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Key Points

Life insurance companies aren't worried about the new GST exemption rules affecting their bottom line. They've already prepared strategies like cost optimization and product repricing to handle the changes. Most insurers expect less than 1% impact on their Embedded Value calculations. The industry actually sees this as positive for long-term growth and customer affordability.

Key Points: Life Insurers Dismiss GST Exemption Impact on Input Tax Credit

  • Listed insurers expect less than 1% Embedded Value impact from GST changes
  • Companies implementing cost optimization and product repricing strategies
  • LIC forecasts minimal 0.5% effect on its valuation metrics
  • GST exemption expected to boost insurance affordability and long-term growth
2 min read

Life insurance companies dismiss GST exemption concerns, see limited impact on input tax credit: Report

Life insurance companies say GST exemption on premiums will have limited effect on profitability. Most expect less than 1% Embedded Value impact with strategies in place.

"life insurance companies remain confident in mitigating the impact of the GST exemption on Embedded Value - Centrum Institutional Research"

New Delhi, September 9

Life insurance companies have dismissed concerns over the impact of Goods and Services Tax (GST) exemption on input tax credit, saying they have strategies in place to manage the situation.

According to a report by Centrum Institutional Research, listed players in the life insurance sector remain confident that the effect on their Embedded Value (EV) will be very limited.

It stated "life insurance companies remain confident in mitigating the impact of the GST exemption on Embedded Value (EV)".

The central government, after the GST rate rationalisation meeting, announced a GST exemption on all health and life insurance premiums, thereby removing Input tax credits to insurers. The new rule will come into effect from September 22, 2025.

The exemption is expected to make insurance policies more affordable for customers as they will no longer need to pay GST on insurance premiums.

However, it also creates pressure on insurance companies' margins, as they will lose the benefit of Input Tax Credit (ITC) that they could earlier claim on their expenses.

Despite this challenge, insurers have said that they are well prepared. Companies have already put in place a mix of strategies to deal with the change.

These include optimising costs, repricing or relaunching products, and in some cases even absorbing part of the cost impact themselves. Because of these measures, most companies expect only a minor impact on their profitability and valuations.

The report highlighted that all listed life insurance companies have guided for an Embedded Value impact of no more than 1 per cent.

Life Insurance Corporation of India (LIC), the country's largest life insurer, has expressed confidence that the GST changes will not create major hurdles.

LIC expects the impact on its Embedded Value to be less than 0.5 per cent. On the contrary, the company believes that the GST exemption will support long-term growth in the industry.

The company also sees the changes contributing to a stronger Value of New Business (VNB) in the years ahead.

The report said it is maintaining its current estimates for the sector and reiterated that the GST exemption, while creating some short-term cost adjustments, is ultimately positive for the industry.

- ANI

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Reader Comments

P
Priya S
I work in insurance sector. Companies have been preparing for this for months. The 1% impact guidance seems realistic given the cost optimization measures already in place.
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Aman W
Hope the companies don't secretly increase other charges to compensate for the ITC loss. Regulators should keep a close watch on policy pricing changes.
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Sarah B
LIC saying less than 0.5% impact shows their scale advantage. This move should actually boost insurance penetration in India which is still quite low compared to global standards.
Vikram M
Good step by government. Insurance should be encouraged, not taxed. More people getting covered means better financial security for families across India. 🏠
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Nikhil C
The September 2025 implementation gives everyone enough time to adjust. Smart planning by both government and insurance companies. Long term positive for the industry.

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