The removal of GST on individual life and health insurance policies, effective September 22, 2025, has increased insurance purchases and expanded the customer base, according to insurers and distributors cited by Business Standard. Term insurance purchases on Policybazaar initially rose nearly 2.5 times, while health insurance demand increased 2.2 times following the tax change. Although the initial surge has moderated, the industry is now growing from a higher base, with insurers reporting 20–25% growth above projections during the first seven to eight months.
The impact is also visible in coverage levels. The average ticket size of life and health policies has increased by 10–15%, with stronger demand for term policies carrying sums assured above ₹2 crore and health policies offering ₹20 lakh to more than ₹1 crore of coverage. HDFC ERGO reported that its new health insurance business had almost doubled year-on-year, while insurers are also seeing more first-time health insurance customers. However, the removal of GST also eliminated input tax credit, increasing insurers’ operating costs and putting pressure on margins.
The development suggests that the GST exemption has improved affordability and helped bring additional customers into the insurance market, although healthcare inflation remains a structural challenge that the tax change does not address. Distributors have also faced lower commissions following the GST change, but higher policy volumes have helped offset some of the pressure. The broader effect is therefore being seen not only in premium growth but also in higher coverage levels and wider insurance participation.
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