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Insurance Body Pushes for GST Cut on Health Policies

The Confederation of General Insurance Agents’ Associations of India is urging the government to slash GST on individual health insurance policies from 18% to 5%. This move, they argue, would encourage more people to secure health insurance as a social safety net.

In the fiscal year 2023-24, the general insurance industry amassed a premium of ₹ 109,000 crore under health insurance. Despite this financial growth, the actual number of people covered and policies issued has remained low. Out-of-pocket health expenses are at 48.2%, forcing many to pay steep medical bills. Seniors with health insurance often face premiums of ₹ 12,000 to ₹ 15,000 per lakh, straining their limited incomes.

The confederation also highlighted that the uptake of health insurance is concentrated in just five states, leaving vast regions underinsured. This makes the tax benefits under Section 80D of the IT Act ineffective for many.

‘Health insurance is crucial for the masses, but policy renewals are declining due to frequent premium hikes and medical inflation,’ the confederation noted. They stressed that India has one of the highest GST rates on insurance globally, hindering the goal of ‘Insurance for all by 2047,’ a target endorsed by the Standing Committee on Finance in its 66th report to Parliament in February 2024, which recommended rationalising GST on health insurance.

However, not everyone is convinced. ‘It’s to be seen whether insurers will pass on the benefit to customers,’ remarked an insurance sector observer.

An insurance firm CEO commented, ‘We’ve been advocating for this change, but it hasn’t been effective so far. After the election, we will renew our efforts. Currently, the 18% GST makes insurance prohibitively expensive. In markets like Singapore and Hong Kong, there’s no GST or VAT on insurance. Ideally, the rate should be reduced to 12% or even 5%.’

The industry continues to push for reforms, hoping that a reduced GST will make health insurance more accessible and affordable for all.

Monika Shanmugam