How 0% GST on Health Insurance Will Drive Higher Insurance Penetration in India

Big news! The recent GST cut to 0% on health and life insurance premiums could be a major turning point for insurance adoption in India.

Current Penetration Levels

According to the IRDAI Annual Report for FY 2023-24, India’s overall insurance penetration is around 4% of GDP—down from 4.2% the year before. Life insurance accounts for 2.8%, while general insurance remains stagnant at ~1%. This is significantly lower than the global average of ~7%.

Why Removing GST Makes a Big Difference

Previously, premiums were taxed at 18%. That extra cost deterred many, especially middle-class families, from buying policies. Industry experts now believe the GST move can make insurance significantly more affordable.

Rakesh Jain, CEO of Reliance General Insurance, stated that cutting GST will encourage more people to protect themselves financially without worrying about stretching their budget.

Projected Uptake in Insurance Penetration

Analysts estimate that making insurance tax-free could boost insurance penetration by ~0.5–1% over the next 3–5 years. Reports also suggest that GST rationalisation may especially spur savings among price-conscious buyers in health and life insurance segments.

Why This Reform Matters

Direct savings (18% less on premiums) encourage both new buyers and upgrades.
Greater awareness and affordability across rural and middle-income groups.
Supports national goals of “Insurance for All by 2047.”

Before vs. After: Real-World Impact

Scenario	Annual Premium (₹)	Tax (GST)	Total Payable (₹)
Before (18% GST)	20,000	3,600	23,600
After (0% GST)	20,000	0	20,000

Conclusion

The GST removal is not just a financial relief—it’s a structural reform. By making insurance more affordable, India can move closer to its long-term vision of universal health and financial protection.

Stay insured, stay secure. 💙

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