The Confederation of General Insurance Agents’ Associations of India, an umbrella body of non-life insurance agents, has urged the government to reduce the GST on individual health insurance policies from 18 per cent to 5 per cent in order to encourage people to avail these policies as a measure of social security.
The general insurance industry collected Rs 109,000 crore premium under the health portfolio in fiscal 2023-24.
Though the gross premium during last five years had almost doubled, leading to the growth of health insurance business in the country, the virtual number of lives covered and number of policies issued remained meagre, the confederation said. Out-of-pocket expenses for health remain at 48.2 per cent, pushing the common man to pay a hefty medical bill and leaving the senior citizens who have taken health insurance to pay a premium of Rs 12,000 to Rs 15,000 per lakh out of their nominal income resources, it said.
“Further, the fact that stagnancy factor in the share of health insurance was restricted to only five states in the entire country was also highlighted,” it said. Vast areas of the remaining States remain underpenetrated, making the new tax regime aimed at offering the benefit of deduction under Section 80D of IT Act redundant.
“Portfolio of health insurance in the general insurance industry is very significant for the benefit of masses. But sadly, the renewal rate of the policies is alarmingly declining due to frequent premium hikes and medical inflation,” the confederation said.
GST levied on insurance in the country being highest in the world, needs to be addressed by the government to attain the goal of “Insurance for all by 2047” which was endorsed by the Standing Committee on Finance in its 66th report submitted to both the houses of Parliament in February 2024. This report had recommended rationalisation of GST on health insurance.
However, there are skeptics who doubt whether the GST reduction will help the policyholders. “It’s to be seen whether insurers will pass on the benefit to customers,” said an insurance sector observer.
On the GST cut, CEO of an insurance firm said, “we keep on representing. But it has not been of much use till now. We are now waiting for the election to get over and we will again reach out to them. See, today it’s 18 per cent and in other markets like Singapore and Hong Kong, there is no GST or VAT on insurance. So anyway, it is a difficult product to buy. People don’t want to take insurance. On that also, whatever insurance they take, you are going to put an 18 per cent tax which will make it costly for them. Ideally, they should reduce it to 12 per cent or 5 per cent.”
