In addition to this, the GST on reinsurance cost has also been exempted.
Which means, that life and health insurance policies will no longer attract any GST. Here’s how much GST is currently levied on health and life insurance policies:
| Policy | GST Rate (%) |
| Health Insurance | 18 |
| Life Insurance ULIP | 18 |
| Term Life Insurance | 18 |
| Endowment Policies – First Premium | 4.5 |
| Endowment Policies – Regular Premium | 2.25 |
| Single Premium Annuit Policy | 1.8 |
Here’s why this is a double whammy for insurance companies:
Insurers incur various costs like reinsurance, commissions, and claims processing. With GST exempted, insurers cannot claim Input Tax Credit, increasing their net cost of operations. This could impact profitability or lead to higher policy costs in the future.
Additionally, Reinsurance, which is also exempt, is only 30–35% of an insurer’s cost base. Most individual policies are not even reinsured. Therefore, with the reinsurance exemption and inverted duty structure still not fixed, policies will get cheaper for a policyholder by close to 15% if all the benefits are being passed on. However, every policy will increase the cost for insurers by 5% to 7%.
Shares of HDFC Life have gained over 5% in the last one month, while those of SBI Life are down only 1%. Both these stocks though, have gained between 25% and 30% so far in 2025. Shares of ICICI Prudential have underperformed both these stocks, having declined 7.5% so far this year. Niva Bupa’s shares are just above their IPO price of ₹74 apiece.
