The 56th GST Council on Wednesday, September 3, exempted both health and life insurance premium from the goods and services tax (GST).
This results in lowering the total insurance premium cost for customers. However, the transition to new systems will have an impact on the embedded value (EV) of insurers, which the firms have said will be minimal.
HDFC Life
HDFC Life said the latest GST change will spur demand and over time be accretive to the value of new business by doubling it in next four to five years.
HDFC Life said it sees less than 0.5% impact on the embedded value.
Brokerage firm Morgan Stanley has an “overweight” rating on the stock with a target price of ₹890 per share.
It said that the GST reforms should overall drive higher penetration, improve persistency and accelerate long-term growth.
SBI Life
SBI Life said it will align its insurance products as per the new tax regime.
It added that it sees a minimal impact of less than 0.2% on the embedded value.
ICICI Prudential
ICICI Prudential said it expects an impact of around 1% on the embedded value.
Axis Max LifeÂ
Axis Max Life said it sees less than 1% impact on the embedded value.
CLSA sees 1.5% hit on EV of life insurers
Brokerage firm CLSA said the GST exemption on all life insurance products — both, fresh and backbook — along with loss of input tax credit benefit, could result in up to a 1.5% hit on the embedded value of life insurers.
It believes the drag on fresh book can still be managed by price hikes and commission cuts.
However, it is the backbook that has less flexibility. CLSA’s initial assessment indicates a 0.5-1.4% drage to the backbook surplus.
Shares of SBI Life, ICICI Prudential and HDFC Life were trading up to 0.8% higher around 9.20 am on Friday.
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