Niva Bupa may take hit of 50-60 bps on combined ratio after GST, ITC change

Niva Bupa expects a modest 50-60 basis point hit from GST-related ITC loss but aims to offset it through higher policy sales, revised distributor commissions, and cost efficiencies

Standalone health insurer Niva Bupa Health Insurance expects 50-60 basis points (bps) impact on combined ratio due to the removal of input tax credit (ITC) post goods & services tax (GST) rate revisions, Vishwanath Mahendra, chief financial officer (CFO), said.

 

However, revision in distributor commissions, increase in volume of business and lower GST rates for medicines should help mitigate the impact.

 

The combined ratio of the company, according to the International Financial Reporting Standards (IFRS) accounting method was 103 per cent at the end of H1 FY26 and is expected to improve further in H2.

 

In early September, the GST Council announced a complete tax exemption on all individual life and health insurance policies, and their reinsurance have also been exempted to boost penetration effective from September 22. The insurer has already revised distributor commissions to mitigate the impact.

 

“Input tax credit impact is due to commission brokerage for ITC and second is our overhead. For all commission brokerage, we have decided from October 1 onwards that it will be inclusive of GST. In case of our overheads, we are taking many initiatives — looking at vendors, renegotiating wherever possible and reducing or changing contracts. Due to higher volume, there will be economies of scale which will kick in. There is some reduction in GST on medicines which will help us (mitigate the impact),” Mahendra said.

 

Otherwise, the GST exemption was hugely positive with around 40 per cent year-on-year (Y-o-Y) growth in retail health insurance premiums from fresh business and renewals in October 2025 from the previous year. On the other hand, the growth in premium for the entire (April-September FY26) H1FY26 was 28 per cent. The policyholders are opting for higher sum insured post the reform.

 

Retail health insurance accounts for 70 per cent of their business in H1 FY26 and 30 per cent was group insurance.

 

The premium growth — which remained muted during April-September of FY26 due to the revised accounting norms — is expected to pick up in the second half.

 

Also, regarding the ongoing issue between the hospitals and insurers, Mahendra said that there are several initiatives being taken at the General Insurance Council level. They include common empanelment and standardisation protocol, which will improve transparency for hospitals and insurance companies.

 

Niva Bupa is also in discussions with some of the hospital chains.

 

“When a contract comes for renewal with the provider, we negotiate for the best interest of our policyholders. Otherwise, we will be ultimately passing the higher charges in the form of higher premium. So, our endeavour is to give the best value to our policyholder. In case there are any issues with hospital chains around cashless, we make sure that we do instant reimbursement after discharge,” he added.