The life insurance sector's trouble with taxation on high-value policies

The imposition of a tax on high-value policies could hurt the growth rates of life insurers in the next fiscal year

At a time when life insurers reckon that the industry is in a policy sweet spot because of the steps taken by the regulator to enhance the ease of doing business, the imposition of a tax on high-value policies in the latest Budget comes as a dampener.

Analysts and experts say that the government’s proposal to tax income from traditional insurance policies, other than unit-linked insurance products (ULIPs), having a premium of more than Rs 5 lakh a year, is likely to impact the growth and margins of life insurance companies, at least in the next year.

The rationale behind