India’s private life insurance industry recorded a strong year-on-year expansion of around 21% in the October–November 2025 period, supported largely by the introduction of GST exemptions on life insurance premiums. The tax benefit has lowered effective costs for policyholders, encouraging more consumers to purchase protection and savings products.

Demand Rises After GST Relief

Following the GST exemption announced in September 2025, private insurers have reported a noticeable increase in policy enquiries and new business volumes. The removal of tax on premiums has made life insurance more affordable and attractive, prompting first-time buyers as well as existing customers to expand their coverage.

Industry participants noted broad-based growth across product categories, with protection, term, and savings-oriented plans seeing higher traction during the two-month period.

Profitability Challenges Emerge

While the exemption has clearly supported sales, analysts caution that insurers may face pressure on margins due to the loss of Input Tax Credit (ITC). Earlier, insurers were able to offset some of their tax outgo through ITC claims on various purchases and services. With this benefit no longer available, tax costs are expected to rise at the company level.

This change could weigh on profitability for new business, especially for insurers with higher operating expenses or slower premium growth. In some cases, margin compression has been observed even where sales growth has been relatively modest.

Way Forward for Insurers

Experts believe that insurers will now need to focus on cost optimization, product mix, and operational efficiencies to manage the impact of reduced ITC benefits. At the same time, the surge in demand created by the GST exemption provides an opportunity to deepen insurance penetration and expand the overall market.

Summary

Life insurance sales by private insurers grew about 21% year-on-year in October–November 2025 after GST was exempted on premiums. Key points:

• GST exemption lowered premium costs, boosting demand across product categories,
• insurers reported strong jump in policy sales and customer interest,
• loss of Input Tax Credit may pressure profit margins despite higher volumes, and
• companies are expected to balance growth opportunities with the need to manage rising costs.

The policy change has expanded access to life insurance but also introduced new profitability challenges for the industry.

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