The government introduced multiple progressive reforms for the insurance sector in the recent past to maintain domestic demand and support the industry’s growth trajectory. The key reforms include the introduction of GST 2.0. and raising the ceiling on foreign direct investment in insurers to 100% from 76% previously.
As a part of GST 2.0 reforms, the government removed the GST on individual insurance products. Allowing 100% FDI has also bolstered market sentiment and improved the outlook for the sector.
Moving forward, Insurance industry leaders expect the government to focus on long-term reforms in the coming Budget to improve affordability and increase insurance coverage and penetration. Industry leaders say that continuity in policy, clearer rules and realistic tax benefits from insurance policies will matter more.
Speaking with Asia Insurance Review, Axis Max Life Insurance MD and CEO Sumit Madan said, “Higher and simpler tax incentives, under various sections of the IT Act to revive insurance adoption, should be brought in.”
He said there should be a separate tax deduction for pure term insurance, outside the existing income tax (IT) limit, to improve life cover across the country. He said such steps would reinforce life insurance as a key pillar of a resilient and future-ready economy.
Bajaj General Insurance MD and CEO and Chairman of General Insurance Council Dr Tapan Singhel said, “On behalf of the general insurance industry, my pre-Budget recommendations rest on a simple premise: treat insurance as social infrastructure, an essential system that protects citizens, businesses and public investment.
He added, “MSMEs are central to India’s economy. According to the Ministry of MSME and NITI Aayog, they contribute 29–30% of GDP, 36% of manufacturing output, 45% of exports, and employ over 120m people. But they remain highly exposed to climate-related risks. To reduce their vulnerability, we have proposed a National MSME Protection Scheme, which can become mandatory in three steps.”
- A simple standard cover for property damage from key perils
- Parametric add-ons for floods, cyclones and extreme rainfall, with predefined triggers and payouts
- Automated payouts to MSME bank accounts when triggers are met, avoiding complex documentation.
Dr Singhel said, “Policyholders today mostly look at the total premium and basic policy coverage. They rarely know how much of their payment goes toward the risk pool, commissions or operating expenses. Strengthening trust requires clearer information.”
He said, “We have recommended a Unified Commission and Expense Disclosure Framework for retail health and motor policies. Every policy should clearly display these details, both in rupees and percentages.
- The commission on a specific insurance policy and intermediary type
- Estimated management and operating expenses
- The amount allocated to the risk pool and claims
IndusInd General Insurance CEO Rakesh Jain said, “Health insurance is now the core of the Indian general insurance market. It needs policy support to counter rising medical inflation and enhance access, especially for vulnerable groups. Similarly, India also requires future-ready risk solutions backed by stable regulation, stronger domestic reinsurance capacity, and clear catastrophe frameworks.
“Significant focus on insuring houses and SME/MSMEs is also critical to ensure that the asset and lifestyle creation of India is not at risk due to physical or economic volatility. With rising climate-linked events, rapid urbanisation, and increasing asset ownership across Tier 2 and Tier 3 regions, home insurance that is traditionally underpenetrated requires policy incentives, tax benefits, and simplified product frameworks to drive mass adoption and strengthen household resilience,” said Mr Jain.
SBI General Insurance MD and CEO Naveen Chandra Jha said, “This Budget presents an opportunity to deepen insurance penetration by improving affordability and access, particularly in underinsured segments such as small businesses, rural households and first-time buyers. Targeted incentives for microinsurance and social sector covers, along with relief on policy-level costs for low-premium products, can materially accelerate last-mile adoption.
“Budget 2026 can also play a catalytic role in strengthening India’s risk resilience by encouraging the development of climate-risk insurance solutions, continued emphasis on data-led reforms, such as unified insurance data exchanges, and consent-based digital infrastructure can improve underwriting accuracy, curb fraud and enhance the claims experience.”
Mr Jha said, “A balanced mix of affordability, innovation and data-driven discipline can enable general insurers to scale responsibly while supporting India’s broader goals of financial inclusion and economic resilience.”
Edelweiss Life Insurance deputy CEO and ED Subhrajit Mukhopadhyay said, “In the upcoming Budget, we expect a continuation of the government’s efforts to bring ease of business, boost capital inflow into the Indian economy and further the agenda of' Insurance for All by 2047'.
Highlighting the challenges of an ageing society, “India is home to the second largest elderly population in the world. The number of senior citizens is likely to increase to 230m in 2036, about 15% of the total population, according to government estimates. Add to this the fact that the average life expectancy in India has increased about 14 years between 1990 and 2025.”
Mr Mukhopadhyay said, “This vast ageing population underlines the need for an active and burgeoning pension and annuity market in India. Currently, an annuity is completely taxed in the hands of the customer. Hence, a tax break on annuities could further encourage Indians to opt for these instruments, providing the much-needed social security to many during their golden years. Further, this will help insurance companies invest in long-rated bonds and channel long-term savings into capital-intensive sectors.”
Niva Bupa Health Insurance MD and CEO Krishnan Ramachandran said, “Health insurance protection should be encouraged, irrespective of the tax structure chosen. With rising healthcare costs and increasing longevity, the current Income tax deduction limit of up to INR100,000 ($1,091) may no longer be adequate. A comprehensive review and enhancement of this limit to at least INR150,000 would meaningfully strengthen preventive care and long-term health planning.
“Additionally, personal accident and travel insurance products currently fall outside the ambit of IT deductions. Including these within the deduction framework would promote holistic risk protection and drive wider adoption.”