The recent reduction of GST on health insurance policies to zero is expected to have a significant impact on the industry. According to Tapan Singhel, managing director and CEO of Bajaj Allianz General Insurance, the entire benefit of GST rationalization will be passed on to policyholders. This means that customers can expect an immediate reduction of 18% in their premium outgo for new purchases made on or after September 22, and for upcoming renewals. The reduction in GST will make health insurance more affordable, encouraging more families to purchase health cover.
However, the exemption from GST will also result in insurers incurring additional costs, such as commissions, as they will no longer be able to claim input tax credit. Singhel estimates that the impact on input tax credit will be around 3-8%, depending on the volume of retail health business for each company. Nevertheless, he believes that the 18% GST exemption will still result in significant gains for customers. If hospitals also pass on their GST relief, claim costs will reduce, further offsetting financial pressures for customers.
In the short term, Singhel expects a wait-and-watch approach from some customers, but he does not see a meaningful pause in purchases. Health insurance is a protection product, and people buy it to safeguard themselves and their families, not to time the market. In the long run, affordability will drive growth, and demand for health insurance is expected to increase. The reduction in GST will leave more money in the hands of consumers, allowing them to purchase health insurance and build a financially progressive and resilient India.
The impact of GST reduction on auto sales and motor business is still uncertain. While higher auto sales may drive motor business for general insurance companies, the reduction in GST on health insurance policies is expected to have a more significant impact on the industry. Overall, the industry’s commitment is to pass on the full benefit of GST rationalization to policyholders, focusing on efficiency, technology, and stronger collaboration across the value chain to offset additional costs. Distributors will continue to play a critical role in taking insurance to every household, and the industry’s role is to ensure that the entire benefit reaches the customer.