Private insurers cut agent commissions after GST changes on health cover

ICICI Lombard, Care Health and Aditya Birla Health Insurance have lowered commission payouts on retail policies as GST on health premiums goes nil and ITC norms tighten

Following a reduction in goods and services tax (GST) rates on individual health insurance premiums to nil from 18 per cent, and changes to input tax credit (ITC) norms with effect from October 1, 2025, some of the non-life insurers like ICICI Lombard General Insurance, Care Health Insurance, and Aditya Birla Health Insurance have reduced their commission payout to distributors on retail health insurance policies, sources said.

 

According to the new GST regulation, the ITC benefits will not be available for insurers on commission, rewards & equivalent, and other corporate expenses. This is expected to have a major impact on the finances of the health insurance companies wherein the GST will now be a cost, weighing on the profitability and their expense of management. Insurance firms are mandated to pass on the benefits, and keep premiums at affordable rates. In order to mitigate the impact, some non-life insurers are reducing commission payout by 18 per cent.

 

In a communication to its distributors, ICICI Lombard General Insurance said: “To ensure a fair balance between the interests of customers, distribution partners, and ICICI Lombard, we will absorb the impact of ITC on non-commission-related expenses. However, the commission structure for GST-exempt policies will be revised.”

 

Care Health also notified its distribution partners about moving to commission rates inclusive of GST, which will be effective from October 1, 2025. “For all health/general insurance companies, there are many components like rent, technology, and contractual manpower, etc. for which they will have to bear GST. We will absorb the impact of GST on these . However, we are constrained the impact of GST on commission will be passed on to the distribution partners. This is being done to maintain a right equilibrium in customer’s interests,” the health insurer said.

 

Aditya Birla Health Insurance has told its distribution partners: “…Effectively, GST on commission, rewards & equivalent on all fresh and renewal business shall be borne by the distributors effective October 1, 2025.”

 

Emails sent to these insurers did not elicit a response till the time of going to the press.

 

The total health insurance premium in 2024-25 (FY25) stood at ₹1.18 trillion. Out of which, retail health insurance with around 40 per cent stood at ₹47,291.7 crore while group health insurance stood at ₹60,818.72 crore. Standalone health insurance companies collected nearly 57 per cent of the total premiums in retail health insurance at ₹27,254 crore in the period.

 

In April-August of FY25, retail health insurance premium stood at ₹19,708.55 crore while the total health insurance premium was at ₹53,459.72 crore.