given a diversified product suite and evolving distribution ecosystem,” it said.

The Union Budget 2020-21 has proposed doing away with all tax exemptions and deductions for those opting for the lower personal Income Tax rates.

Accordingly, taxpayers opting for the lower slab will no longer have the benefit of claiming deduction of up to ₹1,50,000 under Section 80 C for life insurance premium and Section 80 D for health insurance premium payments.

Life insurance companies have, however, stressed that the proposal will not have much impact on sales.