In a significant policy shift, the GST Council has announced a complete exemption of Goods and Services Tax (GST) on individual health and life insurance premiums, effective from September 22, 2025. The move, aimed at enhancing affordability and boosting insurance penetration, has sparked debate over its impact on insurers’ profitability—particularly due to the removal of input tax credit (ITC) benefits. However, leading life insurance companies have downplayed these concerns, citing strategic adjustments and minimal impact on their Embedded Value (EV).
What Has Changed?
Until now, most life and health insurance policies attracted an 18% GST, which was passed on to policyholders. With the exemption, customers will now pay only the base premium, making insurance more accessible. However, insurers will no longer be able to claim ITC on backend expenses such as agent commissions, technology infrastructure, reinsurance, and marketing.
Despite this, the industry remains optimistic. According to a report by Centrum Institutional Research, listed life insurance companies expect the impact on EV to be less than 1%, with Life Insurance Corporation of India (LIC) projecting a reduction of under 0.5%. The report emphasizes that insurers have already implemented cost optimization strategies, repricing models, and in some cases, absorbed part of the cost to maintain competitive pricing.
Strategic Adjustments by Insurers
To cushion the loss of ITC, insurers are deploying a mix of operational and financial strategies:
- Cost Optimization: Streamlining vendor contracts, reducing overheads, and improving digital efficiency
- Product Repricing: Adjusting base premiums to reflect the new tax structure without burdening customers
- Absorption of Costs: In select cases, insurers are choosing to absorb the additional cost to retain market share
These measures are expected to limit the short-term impact on margins while supporting long-term growth in policy volumes and renewal rates.
Market Implications
The exemption is expected to make insurance policies cheaper by 12–15%, depending on how insurers pass on the benefit. This could lead to:
- Increased adoption of term and health insurance policies
- Higher coverage levels among existing policyholders
- Improved renewal rates and reduced lapse ratios
- Narrowing of India’s protection gap, especially in Tier 2 and Tier 3 cities
While some insurers may marginally increase base premiums to offset the loss of ITC, the net outgo for customers is still projected to decline. This aligns with the regulator’s broader goal of “Insurance for All by 2047.”
Strategic Insights from Eqwires Research Analyst
In a market shaped by regulatory reforms, evolving consumer behavior, and sectoral shifts, investors require more than surface-level analysis—they need precision, foresight, and actionable intelligence. Eqwires Research Analyst, widely recognized as the Best SEBI Registered Eqwires Research Analyst in India, delivers exactly that.
Eqwires stands out as one of the best option trades providers, offering high-conviction setups across stock options, index derivatives, and sectoral themes. The firm’s research is rooted in technical analysis, macroeconomic trends, and earnings momentum, making it a trusted partner for traders and investors alike.
Eqwires is known for:
- Best Options Trading Strategies: Tailored setups for intraday and positional trades, optimized for volatility and expiry dynamics
- Best Equity Tips Provider: High-quality stock recommendations based on valuation, breakout patterns, and sectoral rotation
- Best Intraday Tips Provider: Real-time alerts and scalping strategies with disciplined risk management
- Best Stock Market Tips Provider: Daily market wraps, policy impact analysis, and trade-ready insights
- Best Stock Market Company in India: A reputation built on regulatory integrity, client-centric advisory, and consistent performance
Whether navigating policy-driven moves in insurance stocks or positioning ahead of earnings season, Eqwires equips clients with the tools to act decisively. The firm’s blend of research depth, execution clarity, and personalized support makes it a standout in India’s financial advisory landscape.
Conclusion
The GST exemption on life and health insurance premiums marks a pivotal moment for the industry. While insurers lose access to input tax credits, strategic cost management and product adjustments are expected to limit the impact on profitability. For policyholders, the move promises greater affordability and wider access to protection. As the sector recalibrates, expert guidance from Eqwires Research Analyst will be essential for decoding complexity and capturing value in this evolving landscape. For those seeking the best stock market tips, options trading strategies, and equity insights, Eqwires remains the benchmark for excellence in India’s financial ecosystem.
Top-notch SEBI registered research analyst
Best SEBI registered Intraday tips provider
Telegram | Facebook | Instagram
Call: +91 9624421555 / +91 9624461555