Why Max Life’s CEO Expects New Tax Regime To Have Negligible Impact On Insurance Sales
Pedestrians and traffic cross a railway crossing near Chunabhatti railway station in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Why Max Life’s CEO Expects New Tax Regime To Have Negligible Impact On Insurance Sales

On Feb. 1, Finance Minister announced a new and optional personal income tax regime with lower taxes for those who let go of the exemptions offered by the government—often a key sales pitch for those selling insurance. Max Life Insurance, however, expects this will have little impact on their new business.

After calculating all the deductions and exemptions on 80C under Section 16, house rent exemption, National Pension Scheme and exemptions with respect to house loans, it’s more profitable for salaried people to remain under the old regime, Prashant Tripathy, the insurer’s chief executive officer and managing director, told BloombergQuint in an interview. “Hence, impact on new sales should be negligible.”

Moreover, investing in life insurance also calls for tax benefits under Section 10(10D) of the Income Tax Act during the payout of the policy, which is still intact under the new regime, he pointed out.

Speaking about the impact of the tweaks in Direct Distribution Tax and its impact on the company’s performance, Tripathy said their company will see a 50-60-basis-point hit to their operating margin in a worst-case scenario. Impact on the embedded value would be of about 1 percent, he said.

“But the point I’m trying to highlight is that these aren’t significant impacts that could drive the share prices down to the levels seen on Saturday,” he said. “I’m glad that the market has started doing the math and we're seeing some recovery in the stocks.”

Watch | Max Life Insurance’s CEO & MD On The Impact Of Budget 2020

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