The insurance industry on Thursday expressed its reservations about some aspects of this year's Union
Budget, among them the levy of 10 per cent service tax on the risk premium for life insurance policies and
the absence of tax exemption for single premium products.

But it welcomed a hike in the ceiling on foreign direct investment from 26 per cent to 49 per cent.

The imposition of a service tax on risk premium would create administrative problems for insurance
companies and end up getting older people to pay more taxes as the premium rose with advancing age, said Life
Insurance Corporation of India chairman S B Mathur.

Echoing Mathur's views, Shivaji Dam, managing director of Kotak Mahindra Old Mutual Life Insurance, said
India was an under-insured country and a service tax would make policies expensive.

Birla Sun Life Insurance chief executive Nani Javeri said the rules on the service tax on risk premium had to be
clearer so that their impact on the nascent industry could be gauged.

Mathur said he was disappointed over the lack of tax exemption for short-term insurance policies.

The LIC chief said the industry welcomed the hike in FDI to 49 per cent, and that foreign players could now
control their local operations.

ICICI Bank deputy managing director Kalpana Morparia said his company would maintain management
control, at least for the interim.

"If our insurance venture partner Prudential so desires, we will take a look at it at an appropriate time. But we
will continue to have management control and it will remain our subsidiary," he said.