Insurance Association Urges GST Reduction on Health Policies:
The Confederation of General Insurance Agents’ Associations of India, representing non-life insurance agents, has called on the government to reduce the GST on individual health insurance policies from 18 percent to 5 percent. The aim is to make these policies more accessible and serve as a social security measure.
In fiscal year 2023-24, the general insurance industry collected Rs 109,000 crore in health premiums. Despite nearly doubling the gross premium over the past five years, the number of lives covered and policies issued remains low. The Insurance Association highlighted that out-of-pocket health expenses are still at 48.2 percent, burdening individuals with high medical bills and leading senior citizens to pay premiums of Rs 12,000 to Rs 15,000 per lakh from their limited incomes.
The Insurance Association also noted that the health insurance market is concentrated in just five states, leaving vast areas underpenetrated. This limits the effectiveness of the tax deduction benefits under Section 80D of the IT Act.
Health insurance is crucial for the general public, yet policy renewal rates are declining due to frequent premium hikes and medical inflation, the confederation stated. They argue that the high GST on insurance, the highest globally, must be addressed to achieve the goal of “Insurance for all by 2047,” a goal endorsed by the Standing Committee on Finance in its 66th report to Parliament in February 2024, which recommended rationalizing GST on health insurance.
However, some skeptics question whether a GST reduction will benefit policyholders. “It’s to be seen whether insurers will pass on the benefit to customers,” said an insurance sector observer.
Insurance Association
An insurance firm CEO commented, “We keep advocating for this change, but it hasn’t been effective so far. After the election, we plan to push again. Currently, the 18 percent GST makes insurance an expensive product in a market where countries like Singapore and Hong Kong have no GST or VAT on insurance. Ideally, it should be reduced to 12 percent or 5 percent.”
