The GST exemption on individual life and health insurance has encouraged more people to buy policies and opt for higher coverage, although demand growth has moderated from the initial surge.
India’s insurance sector has seen a clear increase in insurance demand since the government removed GST from individual life and health insurance premiums. Insurers and distributors report more policy purchases, higher coverage amounts and a broader customer base, although the sharp rise recorded immediately after the tax change has started to moderate.
The GST Council removed GST from individual life and health insurance policies from September 22, 2025. The exemption covers individual health plans, including family floaters and senior citizen policies, as well as individual life insurance products. The earlier GST rate on most such premiums stood at 18%.
Insurance demand remains above earlier projections
Policybazaar recorded a sharp rise in demand after the GST exemption. Term insurance purchases initially climbed around 2.5 times the pre-GST level, while health insurance demand increased about 2.2 times. Demand later settled at a higher level, with the platform reporting sustained growth after the initial spike.
Insurers now see growth from this higher base. Policybazaar said insurance business across life and health segments has remained around 20–25 per cent above earlier projections during the first seven to eight months following the tax change.
The shift also extends to the amount of protection customers choose. The average ticket size for life and health insurance policies has increased by around 10–15 per cent, indicating stronger demand for higher coverage.
Life insurers have reported greater interest in term policies with sums insured above ₹2 crore. Health insurers are also seeing customers choose policies with coverage of ₹20 lakh to more than ₹1 crore, as lower upfront costs make larger covers more accessible.
Health insurance sees wider customer participation
The GST change has also brought more first-time buyers into the health insurance market. HDFC ERGO has reported a near doubling in its new health insurance business on a year-on-year basis during the period following the tax exemption.
The insurer attributed the increase to both existing customers upgrading their coverage and new customers entering the market. However, insurers expect percentage growth to moderate as comparisons move against a higher base.
The reform has also created cost pressures for insurers. Removing GST means insurers can no longer claim the same input tax credit on eligible business expenses. This has increased operating costs, with insurers absorbing some of the impact in their financial statements and adjusting through other measures.
Despite the cost pressure, the expansion of the customer base remains a key development for the insurance sector. The GST exemption has reduced the upfront tax burden for individual policyholders while encouraging more customers to consider larger protection covers.
Policybazaar’s latest information also confirms that individual health and life insurance premiums have remained GST-free from September 22, 2025, while group insurance continues to follow different GST treatment.
How Insurance Works in India: Understand how insurance works, from risk coverage to claims and policy terms. – Learn How Insurance Works
Also Read: Buying Insurance Inside Apps You Already Use: Check This Before You Tap ‘Pay’
Disclaimer: This MyRupia article provides information based on publicly available government, regulatory and industry sources. It does not constitute investment, financial, tax, insurance or legal advice. Information, examples, market data and expert views may change over time and do not represent a recommendation to buy, sell, invest in or surrender any financial product. Readers should consider their individual circumstances and consult a qualified financial professional before making financial decisions.