• Source:JND
The Union Budget of India is set to be tabled in the Parliament on February 1, and India’s financial sector eyes a structural reform to make insurance and credit more accessible to the common people. According to the insurance industry, the goal of financial inclusion will be difficult to achieve without plugging the gaps in the tax regulation, data infrastructure and credit access.  

What Are The Major Demands Of Insurance Sector?

Demand 1

The insurance sector’s main demand ahead of Budget 2026 is a change in how pension and annuity products are taxed. According to a report on Budget 2026 by Deloitte, the entire amount received from an insurance annuity is taxable, while the principal amount has already been taxed at the time of investment.
 
However, investors in the National Pension System get undue tax benefits. This is driving people towards tax-saving schemes instead of rotating the money through various retirement schemes to keep a constant flow of income.
 
Insurance companies are therefore asking the government to tax only the returns earned on annuities, not the full payout. They also want insurance-based pension products to get the same tax benefits as NPS.

Demand 2

Climate risk insurance is expected to be another major relief that can be announced in Budget 2026. This is because traditional insurance policies and systems have failed to give economic relief to the people amid worsening weather conditions like floods and heatwaves.
 
According to Deloitte, parametric insurance is the most viable solution, where faster payouts are given to the people on some fixed parameters rather than calculating the amount of loss. The initiative can be facilitated through government co-financing and a public-private model.

Demand 3

The next demand of the insurance sector is a consolidated platform for data on motor insurance, which can be built on existing institutions such as Insurance Information Bureaus. This will prevent data fragmentation, which remains a major challenge despite the use of telematics, artificial intelligence and health data of cars. This could help reduce fraud, enable personalised pricing, and increase consumer trust.

Demand 4

A composite licensing policy which allow companies to offer both life insurance and non-life insurance. According to Naveen Chandra Jha, MD and CEO of SBI General Insurance, quoted by Jagran.com, "Composite licensing will reduce costs and provide customers with tailored solutions for life events."

Demand 5

To increase the reach of insurance benefits, companies are advocating for the complete removal of costs such as stamp duty, which will bring down the cost of premiums. They are also advocating for simpler distribution rules to make it easier for more people to obtain insurance. As per IRDAI data, India's total insurance penetration is only 3.7 per cent of the GDP, which is significantly lower than the global average. 
 
According to Tarun Chugh, MD and CEO of Bajaj Life Insurance, quoted by Jagran.com, "The challenge for insurance is not just demand, but affordability, trust, and access. Budget 2026 can make insurance the foundation of household security."

Demand 6

NBFCs and other alternative lenders are demanding better financing support for MSMEs in the rural nd semi-urban areas. They are also demanding equal tax benefits enjoyed by banks in these areas.  
 
The industry says there is a credit gap of over Rs 20 lakh crore for MSMEs, even though the sector plays a major role in India’s GDP and exports.

Demand 7

Digital lenders are seeking more transparent rules to increase online transactions. They are also looking at a push towards investment in the green energy sector. Overall, the insurance sector is demanding to make insurance and loans not just financial products, but the foundation of financial security for every Indian family.

Also In News