India’s health insurance sector has always played a vital role in providing financial protection against medical emergencies. Recently, the government has been considering significant regulatory enhancements. One such potential change is the scrapping of Goods and Services Tax (GST) on term insurance and senior citizen health insurance policies. This move is expected to bring major relief to millions across the country, especially middle-class families and senior citizens. In this detailed article, we explore what this decision could mean for policyholders, insurers, and the broader ecosystem of health insurance and senior citizen health insurance in India.
Understanding GST on health insurance and senior citizen health insurance
At present, both term insurance and health insurance, including policies designed for senior citizens, attract 18 percent GST on premiums. This tax burden often discourages many individuals, especially pensioners and retirees, from investing in adequate health insurance cover. For a senior citizen health insurance policy costing Rs. 25,000 a year in premium, GST alone adds Rs. 4,500 to the annual outlay.
This additional expense puts pressure on household budgets and makes it challenging for families to afford comprehensive coverage. Term insurance policies, which are vital for ensuring family security in case of an untimely death, are also taxed in a similar manner.
Proposed move to scrap GST on insurance
In 2024, the GST Council of India began actively considering the removal of GST on health insurance and term insurance premiums, especially for senior citizen health insurance. Recommendations from both the Insurance Regulatory and Development Authority of India (IRDAI) and industry groups have pushed for this change.
The core reasoning is to make insurance products more accessible and affordable, in line with the government’s objective to widen the penetration of insurance in India. The GST Council had already provided certain relaxations in the recent past, such as reduced GST on select micro-insurance and health products. Removing the GST from these mainstream products will be a major step forward.
Impact on policyholders
The removal of GST on health insurance and senior citizen health insurance will make policies significantly cheaper.
Key benefits for individuals and families
– Lower premiums: A direct reduction of 18 percent from existing premiums. For example, a family floater policy costing Rs. 30,000 annually would become cheaper by Rs. 5,400.
– Better affordability: More families, especially middle and lower-income groups, can secure health insurance and senior citizen health insurance.
– Higher coverage possible: Lower premiums mean families can opt for higher sum insured amounts with similar budgets.
Special advantage for senior citizens
Senior citizens often face higher premiums due to age-related health risks. Removing GST will provide a much-needed financial relief, making it easier for pensioners and retirees to protect themselves against medical emergencies. This also aligns with IRDAI’s ongoing efforts to encourage the elderly to not skip buying or renewing their policies.
How this move helps insurers
The removal of GST is expected to spur positive momentum in the insurance sector. Lower premiums will make health insurance and senior citizen health insurance more attractive, boosting demand. This will help insurers:
– Widen their customer base
– Improve penetration in under-served markets such as rural areas and small towns
– Reduce the need for discounts or promotional pricing to attract customers
The insurance industry has long requested GST rationalisation, arguing that insurance is a necessity and not a luxury. Such a change will enable greater inclusion and support the government’s vision of universal insurance coverage.
Economic impact and government perspective
Insurance penetration in India remains well below the global average. According to IRDAI, non-life insurance penetration is just about 1 percent of GDP, compared to a global average of 3.9 percent (2022 data). Removing GST from health insurance and senior citizen health insurance could be a crucial step towards closing this gap.
For the government, any short-term loss in GST revenue can be offset by the long-term gains. Greater insurance coverage reduces the burden on public healthcare infrastructure by encouraging people to seek timely and quality medical care through private channels. Additionally, a healthier population enables higher productivity.
How this move supports financial inclusion
Affordable health insurance and senior citizen health insurance is a core component of financial inclusion. Many families in India still rely on out-of-pocket expenses for medical treatment. As per National Health Accounts (NHA) 2021, out-of-pocket health expenditure still ranks high at over 48 percent of total health spend in the country.
The GST waiver will:
– Encourage more young adults, women, and vulnerable groups to secure coverage
– Make it easier for employers to offer better employee benefits in group health plans
– Provide greater peace of mind and financial independence to senior citizens
Will premiums come down immediately
While the move is widely supported, a reduction in premium will happen only when the GST Council takes an official decision and notifies the changes. After this, health insurance and senior citizen health insurance companies will adjust their pricing structures. Policyholders are advised to check with their insurers for updated costs before renewal or buying a new policy.
In the interim, some insurers may start passing on anticipated benefits through promotional offers. However, always confirm the final premium breakup and compare various plans online, as price is just one aspect of choosing the best health insurance policy.
How to prepare if you are a policyholder
If you already have a health insurance or senior citizen health insurance policy, keep these points in mind:
– Stay in regular contact with your insurance provider for updates on GST changes
– Carefully check renewal notices and new premium quotes
– Avoid letting your policy lapse, even in anticipation of GST reduction as coverage is crucial
– Look out for communication from IRDAI and your insurer for official notifications
The growing importance of health insurance for senior citizens
Senior citizens are among the most vulnerable to unexpected medical emergencies. As per industry data, nearly 47 percent of India’s senior population still lacks dedicated health insurance coverage. The rising cost of treatment and outpatient medical care makes senior citizen health insurance a non-negotiable need.
With GST gone, more seniors can afford comprehensive policies that cover chronic illnesses, pre-existing diseases and home-care treatments. This will ease the financial burden on families and give retirees peace of mind.
Conclusion
The potential scrapping of GST on health insurance and senior citizen health insurance marks a pivotal shift in India’s insurance policy framework. For millions, this translates into reduced premiums, better policy options, and increased financial security. The move is set to catalyse higher insurance penetration, expand access for senior citizens, and align with the government’s push for financial inclusion.
As the GST Council deliberates, it is prudent for Indian families and senior citizens to stay informed and regularly review their insurance needs. Removing GST from health insurance and senior citizen health insurance will not just make these products more affordable, but will ensure a healthier, financially secure future for all Indians. Stay tuned for official updates and consult with your insurance advisor to make the most of forthcoming changes.
