LIC may pass on service tax burden to agents

While Budget 2008 have not mentioned anything about service taxation on coverage commissions, Life Insurance Corporation (LIC) is considering passing play on the taxation load to its agents or customers, according to beginnings in the public sector insurer.

Life coverage companies, both authorities and private, had sought decrease in the current service taxation charge per unit of 12.5 per cent.

LIC have been absorbing liabilities arising out of service taxation on agent commissions, leaving its 13 hundred thousand agents free off this burden. A senior LIC functionary said that LIC's new concern insurance premium (NBP) income was Rs 55,395 crore during 2006-07.

Considering that the norm committee per policy is at 10 per cent, the corporation would have got paid around Rs 5,500 crore as the committee of the agents. Here, the service taxation at 12.5 per cent plant out to about Rs 700 crore, which have been borne by the the insurance company on behalf of the agents.

This figure is only for NBP income and if the committee on policy renewals is added, the service taxation load would be much higher for LIC, the functionary added.

With gradual addition in service taxation rates, it may not be possible for LIC to absorb the service taxation load in full.

"Going forward, we may have got to go through it on to our agents or customers, either a part of it or full. In this epoch of intense competition, we cannot afford to lose our clients by giving them less bonus. So, we might stop up passing on the load to the agents," the senior functionary added.

He added that from April to December 2007, LIC collected NBP of Rs 34,595 crore, which is likely to travel up to Rs 60,000 crore by the end of the current fiscal year. A 10 per cent committee for this amount plant out to Rs 6,000 crore. And, the service taxation amount plant out to Rs 750 crore at the charge per unit of 12.5 per cent.

However, in the lawsuit of private insurers, the service load have been passed on to the agents. During 2006-07, private insurance companies collected NBP income of Rs 19,471 crore for which committee worked out to about Rs 3,000 crore. The service taxation amount of Rs 350 crore was born by the agents.

It is also estimated that life coverage companies, including LIC, are likely to accumulate NBP of Rs 1 hundred thousand crore during the current fiscal year, on which committee of 10 per cent will be levied (to around Rs 15,000 crore). On this commission, life coverage companies will have got to blast out Rs 10,000 crore as service tax.

A senior functionary with a private life coverage company pointed out that insurance companies will now confront the challenge of retaining their agents. Insurers are trying their best to maintain abrasion degrees low by giving inducements directly and indirectly. If the service taxation load is passed on to the agents, it will impact their income levels, which may take to higher attrition, state industry watchers.

LIC may write insurance policy for women self-help groups

HYDERABAD/MUMBAI:
The United Progressive Alliance authorities is looking at rolling out a
micro-insurance strategy for women self-help groupings to supply security to scores
of mediocre women in the country. The scheme, perceived to be a populist measure,
could have in the Budget. The Life Insurance Corporation (LIC) is
understood to have got been asked to work out the modes of an coverage scheme
aimed at providing life screen to these segments. The authorities will part-fund
the coverage premium obligations, implying that it may look at giving a 50% subsidy to
the insurance company that offerings the scheme. Officials involved in the exercise
said the strategy could be offered by LIC and other insurance companies as well. The insurance premium plant out to Rs 5 to Rs 6 for a sum of money assured of Rs 1,000. The sum of money assured for a life screen to this section could change from Rs 10,000 to Rs
50,000. So the insurance premium payout would change from Rs 50 to Rs 250 a year. The
government is also looking at a service taxation release on the insurance premium amount as the
product is targeted at low income groups. The authorities is also
understood to have got held negotiation with LIC on extending the range of the
Bhagyalakshmi Insurance strategy introduced by the Mysore authorities at the
central level. The Bhagyalakshmi strategy is aimed at providing support to
families below the poorness line with a miss child. Sources said the
government was looking at support a strategy which would supply conditional
transfer of finances to a mediocre household with a miss child. The assorted conditions
subject to the monetary fund transportation include mandatory school attending and family
planning by a parent. The strategy was introduced in Mysore a
couple of old age ago with the aim of improving the male-female ratio. Sources said the authorities had made enquiries on the sort of funding
requirement to do such as a strategy feasible. In the past, successive
government’s have got announced coverage strategies for the poor, but none of
these strategies were specifically targeted at women. Policy directors are assessing
the efficaciousness of some of the strategies introduced in the past. Last year, for
instance, the authorities announced the Aam Admi Bima Yojana to widen decease and
disability coverage screen to the unorganised sector. The strategy is
managed by LIC. Rashtriya Swasthya Bima Yojana is a wellness coverage strategy for
below-poverty-line households and supplies benefits of up to Rs 30,000. The
premium expenditure is to be borne by both the cardinal and state governments. Earlier,
the National Democratic Alliance authorities had announced two strategies through
LIC â€" Varishta Bima Pension Yojna and Janshree Bima Yojna.