'GST rate cut is a growth opportunity for insurers'

Making insurance products more affordable shows that the govt views the sector as essential as food, says Irdai chief Ajay Seth

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The exemption of individual life and health insurance premiums from the goods and services tax (GST) enables the insurance industry to make affordable and products attractive, said Ajay Seth, chairman of the Insurance Regulatory and Development Authority of India (Irdai) at the Business Standard BFSI Insight Summit 2025.

"What the government has signalled is that insurance firms have zero GST, and so do food products [processed]. The inference I draw here is that the government is putting insurance in the same category as food, which is essential for life. This is an opportunity for the sector to focus on the consumer," Seth said in his first public interaction after taking charge.

The government in September rationalised the GST on premiums of individual life and health insurance products to zero from 18 per cent earlier. The input tax credit (ITC) that insurance companies could claim on the GST payment was removed.

Insurance companies have passed on the benefit of the GST cut to consumers, and they have committed not to alter product prices. The action will make insurance more accessible and support the sector's goal of achieving 'Insurance for All by 2047'.

Companies are adjusting their product mix and rationalising distributor commissions to offset the impact of the withdrawal of ITC. Insurers are taking a hit on margins but they believe that in the long run higher salesdriven by GST rationalisation --will offset the impact of ITC withdrawal.

About distributor commissions, Seth said: "The matter that requires the highest attention is distribution".