Life Insurance News

GST removed on health and life insurance premiums: Key savings for policyholders

- 

GST removed on health and life insurance premiums: Key savings for policyholdersStarting today, health and life insurance premiums are exempt from Goods and Services Tax (GST), providing significant relief to policyholders. The decision, approved by the GST Council, removes the earlier 18% GST levied on health insurance and 4.5% on first-year life insurance premiums. The move is expected to directly reduce premium costs, making insurance more affordable, especially for middle-class and senior citizens.

For example, a Rs. 25,000 health insurance premium that previously cost Rs. 29,500 including tax will now be limited to Rs. 25,000, leading to a saving of Rs. 4,500 annually. Similarly, for a Rs. 50,000 life insurance premium, the savings could be as much as Rs. 2,250.

Insurers have welcomed the reform, noting it aligns with the government's broader push for "Insurance for All by 2047." Experts believe the tax exemption will help deepen insurance penetration in rural and underserved areas where cost sensitivity remains high.

GST cut to prompt repricing in insurance sector: Shriram Life CEO

Following the GST Council's decision to remove GST on health and life insurance premiums, the insurance industry is preparing for a significant repricing of products. Shriram Life Insurance MD & CEO Casparus Kromhout stated that while the GST waiver is a welcome move to make insurance more accessible, it will also force insurers to revisit their pricing strategies.

He highlighted that the earlier structure included tax credits and compliance costs, which now need to be adjusted. For insurers that earlier benefited from input tax credits (ITC), the removal of GST may result in cost absorption unless product repricing is undertaken. Kromhout emphasized that the repricing will be necessary to maintain solvency margins and financial health.