How Much Will Life & Health Insurance Premiums Actually Drop After GST Removal?

New Delhi: The government has announced that GST will no longer apply to individual life and health insurance policies, effective 22 September 2025. This move comes at a time when health insurance premiums have been steadily rising, and it is expected to make insurance products more attractive to the general public.

Industry Perspective: Will Premiums Really Become Cheaper?

Insurance executives have welcomed the decision, citing increased accessibility for ordinary people.

Bajaj Allianz General Insurance MD & CEO, Tapan Singhal, said, “The GST Council’s move to remove GST on health insurance is a major step toward increasing public interest in insurance products. This change will bring millions of Indians under the insurance umbrella and is beneficial for the insurance industry, as increased policy sales will boost profitability.”

Similarly, Sarbvir Singh, President & Joint Group CEO of PB Fintech, remarked, “The removal of GST on life and health insurance demonstrates the government’s recognition of their importance to the economy. Term life insurance, in particular, is essential, and this move reduces the financial burden at a time when healthcare costs are rising.”

Why Policyholders May Not See Full Benefit

Experts caution that the GST cut may not fully translate into lower premiums for customers. Currently, insurance companies claim Input Tax Credit (ITC) on various input services, typically around 8–10%. ITC allows insurers to offset part of their operational costs, such as agent commissions, marketing, and office expenses.

With the removal of GST, ITC will no longer be available. This means insurers will have to bear the full input cost themselves, which could be factored into the premium. As a result, the expected reduction in premiums may be less than anticipated.

Ashwin Mehta, an industry expert, noted, “Without ITC benefits, operational costs for insurers will rise. Companies may include a portion of these costs in the base premium. While the GST removal is welcome, clarity on ITC implications is essential.”

The Bigger Picture

• Public Impact: The government aims to reduce premium burdens at a time when healthcare costs are increasing.

• Insurance Penetration: India still has limited insurance coverage across its population. Lower premiums could encourage more people to purchase policies.

• Regulatory Guidance: IRDAI is expected to issue detailed guidelines soon regarding the operational impact of GST removal on insurance premiums.

Bottom Line: While the GST removal on life and health insurance is a positive step for policyholders, the absence of ITC may limit the actual savings. Customers should monitor premium changes and compare plans to maximize benefits.