Insurance Agents Urge Government to Reduce GST on Health Insurance Policies to 5%

In a significant appeal aimed at enhancing social security, the Confederation of General Insurance Agents’ Associations of India has requested the government to reduce the Goods & Services Tax (GST) on individual health insurance policies from the current 18% to 5%. This plea was made on Tuesday, highlighting the critical need to encourage more people to invest in health insurance as a protective measure.

Rising Health Insurance Premiums

The umbrella body representing non-life insurance agents emphasized that health insurance premiums have nearly doubled over the past five years, contributing to the segment’s growth. However, despite this growth, the actual number of lives covered and policies issued remains relatively small.

Declining Renewal Rates

According to the association, the renewal rates for health insurance policies have been declining due to frequent premium hikes and rising medical inflation. In a letter addressed to the Union Finance Minister, the association noted, “The average percentage of renewal of retail health insurance policies is at 65% – 75%. From this, it is very much evident that most of the policyholders are not able to pay the premium due to frequent hikes in insurance premiums and the very high rate of GST.”

Comparison with International GST Rates

The letter also pointed out that the GST rates on insurance in India are among the highest globally. Senior citizens, in particular, are heavily impacted, with an average expenditure of Rs 12,000 – Rs 15,000 for a health insurance coverage worth Rs 1 lakh.

Urgent Call for GST Reduction

Citing the importance of health insurance, weak penetration, declining renewal rates, and higher GST rates, the association has urged the government to consider reducing the GST rates to 5%. This reduction, they argue, would make health insurance more affordable and accessible to a larger segment of the population, thereby improving overall social security.

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