The Life Insurance Corporation of India (LIC) witnessed a significant surge in inflows, exceeding Rs 1,100 crore on the first day after the goods and services tax (GST) was removed from individual traditional life insurance policies. This sharp increase is a notable contrast to the Rs 5,000 crore of monthly premium income from retail policyholders seen in August 2025. The GST exemption, which took effect on September 22, 2025, applies to term, unit-linked, and traditional life insurance products, as well as health covers such as family floaters and senior citizen plans.
Most of the surge in inflows came from regular endowment products, rather than new product launches. Prior to the tax change, LIC’s early September sales were lower compared to the previous year, as customers and agents delayed purchases in anticipation of the GST exemption. However, once the new regime came into force, pent-up demand was quickly released, resulting in the significant inflow.
Industry insiders believe that it will take several months to determine the long-term trend for the sector. Despite higher ticket sizes and increased inflows, the overall number of policies issued has declined. New business premiums grew by 6.2% during April-August 2025 compared to the same period last year, driven mainly by rising ticket sizes rather than policy count. Private insurers reported a 10% increase, while LIC’s new business premiums rose by 3%.
The overall industry new business premiums climbed to Rs 1,63,461 crore in April-August 2025 from Rs 1,54,193 crore a year earlier, even as the number of policies issued fell by 8.9%. The exemption is expected to make insurance products more affordable, potentially encouraging higher annual premium commitments for certain buyers. The Life Insurance Council reported these figures, highlighting the impact of the GST exemption on the life insurance sector.
The removal of GST from individual traditional life insurance policies has had an immediate positive impact on LIC’s inflows, with a significant surge in premium income. However, the long-term effects of this change on the industry remain to be seen. As the industry adjusts to the new regime, it will be important to monitor the trends and patterns that emerge in the coming months.