Page 13 - The Insurance Times April 2025

able manner but tend to jump at inter- for agents, making these policies less Weak retail demand slows
vals. Insurers typically adjust their rate attractive for them to sell, according
schedules every three years to account to sources. health insurance premium
for medical inflation - the rising cost of "There is a drop in sales of multi-year growth
treatments. Premiums also increase health insurance policies after the Health insurance premium growth has
with age, with sharper hikes in later change in accounting norms. Agents slowed significantly after touching
years reflecting higher claims in older are important distribution partners for record highs during the Covid-19 pan-
age groups. health insurance policies, and after the demic due to tapering demand from
Over the last 10 years, the compound revision in norms, they find it less at- retail consumers amid affordability is-
annual growth rate (CAGR) in premi- tractive to sell these policies as the sues.
ums ranged between 5-10% for 52% of commissions will be distributed across According to General Insurance Coun-
policyholders. This means that for more the years," said a senior executive at cil data, health insurance premiums
than half of them, a Rs 100 premium a standalone health insurer. grew by 10.44 per cent year-on-year
increased to Rs 162-259 after 10 The Insurance Regulatory and Devel- (Y-o-Y) in the Apr-Jan period of FY25 in
years. opment Authority of India (IRDAI) re- comparison with 20.79 per cent in the
vised the format for reporting pre- year-ago period. It was around 23.57
Multi-year health insur- mium figures, requiring non-line insur- per cent in FY23, and 25.89 per cent
ance companies to report long-term in FY22.
ance policy sales dip as
premiums based on 1/N, where N is the
agents' commissions drop number of days of the policy. The A sharp decline in premiums from the
government-backed schemes and the
The sale of multi-year health insurance norms took effect on October 1, 2024. change in accounting norms mandated
policies has declined following the Insurers have also revised their com- by the regulator, effective October last
implementation of new accounting mission structure accordingly to an year, have also weighed heavily on pre-
norms by the insurance regulator for annual basis, which, according to mium growth in the health segment.
non-life insurance companies to report agents and insurers, has made these
their premiums. As a result, insurers policies less attractive for agents to "There is a tapering of demand for
have revised the commission structure sell. retail health insurance as people have
been buying significantly in the last 2-
3 years after Covid-19. Now, we as-
GST on insurance may be slashed to 5% sume that somewhere the growth will
The Goods and Services Tax (GST) Council may settle for a reduction in the normalise due to affordability and im-
tax rates on health & life insurance, instead of a full waiver. The GST, which pact of macroeconomic situation. On
now applies at 18% on gross premiums, is likely to be reduced to 5%, while the corporate side, the health insur-
retaining the facility of input tax credit, according to official sources. ance rates are poor. The growth in
Most members of the Group of Ministers (GoM) that reviewed tax rates for health insurance will depend on new
health and life insurance are favouring the tax cut, but feel that a full ex- ideas, new products, innovation," said
a private sector general insurance
emption could only jack up costs as input taxes would get accumulated for
CEO.
the insurers. In fact, sections of the insurance industry reckons that even a
5% tax will result in non-utilisation of tax credit, and pitch for a 12% output According to a private sector insur-
tax liability. ance executive, the spike in demand
for health insurance, which was seen
“We are not in favour of completely exempting life and health insurance
post-Covid-19, has started to decline.
premia from GST, but wish to reduce the rates. We have finalised our
report now it’s up to the Council to decide,” a member of the GoM told
FE. Another member said: “A 5% GST on life and health insurance premia 1% of claims relate to
would reduce the burden on policy holders.” mental health in group
The GST Council is likely to meet in April or May to deliberate on the issue, medical insurance
where it will also consider the report prepared by Insurance Regulatory A survey conducted in 150
and Development Authority of India (IRDAI) on taxation of these insurance organisations, encompassing sectors
premia. like technology, healthcare, and retail,

The Insurance Times April 2025 13