Page 13 - The Insurance Times October 2025

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GST removed on health and life insurance Policyholders may not
premiums: Key savings for policyholders fully benefit from GST

Starting today, health and life insurance premiums are exempt from Goods exemption as premiums
and Services Tax (GST), providing significant relief to policyholders. The likely to rise
decision, approved by the GST Council, removes the earlier 18% GST levied
on health insurance and 4.5% on first-year life insurance premiums. The Despite the GST Council's decision to
move is expected to directly reduce premium costs, making insurance more exempt health and life insurance
premiums from Goods and Services Tax
affordable, especially for middle-class and senior citizens.
(GST), experts suggest that
For example, a Rs. 25,000 health insurance premium that previously cost policyholders may not receive the full
Rs. 29,500 including tax will now be limited to Rs. 25,000, leading to a saving benefit. Insurers will no longer be
of Rs. 4,500 annually. Similarly, for a Rs. 50,000 life insurance premium, the eligible for input tax credit (ITC), which
savings could be as much as Rs. 2,250. previously helped them offset tax paid
Insurers have welcomed the reform, noting it aligns with the government's on services like distribution,
broader push for "Insurance for All by 2047." Experts believe the tax advertising, and IT.
exemption will help deepen insurance penetration in rural and underserved Without ITC, these costs could now be
areas where cost sensitivity remains high. added to the policy premium itself,
making some policies more expensive
GST cut to prompt He highlighted that the earlier instead of cheaper. This may
structure included tax credits and particularly impact insurers using third-
repricing in insurance compliance costs, which now need to party services. While the exemption
sector: Shriram Life CEO be adjusted. For insurers that earlier could improve affordability for low-
benefited from input tax credits (ITC), ticket or first-time policies, mid- and
Following the GST Council's decision to high-value covers might see minimal
the removal of GST may result in cost
remove GST on health and life absorption unless product repricing is reduction or even slight hikes.
insurance premiums, the insurance undertaken. Kromhout emphasized Industry stakeholders believe the
industry is preparing for a significant that the repricing will be necessary to transition may lead to temporary
repricing of products. Shriram Life maintain solvency margins and pricing uncertainty as companies
Insurance MD & CEO Casparus financial health. rework cost structures. Customers are
Kromhout stated that while the GST The reform is expected to benefit advised to assess revised premiums
waiver is a welcome move to make customers, especially first-time buyers, before making new purchases or
insurance more accessible, it will also but may take a few months for renewals.
force insurers to revisit their pricing insurers to fully reflect these changes
strategies. in pricing and marketing. LIC pays Rs. 7,324 crore

The Insurance Times October 2025 13