Introduction: SBI Pushes for Healthcare and Insurance Reforms
As preparations for the Union Budget 2025 gain momentum, the State Bank of India (SBI) has highlighted the urgent need for reforms in the healthcare and insurance sectors. In its latest report, SBI has proposed increased healthcare spending and significant tax relief measures to address declining insurance penetration and improve access to essential services.
Key Recommendations from the SBI Report
1. Increased Healthcare Spending
- The report recommends allocating 5% of GDP to healthcare, surpassing the National Health Policy 2017 target of 2.5% by 2025.
- Enhanced public spending is seen as critical to addressing the needs of a growing and ageing population.
2. Tax Relief for Insurance Premiums
- SBI suggests granting tax exemptions on term life and health insurance premiums, similar to the National Pension Scheme (NPS), to make these policies more affordable.
- It also calls for a separate tax deduction of ₹25,000–₹50,000 for life and health insurance premiums under both the old and new tax regimes.
3. Unified Pension Schemes
- To improve accessibility and operational efficiency, the report advocates integrating government-sponsored pension schemes such as the Atal Pension Yojana (APY) and Pradhan Mantri Shram Yogi Maandhan (PM-SYM) under a single platform.
4. Rationalization of GST on Medical Devices
- SBI proposes standardizing GST rates on medical devices to 5%-12%, replacing the current range of 5%-18%, to reduce costs and improve affordability.
Addressing Declining Insurance Penetration
The report draws attention to India’s declining insurance penetration, which fell to 3.7% in FY24 from 4% in FY23.
- Life Insurance: Penetration dropped sharply to 2.8%, signaling the need for urgent reforms.
- Non-Life Insurance: Stagnated at 1%, reflecting limited adoption.
The Insurance Regulatory and Development Authority of India (IRDAI) aims to achieve ‘Insurance for All by 2047’, but the current trajectory highlights the need for immediate action.
Proposed Measures to Boost Insurance Adoption
1. Insurance Premium Tax Relief:
- Tax exemptions would encourage more people to purchase health and life insurance, enhancing financial security and access to healthcare.
2. Improved Accessibility for Low-Income Groups:
- Expanding tax incentives and simplifying insurance processes would make policies more accessible to underserved populations.
3. Increased Awareness Campaigns:
- Promoting insurance benefits through targeted outreach programs can drive adoption across diverse demographics.
Potential Economic and Social Impact
If implemented, these recommendations could:
- Strengthen Healthcare Infrastructure: Increased public spending would improve access to quality healthcare services.
- Enhance Financial Security: Tax exemptions and deductions would make insurance more affordable, encouraging broader participation.
- Support Economic Growth: A healthier and more financially secure population would contribute to greater productivity and national prosperity.
Conclusion: A Roadmap for Inclusive Development
The Union Budget 2025 presents a critical opportunity for the government to address challenges in the insurance and healthcare sectors. By adopting SBI’s recommendations—such as increased healthcare spending, tax relief for insurance premiums, and GST rationalization—the government can pave the way for a healthier, financially secure, and inclusive India.
These measures not only align with the IRDAI’s vision of ‘Insurance for All by 2047’ but also serve as a foundation for achieving long-term economic and social resilience.