What Union Budget 2022-23 had to offer for insurtech startups

Promulgated by Finance Minister Nirmala Sitharaman’s shortest budget speech, Union Budget 2022-23 prominently featured startups and focused on technology. The Budget itself is future-ready, pro-technology, and boosts green energy, having several attributes in favour of startups.

The Budget seems to appreciate the fact that the entire economy has faced some extremely tough seasons due to pandemic-induced lockdowns and slowdowns. Since the economy is gradually finding its way back towards normalcy, with necessary budget sponsorship, it could finally recalibrate its focus on entrepreneurship, innovation, and invention. This is the ultimate roadmap to new job opportunities and the needed boost to the economy.

A new day for startups

Care packages announced in favour of startups and entrepreneurship have been lauded by the ecosystem, as has been the fund provisions to state governments to attract investment and efforts towards the creation of new jobs. While the corporate tax rates have been retained, so has been the concessional rate of 15 percent for newly-incorporated manufacturing units, with an additional extension of an entire year.

The second factor is a boon for newly-minted units, and just as the FM mentioned, while the nation has registered a noticeable spike in profit-making startups, they deserve recognition as the true "drivers of growth for India's economy" as well.

In fact, capping surcharges levied on long-term capital gains stemming from sales of unlisted companies’ shares at 15 percent is another direct way of endorsing further direct investments in startups by way of VCs, HNIs, et al. While some experts think that the impact of this announcement will be more telling for share-holding startup employees and individual investors, nonetheless, there is bound to be an impact for VCs and institutional investors interested in startups too.

The tax incentive extension provided for eligible startups for three consecutive years out of ten from incorporation needs some clarifications still, but once that’s addressed, it could prove to be another strong aid.

Focusing on the insurance sector

As the Budget focused sharply on macro growth and fiscal stimulus in the direction of economic recovery, it has also brought some respite to insurance customers – but only to certain groups.

In the post-pandemic economy, the life insurance segment had some justifiable asks and measures to enhance insurance penetration, especially in the vulnerable areas of the society where the blanket of financial security is much needed.

That request went unheard, but the announcement of the lump-sum and annuity payouts to the differently-abled dependents during the lifetime of their guardians or parents is a thoughtful value bonus from the insurers’ side to the said community, which is many times in financial duress.

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Insuring MSMEs and infra segment

A clutch of proposals announced targeted small businesses – starting with offering credit guarantee schemes to increasing the ease of functioning to aid MSMEs tide over tough economic seasons. This particular move is warmly welcomed by insurtechs for whom these businesses are important primary clients.

The ‘Ayushman Bharat Digital Mission’ is another move towards noteworthy healthcare and health insurance gains, since, if effectively implemented, medical records will be seamlessly transferable across stakeholders – a huge erstwhile challenge.

Creating a brand new, key avenue for non-life insurers, the Budget has nominated surety bonds as an apt alternative to bank guarantees for the infrastructure sector. With the IRDAI ready with a framework to be implemented from April 1, 2022, such insurers should be prepared for a windfall if all conditions stay the same.

The acceptance of surety bonds instead of bank guarantees in government procurements is a step in the direction of reducing indirect fees for contractors and suppliers. This move bodes well for both the sectors, insurance as well as infrastructure.

A bit more support goes a mile

India’s insurance industry has seen a growth spurt in the last decade, with demographic support from the burgeoning awareness and purchases from the insurable population. Yet, a huge chunk of the total population still lacks this security blanket with our penetration as low as 3.2 percent – almost at the bottom of the barrel as compared to Asian economies. Hence, this vital segment requires governmental support to increase accessibility, especially in a population affected adversely by the pandemic.

So, while a strong impetus for growth is a must, especially a commendable long-term blueprint such as the 25-year-long Amrit Kaal – as Prime Minister Narendra Modi refers to the next 25 years of India’s growth, the insurance and insurtech sectors need a more inclusive approach and direct boost to insurance.