GST waiver on life, health cover: A catalyst for a new phase of growth

Core Viewpoint - The recent waiver of Goods and Services Tax (GST) on individual life and health insurance is expected to catalyze growth in the insurance industry and enhance accessibility for consumers [1][2]. Industry Impact - The removal of 18% GST on insurance is projected to cost the government between ₹18,443 crore and ₹48,000 crore annually, although a State Bank of India report estimates the revenue loss at only ₹3,700 crore due to anticipated growth and consumption boosts [2][3]. - The zero GST on life and health cover is expected to lead to savings for buyers, making insurance more affordable and driving higher penetration, particularly among first-time buyers and underserved segments [4][5]. Consumer Benefits - The move is anticipated to make life-saving drugs and health insurance more accessible, addressing long-standing challenges in financial and medical security for millions of families [6]. - The reform is seen as a way to embed insurance deeper into financial planning, providing a safeguard against rising healthcare costs and unforeseen emergencies [10]. Operational Challenges - Industry leaders have expressed concerns regarding potential increases in operational costs due to the non-availability of Input Tax Credit (ITC) in a zero-GST environment, which may lead insurers to pass some costs onto customers [7][8]. - There are challenges in rolling out revised premiums and ensuring transparency in pricing structures, necessitating a smooth transition managed by the Insurance Regulatory and Development Authority of India (IRDAI) [13][14]. Future Outlook - Insurers are expected to leverage this opportunity to design affordable, customer-centric insurance solutions, particularly targeting rural and semi-urban areas [9]. - The reforms are likely to encourage earlier coverage among individuals, strengthening the risk pool and enhancing the long-term resilience of the insurance sector [9][12]. - The life insurance industry's new business premium for FY25 was ₹3.97 lakh crore, with an 8.98% growth in health insurance premiums, indicating a positive outlook for growth driven by tax reforms [14][15].