Hike Motor TP rates, cut GST on health premiums: Non-life insurers to govt

DFS Secretary urges insurers to improve claims processing in order to reduce customer inconvenience

Private sector non-life insurers on Wednesday appealed to the Centre to revise the motor third-party premiums and reduce the Goods and Services Tax (GST) on health insurance premiums.

 

The insurers made these demands, and some others too, during their meeting with the Department of Financial Services (DFS) Secretary, according to people familiar with the matter. The PM Fasal Bima Yojana was also discussed.

 

The insurers also asked the DFS secretary to nudge hospitals to be empanelled on the National Health Claims Exchange (NCHX) so that health insurance claims can be processed faster for customers.

 

NHCX, a government of India initiative, aims to streamline and standardise health insurance claim processing, enhancing efficiency in the insurance industry and improving the patient experience.

 

DFS also proposed to have an intermediary mechanism which will act as a mediator between hospitals and insurance companies to reduce friction regarding the rates charged.

 

State-owned reinsurer GIC Re also attended the meeting with the DFS secretary. State-owned non-life insurers, however, were not part of the meeting.

 

Sources, who attended the meeting, indicated that the DFS Secretary urged insurers to improve claims processing in order to reduce customer inconvenience. Additionally, insurers were advised to be mindful of premium pricing.

 

Additionally, sources suggested that the meeting was primarily aimed at gathering feedback from the industry on prevailing challenges.

 

Motor third-party premiums have not been revised for the past two years, and the industry has been advocating for an upward revision for some time. These rates are jointly determined by the Ministry of Road Transport and Highways (MoRTH) and the Insurance Regulatory and Development Authority of India (IRDAI). 

 

The DFS also expressed concerns about the inability of insurance companies to meet their motor, rural, and social obligation targets, which the companies attributed to limited access to data. In response, the DFS said that it will help in obtaining the necessary data.

 

The non-life insurance sector reported single-digit growth in premiums in 2024-25 (FY25) -- the lowest in the past three years -- due to a slowdown in health and motor segments, as well as changes in premium accounting norms introduced by the insurance regulator.

 

In FY25, premium of non-life insurers rose to ₹3.08 trillion, marking a 6.2 per cent year-on-year (Y-o-Y) increase. This was down from a 13 per cent Y-o-Y growth in FY24, when premiums reached ₹2.89 trillion, and a 16.3 per cent Y-o-Y growth in 2022-23 (FY23).

 

Similarly, the non-life insurers have been advocating for a reduction in GST rates to 12 per cent on health insurance premiums, which currently is taxed at 18 per cent.