Insurance premiums to potentially decrease under GST waiver, impacting life and health coverage
September 4, 2025
The Goods and Services Tax (GST) on individual life and health insurance policies is being exempted, a move that is seen as a significant step towards making these products more affordable and expanding the insurance market.
The Life Insurance Council, an apex body representing the life insurance industry, had recommended reducing the GST rate on policies to zero, along with equal reductions in tax rates for reinsurance and commissions to avoid Input Tax Credit (ITC) anomalies. However, no specific details were provided about the recommended reductions in tax rates for reinsurance and commissions.
Insurers are analyzing the implications of the GST exemption, but are unsure about passing the entire benefit to policyholders due to ITC issues. If ITC is not available, insurers may pass on some costs to customers, potentially offsetting the GST reduction.
The move is expected to lead to a reduction in premiums for policyholders. Rushabh Gandhi, MD & CEO of IndiaFirst Life Insurance, believes the move will expand the life insurance market. Tapan Singhel, MD & CEO of Bajaj Allianz General Insurance, mentioned that the reform will directly benefit citizens and ease the financial burden on families. Narendra Bharindwal, President of Insurance Brokers Association of India (IBAI), stated that the reforms will strengthen trust in insurance as a reliable safety net.
In the health insurance segment, which is the largest in the non-life industry, the premium stood at ₹1.18 lakh crore in FY25, showing an 8.98% year-on-year growth. Premiums are expected to decrease due to the GST exemption.
In FY25, the life insurance industry's new business premium stood at ₹3.97 lakh crore, showing a 5.13% year-on-year growth. The reforms in health insurance are expected to accelerate insurance penetration.
HDFC Life expects a non-material (less than 0.5%) impact on its Embedded Value due to the GST exemption. Samir Shah, Executive Director & CFO of HDFC ERGO General Insurance Company, stated that the extent of the premium decrease depends on the availability of ITC.
The GST exemption on health cover has been demanded to make health insurance more affordable and provide social and financial security to the common man. The reforms are expected to have a positive impact on the insurance sector and the overall economy. Insurers are waiting for clarity regarding ITC on certain expenses before making any concrete decisions about premium reductions.
Read also:
- Recognition of Exceptional Patient Care: Top Staff Honored by Medical Center Board
- A continuous command instructing an entity to halts all actions, repeated numerous times.
- Oxidative Stress in Sperm Abnormalities: Impact of Reactive Oxygen Species (ROS) on Sperm Harm
- Is it possible to receive the hepatitis B vaccine more than once?