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GST removed on health and life insurance premiums: Key savings for policyholders
Starting 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.
The reform is expected to benefit customers, especially first-time buyers, but may take a few months for insurers to fully reflect these changes in pricing and marketing.
Policyholders may not fully benefit from GST exemption as premiums likely to rise
Despite the GST Council’s decision to exempt health and life insurance premiums from Goods and Services Tax (GST), experts suggest that policyholders may not receive the full benefit. Insurers will no longer be eligible for input tax credit (ITC), which previously helped them offset tax paid on services like distribution, advertising, and IT.
Without ITC, these costs could now be added to the policy premium itself, making some policies more expensive instead of cheaper. This may particularly impact insurers using third-party services. While the exemption could improve affordability for low-ticket or first-time policies, mid- and high-value covers might see minimal reduction or even slight hikes.
Industry stakeholders believe the transition may lead to temporary pricing uncertainty as companies rework cost structures. Customers are advised to assess revised premiums before making new purchases or renewals.
LIC pays Rs. 7,324 crore dividend to Centre for FY25
The Life Insurance Corporation of India (LIC) has paid a dividend of Rs. 7,324.34 crore to the Government of India for the financial year 2024–25. The payment was approved at the insurer’s Annual General Meeting held on August 26, 2025.
LIC CEO and MD R. Doraiswamy presented the dividend cheque to Finance Minister Nirmala Sitharaman, in the presence of Department of Financial Services Secretary M. Nagaraju and Joint Secretary Parshant Kumar Goyal.
LIC stated that its total asset base stood at Rs. 56.23 lakh crore as of March 31, 2025, reaffirming its leadership in the Indian life insurance market.
The dividend reflects the insurer’s strong financial performance, even as it navigates increased competition and regulatory transformation in the sector.
This payout also reinforces the government’s role as the principal shareholder and highlights LIC’s contribution to the public exchequer as a state-owned enterprise.
LIC launches 2-month revival campaign with late fee concessions
LIC has initiated a special campaign to revive lapsed insurance policies, running from August 18 to October 17, 2025. Under this initiative, policyholders can revive eligible non-linked insurance plans with up to 30% waiver on late fees, capped at Rs. 5,000.
The concession is tiered: Rs. 3,000 for premiums up to Rs. 1 lakh, Rs. 4,000 for Rs. 1–3 lakh, and Rs. 5,000 for over Rs. 3 lakh. Micro-insurance policies enjoy a full 100% late fee waiver.
Policies must be revived within five years of the first unpaid premium and must comply with policy terms. Lapsed policies that were within their premium-paying term but did not complete the full term are eligible.
However, there are no relaxations for medical or health-related requirements.
LIC said the campaign aims to support customers who missed payments due to adverse circumstances and to ensure policies stay active for full benefit. Revival is encouraged to restore insurance coverage and financial protection.
Life insurers post 6% rise in new business premiums in August
Life insurers in India recorded a 6.01% increase in new business premiums (NBP) in August 2025, according to the Life Insurance Council. NBP reached Rs. 1,63,461.52 crore, up from Rs. 1,54,193.76 crore in August 2024.
Individual single premiums rose by 9.71%, while individual non-single premiums grew by 4.51%. Combined, individual premiums saw 6.20% growth on a year-to-date basis.
The increase was supported by rising sales among first-time buyers, aided by insurer focus on distribution and agent recruitment.
More than 4.37 lakh agents were added, though overall agent strength grew modestly due to attrition. Digitisation also continues to enhance penetration and policy issuance.
The industry anticipates stronger momentum following the GST Council’s recent decision to waive taxes on individual life and health policy premiums.
This tax relief is expected to make insurance more affordable and stimulate further growth in the life insurance segment during the remainder of FY25 and beyond.
LIC unfazed by market share dip, aims to boost Non-Par portfolio
LIC is not overly concerned about its recent dip in market share, stating that increased competition is a natural progression in a liberalised market. LIC’s Q1FY26 market share stood at 63.51% in premium (down from 64.02%) and 63.07% in policy count (down from 66.54%).
CEO R. Doraiswamy said market share reduction is expected with 25–26 players in the sector. Instead, LIC is focusing on sustainable, profitable growth, especially in non-participating (Non-Par) products, which offer guaranteed returns and are gaining popularity among younger customers.
The Non-Par segment’s share in LIC’s individual Annual Premium Equivalent (APE) has risen to 30% by June 2025, from 24% a year earlier. The company now aims for 40% in the coming years.
LIC’s strategy includes offering products across both Par and Non-Par categories to meet evolving consumer preferences while maintaining steady financial growth.
Doraiswamy reaffirmed LIC’s ambition to contribute positively to the industry’s overall expansion.
Insurers applaud GST exemption move on life and health insurance
India’s insurance sector has welcomed the proposed move to exempt GST on health and life insurance premiums for individuals, calling it a step toward greater affordability and financial inclusion. Currently, both health and life insurance premiums attract 18% GST, which increases the overall cost of protection for policyholders.
Jude Gomes, MD & CEO, Ageas Federal Life, said the move would make insurance more accessible to millions, aligning with the government’s vision of “Insurance for All” by 2047. The exemption, he added, would especially benefit the middle class and economically weaker sections.
Experts also highlighted the need to review the impact on input tax credit (ITC), which could affect insurers’ pricing structures. Narendra Bharindwal, President of IBAI, called the move pro-customer and a boost for societal welfare.
Insurers stressed that the reform not only reduces costs but addresses key structural issues in the sector that have long impacted margins and reach.
Top four life insurers cover 1.4 crore fewer lives in FY25
India’s leading private life insurers reported a collective drop of around 14 million (1.4 crore) in the number of lives covered in FY25, primarily due to a decline in credit-linked group insurance. Weak loan disbursements in microfinance and unsecured lending hit group business volumes.
ICICI Prudential covered 91.74 million lives in FY25, down from 96.91 million in FY24. HDFC Life’s figure declined to 50 million from 66 million, while SBI Life held steady at 80.2 million. LIC, however, expanded its coverage to 92 million from 84.8 million.
The “number of lives covered” metric includes individuals insured under both retail and group plans, counted once regardless of how they are insured.
According to industry executives, the slowdown in credit business and fewer group policy enrolments explain the decline. The drop comes even as the industry attempts to grow protection offerings and deepen insurance penetration through new customer segments.
Life insurers seek equal GST cuts for term plans, reinsurance and commissions
Life insurers are urging the government to implement uniform GST rate cuts across premiums, reinsurance, and commissions for term insurance plans. While a GST cut on term premiums is expected, insurers argue that leaving out reinsurance and commission rates would lead to complications in input tax credit (ITC) and higher operational costs.
The Life Insurance Council has proposed reducing the GST on protection products to zero, with matching reductions across related cost elements. Currently, term insurance plans attract 18% GST.
Kamlesh Rao, Chairperson of the Insurance Awareness Committee, warned that unequal tax cuts would hinder insurers from passing full benefits to customers and affect their bottom line.
The industry is hopeful the reform will boost term insurance adoption. Protection products currently make up only 7–8% of the life insurance market, but could rise to 10–12% within a year if GST cuts are implemented evenly across components.
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