Max Life Insurance MD Prashant Tripathy Addresses Tax Benefit Withdrawal and Industry Outlook

As the life insurance landscape navigates changes in tax policies and market dynamics, Prashant Tripathy, the Managing Director of Max Life Insurance, provides insights into the potential impacts on the industry. 

In an exclusive interview, Tripathy addresses the recent withdrawal of tax benefits for endowment policies, anticipated shifts in premium collections, and the broader industry outlook.

Stability in Premium Collections Despite Tax Changes

Tripathy, a seasoned industry professional, suggests that the withdrawal of tax benefits for endowment policies is unlikely to have a major impact on premium collections. 

The need for insurance, he emphasizes, transcends tax considerations. Insurance serves as a crucial financial tool that offers security and peace of mind beyond the allure of tax incentives. 

Tripathy asserts that while there might be a marginal reduction in premium collections over the next couple of years, the overall stability in collections will remain unaffected.

Dynamic Changes in Premiums and Term Insurance

The life insurance sector has recently seen multiple rounds of premium hikes due to COVID-19-related risks and changes in global reinsurance rates. 

However, with the diminishing threat of widespread COVID-19 fatalities, premiums for term insurance could experience a correction. 

As the industry recalibrates its offerings in response to evolving circumstances, customers can expect more dynamic changes in premium rates.

Beyond Tax Breaks: The Essence of Life Insurance

Effective April 1, 2023, the tax exemption status for maturity proceeds from traditional endowment policies, once a hallmark of life insurance policies, will be phased out if the aggregate annual premium exceeds Rs 5 lakh. 

Despite the boost this tax exemption provided, Tripathy believes that the intrinsic value of life insurance extends far beyond tax advantages. 

This conviction is supported by the strong growth in term insurance premiums and sales, indicating that customers recognize and prioritize life insurance's core value proposition.

Navigating Change in the Industry

While the industry anticipates a dip in sales in the last quarter of FY24 due to the absence of the tax benefit, Tripathy predicts that the impact will likely be marginal. The substantial surge in sales that occurred in March 2023, driven by the tax benefit withdrawal deadline, will contribute to a large base, cushioning the potential decline in sales. 

Moreover, the broader trend of recognizing the importance of life insurance beyond tax benefits is expected to mitigate any significant adverse effects.

Max Life Insurance's Strategy and Focus

Tripathy discusses Max Life Insurance's stance in light of the changes. For the company, high-value endowment policies accounted for a small percentage of policies and premium basis. 

The tax rule amendment will not alter Max Life's product strategy significantly, as the company remains confident in its ability to continue attracting customers seeking comprehensive coverage and long-term financial security.

Persistency Rates and Future Improvement

Persistency rates, reflecting policy renewal rates and customer retention, remain a challenge for the life insurance industry. 

Tripathy acknowledges the need for improvement in this area. While persistency ratios in India lag behind developed countries, Max Life has demonstrated strong performance in terms of both the 13th month and 61st month persistency ratios. 

The company's commitment to enhance these rates aligns with its goal to provide customers with a satisfying and enduring experience.

Looking Forward with Confidence

Tripathy's insights shed light on the intricate dynamics shaping the life insurance industry in the face of changing tax regulations and market trends. 

As the sector adapts and innovates, the core value of life insurance stands strong, driven by customers' recognition of its fundamental significance in securing their financial future. 

Amidst these shifts, Max Life Insurance remains resolute in its commitment to delivering comprehensive coverage, sound financial planning, and a brighter future for its customers.