India’s leading state-run life and general insurers are preparing to roll out individual policies that will be exempt from the Goods and Services Tax (GST). The move comes after the GST Council’s recent decision to waive taxes on certain insurance products, a step aimed at making premiums more affordable and expanding protection coverage across the country.

For consumers, this initiative is expected to significantly lower the cost of both life and health insurance. At present, a GST of 18 percent is levied on premiums, which has often acted as a barrier to wider adoption of insurance, particularly in middle- and lower-income segments. By removing this tax burden, the government hopes to deepen insurance penetration and move closer to its long-term goal of “Insurance for All.”

However, the exemption is not without challenges. Insurers will no longer be able to claim input tax credits on expenses related to agent commissions, IT systems, or other operational costs. This could impact profitability in the short term, as companies will need to absorb these additional costs. Analysts caution that until higher policy volumes compensate for the loss of credits, public insurers may face pressure on their margins.

Despite the immediate strain, the industry outlook remains positive. Experts suggest that as lower premiums attract more customers, the scale of business will eventually offset the initial financial hit. Some reports indicate that health insurance premiums could fall by up to 15 percent, giving families much-needed relief and encouraging more people to opt for coverage.

The government is also expected to monitor the rollout closely to ensure that the tax benefits are passed on to consumers rather than absorbed through hidden increases in base premiums. If executed well, this reform could mark a pivotal moment in India’s journey toward universal insurance access.