GST exemption fuels surge in life and health insurance purchases and higher coverage
The removal of GST on individual life and health policies has lifted demand, expanded the customer base and raised average coverage levels, though the initial spike has eased.
The GST Council’s decision to exempt individual life and health insurance policies, including family floaters and senior-citizen plans, took effect on September 22, 2025, aiming to make coverage more affordable. Following the change, online distributor Policybazaar saw term insurance purchases surge nearly 2.5 times and health insurance demand rise 2.2 times, with the sector now growing 20-25 % above projections across both lines.
Insurers report a 10-15 % increase in the average ticket size of policies, reflecting a shift toward higher sums insured. HDFC ERGO’s managing director Parthanil Ghosh said its health insurance business has almost doubled year-on-year, attracting many first-time customers. The exemption also eliminated input tax credit, raising insurers’ operating costs; firms have absorbed part of this hit while some cost has been passed to distributors. Overall, the tax cut is viewed as a strong positive for insurers, distributors and consumers despite lingering challenges such as healthcare inflation.
Why it matters
The tax exemption makes insurance more affordable, expanding coverage and affecting millions of consumers and insurers.
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