Long-term insurance policies need tax incentives: ICICI Pru’s Anup Bagchi | Insurance News

India needs tax incentives for long-term insurance policies to counter the pull towards shorter-duration instruments, Anup Bagchi, MD & CEO of ICICI Prudential Life Insurance, said at NaBFID’s Infrastructure Conclave 2026.

Bagchi noted a growing appetite for shorter liability instruments across the financial sector — bank deposits under three years have risen from 60-65 per cent to 90 per cent, while mutual funds are also seeing higher demand for short-duration options. To build long-term liability pools, he said, insurers need parity with the tax advantages equities enjoy over debt. “If you want to increase it further, maybe we should work on tax advantages — not for all policies, but perhaps for 10-year-plus policies or 15-year-plus policies — so that we can balance the tax cost,” Bagchi said.

Shorter policy durations leave insurers with less stable long-term funding to match against long-duration assets like infrastructure, he said, creating potential mismatches in duration, liquidity and cash flows. While insurance and pension funds are naturally suited to long-term infrastructure investment, they must carefully manage credit, interest-rate and liquidity risks, which are further complicated by infrastructure’s variable cash flows.

Meanwhile, Dinesh Pant, MD of LIC, said insurance and pension funds are poised to play a transformative role in infrastructure financing, but only with risk-balanced governance frameworks in place. Despite an uptick in ‘BBB’ and ‘BB’ rated companies, he said past defaults cannot be erased by ratings alone, calling for a relook at ecosystem governance. “The life insurance industry and the pension industry have a big role to play (in infrastructure investment). But we really need to re-look at the type of instruments that are available and the ecosystem of governance,” Pant said.

Insurers have shifted over the past decade from funding infrastructure NBFCs to participating directly in large asset pools and SPVs such as airports. But credit enhancement mechanisms haven’t kept pace — they reduce loss given default, not the probability of default — leaving insurers wary of insolvency risk, NPA management and reputational exposure.