Startups hail GST cut on insurance for expanding access despite caveats
Insurance startups executives and industry stakeholders said the move lowers barriers for first-time buyers and underserved families, however, some industry voices warned that the loss of input tax credits could temper the consumer gains.
India’s decision to scrap the 18% goods and services tax on life and health insurance premiums is being hailed as a watershed moment for financial protection, with insurers and digital platforms calling it a “monumental” reform that will make coverage meaningfully more affordable for millions.
Executives from insurance startups and industry stakeholders said the move lowers barriers for first-time buyers and underserved families, though some industry voices warned the loss of input tax credits could temper the consumer gains.
Sarbvir Singh, Joint Group CEO of PB Fintech, called the tax cut a “monumental decision.”
“It sends a clear message that health and life insurance are critical products for the economy and hence are now GST exempt. Term insurance, in particular, is a crucial product, and this move will positively impact the entire category in an unprecedented way. By easing the financial burden at a time when healthcare costs are steadily rising, this decision lowers the entry barrier for millions of Indians to secure their well-being and financial future,” he told YourStory.
Vishal Gupta, CEO of PhonePe Insurance, said the exemption is a significant win for lower‑income customers. “From their perspective, this directly reduces the out‑of‑pocket cost of purchasing insurance and helps them focus on other essential needs,” he said.
“This reduced cost barrier not only encourages new individuals and families to secure protection but also allows existing policyholders to potentially opt for higher coverage amounts, thereby strengthening their financial security,” Gupta added.
Ankit Agarwal, Founder and CEO of InsuranceDekho, said the tax reform will act as a behavioural nudge to encourage families across Tier II and beyond cities to get coverage. “By removing the 18% tax burden, insurance becomes meaningfully more affordable, particularly for first-time buyers and underserved segments. This move not only reduces financial stress for existing policyholders but also lowers the entry barrier for millions who’ve long remained uninsured,” he noted.
Ashish Goyal, Co‑Founder and Whole‑Time Director of Fibe, called the GST rationalisation a historic step. He said: “Among the most impactful measures is the exemption of GST on health insurance, which has the potential to transform healthcare access in India. This move will create a stronger, more inclusive safety net and enable healthcare decisions to be driven by medical need rather than affordability constraints.”
Insurers broadly welcomed the move. Star Health Insurance Managing Director Anand Roy said the exemption can accelerate penetration, improve renewal rates, and support the sector’s long-term growth, aligning with the regulator’s “Insurance for All by 2047” vision.
Behind the celebrations, insurers and brokers are parsing input‑tax‑credit (ITC) mechanics that could blunt some consumer gains.
When output GST is nil/exempt, companies cannot offset GST paid on operating costs—technology, marketing, offices, and commissions—against premiums, forcing a rethink of pricing. Without this credit, insurers’ operational costs increase, which often leads them to raise insurance premiums.
"It may result in about 3% loss of revenue for new sales, but the major impact on insurance companies will be on existing policies as their premiums cannot be increased under the plea that ITC is not available," Nilesh Sathe, a former LIC executive director and independent director at PolicyBazaar parent PB Fintech, noted.
CA Rahul, Tax Head at Lenskart, also concurred that zero GST on insurance should lower premiums for consumers, but insurers will lose input tax credit on their operating costs, which could push expenses higher. Even with cost inflation, he argued, the net effect should still be cheaper policies for buyers. The open question, however, is what the strategy of insurers will be—whether they will absorb the costs or pass them on to consumers.
However, Amit Chhabra, CBO of General Insurance at Policybazaar, argued the GST cut would expand coverage and increase volumes enough to outweigh the loss of ITC. “Input tax credit is only one side of the story. The other important side is that GST reform will significantly increase the penetration of health insurance, and volumes should go up significantly. A large part of insurers’ costs are fixed, so as penetration rises, profitability should improve,” he said.
(The article was updated with a quote.)
Edited by Kanishk Singh