23 Aug 2016
MUMBAI: Insurance companies will potentially have to deal
with more taxes once the GST is implemented with the emergence of the Centre
and states as dual stakeholders, a report said.
The number of taxes will increase as calculation
of input-output tax credits will be done separately for each individual state
in which they are earned, it added.
Insurance, being a service industry, deals with
one single tax (service tax) with one administering authority (the Central
government), the EY and CII 'Insurer of the Future' report said.
"One of the significant impacts on
insurance industry under the dual GST structure would be the emergence of dual
stakeholders in every taxable supply of service, the state government, where
the supply is made and the Centre," it said.
From dealing with a central service tax for
pan-India operations, insurers now will potentially start dealing with 38
taxes, including 35 state GSTs (SGSTs), including Union Territories, one
Central GST (CGST) and IGST on inter-state supplies, it pointed out.
The report added that the reinsurance industry
is undergoing a major change, with foreign insurers being permitted to set up
branch offices in India.
The new rules are expected to create an even greater focus on
services by foreign insurers as they compete for a share of the market, it
The market for emerging risks such as cyber
insurance, customised liability insurance and specific disease insurance is
expected to grow, driven by the willingness of customers to pay a premium for
specialised and innovative solutions.
Reinsurers have a key role to play in helping
the insurance industry innovate and cover new frontiers, as the industry looks
to them when it comes to exploring the unknown.
The report also stated that technology will form
the backbone for this transformation, acting as both an enabler and disruptor.
Its role is expected to rapidly change from its
current ancillary function to becoming a core competency for insurance
Solutions such as data analytics, robotics
process automation, block chain and cloud, which is already being implemented,
however, is only the tip of the iceberg in terms of their potential
applications and overall ability to transform businesses.
The digital bar for insurers is rising
continuously and the companies that can meet this challenge will build greater
customer loyalty, improve cost efficiency and increase profitability, it added.