"Growth could be challenged next financial year. This hurts predictability of our business model in near-term. Insurers will now have to constantly worry about the possibility of the new tax regime being made mandatory," the executive added.
While proposed new tax regime is optional for the taxpayers, Finance Minister has said the government eventually wants to do away with all exemptions with a lower tax-rate simplified structure.
"If more tax-payers shift towards the new tax-code then the 80C category and the associated industries will be at a disadvantage. Apart from ELSS products offered by MF industry, which were notified under 80C, insurance products will also be at a disadvantage," said Jimmy Patel, chief executive officer of Quantum Mutual Fund (MF).
At present, assets managed by the ELSS category stands at Rs 1 trillion.
While the flows coming into ELSS category is not large, it is sticky in nature as it comes with a three-year lock-in. "These flows help the MF industry in closing months of financial year, when investors
are looking for tax-saving options," said a fund manager.
"The new regime could hold back flows to unit-linked insurance plans (ULIPs). The pure-play insurance products -- including life and health -- investors
may still be able attract investor allocation as these products are meant to give cover for contingencies," said Amol Joshi, founder of Planrupee Investment Services.
“Risk management through insurance has been an essential part. In India, the construct has always nudged future savings and risk management through encouraging investment aided by tax relief. We have not seen announcements that will encourage risk management practices,” said RM Vishakha, managing director and chief executive officer of IndiaFirst Life Insurance.