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Insurance costs under lens: RBI flags high-cost distribution driving premium growth, warns of medium-term pressure – The Times of India
The Reserve Bank of India has flagged emerging structural pressures in the insurance sector, warning that premium growth is increasingly being driven by high-cost, distribution-led strategies rather than improvements in operating efficiency, even as the sector remains stable in the near term, according to its latest Financial Stability Report.“While posing no near-term systemic risks, the surface-level stability masks emerging structural pressures that could weigh on medium-term sustainability and coverage expansion,” the RBI said in the report.“A primary pressure is the persistence of a high expense structure, particularly the acquisition costs. Premium growth has been increasingly driven by high-cost distribution-led strategies rather than operating efficiency,” the central bank noted.In the life insurance segment, the RBI said frontloaded acquisition costs have limited the extent to which scale efficiencies are passed on to policyholders. It added that the expected benefits from digitisation have not yet fully materialised.“From a financial stability perspective, continuously elevated expenses could weaken profitability buffers and amplify cyclical vulnerabilities,” the report said.The RBI said a reorientation towards cost rationalisation, better alignment of intermediary incentives with policy persistency and value, and wider adoption of technology-enabled low-cost distribution models are essential to improve the sector’s long-term resilience.Supported by regulatory initiatives such as the risk-based capital framework, enhanced disclosures and strengthened market conduct standards, a sustained moderation in expense intensity would improve consumer value and help the sector transition from a ‘high-cost, low-inclusion’ model to an ‘affordable-cost, broad inclusion and high quality’ equilibrium, it added.According to the report, total premium income rose to Rs 11.9 lakh crore in 2024-25 from Rs 8.3 lakh crore in 2020-21, reflecting continued expansion of the insurance market.“However, total insurance premium masks a significant growth moderation, as the growth rates for both life and non-life sectors have slowed sharply,” the RBI said.At a sectoral level, the life insurance segment continues to exhibit high concentration risk, while the non-life sector has seen a structural shift, with health insurance emerging as the leading segment. Product concentration across both segments indicates limited diversification, the report noted.Total assets under management of the insurance sector stood at Rs 74.4 lakh crore as on March 31, 2025, with life insurers accounting for 91 per cent of total investments, underscoring the sector’s growing role as a major institutional investor.The RBI also highlighted a divergence in cost efficiency between public and private insurers.“Public life insurers show a strong focus on expense management and potentially lower acquisition costs underlined by a flat commission structure despite growing premiums. In contrast, private life insurers show a steep increase in commission pay-outs, particularly surging from 2022-23 onwards, indicating business acquisition at higher marginal cost,” it said.In the non-life segment, public insurers maintain a stable but high expense base, with commission costs remaining low and flat. Private non-life insurers, however, show a sharper escalation in commission expenses, pointing to a high-cost distribution-led growth strategy that could impact underwriting margins, the RBI said.The report also noted that insurance density rose steadily from $78 in 2020-21 to $97 in 2024-25, indicating higher per-capita spending on insurance. At the same time, a decline in insurance penetration suggests that GDP growth has outpaced the rise in premiums.
India-Europe Flight Network: Air India and the Lufthansa Group recently signed a Memorandum of Understanding (MoU) to form a joint business partnership. The agreement establishes a framework for cooperation between Air India, its subsidiaries such as Air India Express, and Lufthansa Group carriers, including Austrian Airlines, Brussels Airlines, ITA Airways, Lufthansa, and SWISS.
Through this partnership, the two companies aim to enhance flight connections and travel experiences between India and Europe on a single ticket. The move follows the recent completion of the India-European Union Free Trade Agreement. The airlines plan to collaborate on route planning, flight schedules, and marketing to make travel more convenient. They also intend to coordinate frequent flyer programs and IT systems.
Carsten Spohr, Chairman and CEO of the Lufthansa Group, said the agreement marks a new phase in aviation between the two regions. He stated, “Together with Air India, we will strengthen our access to the aviation market with the highest growth rates worldwide.”
Air India, in a statement, said it is expanding its fleet and services following its privatisation in 2022. The airline views this cooperation as a way to support growing trade and travel ties. Campbell Wilson, CEO and Managing Director of Air India, noted that the framework allows both companies to explore closer cooperation on multiple levels. He said, “This would unlock greater value for our common customers and respective shareholders, and we look forward to progressing these initiatives together with the Lufthansa Group.”
The two airline groups already collaborate through the Star Alliance and existing codeshare agreements. Currently, they operate 145 routes connecting 15 cities in India with 29 cities in Europe. The new agreement will initially focus on traffic between India and the Lufthansa Group’s home markets of Germany, Austria, Belgium, Italy, and Switzerland, with plans to expand to the rest of Europe and the Indian subcontinent later.
Economic data shows that the EU is India’s largest trading partner for goods, with bilateral trade exceeding 120 billion euros in 2024. Together, India and the European Union represent nearly 25 percent of global Gross Domestic Product. The airlines believe that improved aviation links will further strengthen these economic relations. Final details of the partnership, including specific routes, will be announced after the companies obtain the necessary regulatory and anti-trust approvals.
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Under Section 80C, investors can claim a tax deduction of up to Rs 1.5 lakh in a financial year by investing in a tax-saving FD
One of the key conditions attached to this investment is the mandatory lock-in period of 5 years. (representative image)
A tax-saving fixed deposit (FD) continues to be a popular investment option for individuals seeking a safe avenue to grow their money while reducing their tax burden. The scheme offers dual benefits, capital protection along with tax deductions under the Income Tax Act.
Under Section 80C, investors can claim a tax deduction of up to Rs 1.5 lakh in a financial year by investing in a tax-saving FD. In addition to the tax benefit, these deposits currently offer interest rates of up to around 7%, making them an attractive choice for those looking for stable and assured returns without exposure to market risks.
However, the tax advantage applies only to those who file their income tax returns under the old tax regime. Individuals opting for the new tax regime cannot claim deductions under Section 80C for investments made in tax-saving FDs. Financial planners advise investors to assess their tax planning strategy before committing funds.
One of the key conditions attached to this investment is the mandatory lock-in period of 5 years. During this period, the deposited amount cannot be withdrawn. The restriction is often viewed as a discipline-enforcing feature for long-term savers.
Premature withdrawal is not permitted; if the deposit is broken before completing 5 years, the investor may face penalties and will also lose the tax benefits. The withdrawn amount would then be treated as income in that financial year and taxed accordingly.
Tax-saving FDs also do not offer loan or overdraft facilities against the deposit. In case the account holder passes away, the nominee is allowed to withdraw the amount before maturity.
While the principal investment qualifies for tax deduction, the interest earned is not fully tax-free. If the annual interest exceeds Rs 40,000 or Rs 1 lakh in the case of senior citizens, banks deduct tax at source (TDS) at the time of payment. Despite this, the scheme remains appealing to conservative investors because it guarantees returns at maturity and shields savings from market volatility.
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February 17, 2026, 18:16 IST
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New Delhi: Salaried employees could see a slight increase in their take-home salary from April 1, 2026, as India prepares to implement the new Income-tax Act, 2025, replacing the decades-old Income-tax Act, 1961.
One of the key reasons for higher in-hand salary is the standard deduction benefit available under the new tax regime, which currently stands at Rs 75,000 for salaried individuals. This reduces taxable income and can increase disposable income.
Under the new tax regime, taxpayers earning up to Rs 12 lakh annually can effectively pay zero income tax due to the Section 87A rebate, while salaried individuals can enjoy tax-free income up to about Rs 12.75 lakh after including the standard deduction.
Although income-tax slabs remain unchanged for FY 2026-27, the rollout of the new tax law from April is expected to simplify compliance and maintain tax relief measures introduced in recent budgets.
Overall, the upcoming tax changes are aimed at simplifying the tax system while ensuring that salaried taxpayers continue to benefit from deductions and rebates, which could slightly improve monthly take-home salary depending on income level and tax regime chosen.
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