Insurance policy renewals see delay ahead of GST reforms' implementation

Fresh issuances stay steady as customers weigh renewal options before GST reform

Policyholders are delaying their insurance policy renewals until the new goods and services tax (GST) rates become effective from September 22.

 

However, fresh policy issuances remain steady with insurers allowing customers to buy policies at nil GST rates now, distributors said.

 

Dhirendra Mahyavanshi, managing director (MD) & chief executive officer (CEO), Turtlemint, said, “With the announcement of recent GST reforms, we have noticed hesitation among customers to immediately renew their health and life policies. This is especially from customers with policy expiry dates before September 22. They are choosing to delay their renewals until the GST reforms become effective.”

 

“We observed customers choosing to delay purchase immediately after the announcement of the reform when more clarity was yet to emerge. However, consumers can now pay the premiums without GST immediately and keep their risk start date from September 22. The demand seems to be stabilising, and we expect it to surge in the upcoming days,”  Mahyavanshi added.

 

The GST Council exempted tax on individual life and health insurance policies (including family floater policies and policies for senior citizens) and reinsurance thereof from September 22, to make insurance affordable for the common man and increase coverage in the country.

 

With the GST on individual health and life insurance premiums reduced to nil from 18 per cent (earlier with input tax credit), consumers are expected to benefit from lower premiums. 

 

“There are options for people to buy without GST even today. The only catch is, if you pay without GST, then your coverage will start from September 22. So, the customer has three options — first, they renew now with 0 per cent GST, with coverage starting September 22. Second, they renew now with 18 per cent GST, with coverage starting immediately. Third, they wait until September 22 to buy at 0 per cent GST and the coverage starts after that,” said Amit Chhabra, chief business officer, Policybazaar.

 

According to him, 25 per cent of the people are taking the break in coverage for 8-10 days, and restarting from September 22.

 

“About 75 per cent are continuing with the policy and they are not taking the risk, because one ideally should not be playing with one's own safety. There is no drop in renewals. In fact, more people are renewing. It’s just that some are activating from September 22. Renewal positions are at all-time highs. On the fresh side, we are seeing about half the customers are buying now with a start date of September 22, availing GST benefits,” Chhabra added.

 

Insurance industry has also been communicating with customers regarding the applicability of GST depending on the risk start date of the policy.

 

Renewal notices are shared around 2-3 months before the policy expiry date, which has GST included in them.

 

This was another reason for confusion among customers. However, the industry has been working on updating premium collections on various systems and portals.

 

It is also educating customers on GST reforms through the respective communication platforms.  

Waiting and watching

• Consumers can now pay premiums without GST and keep their risk-start date from Sept 22
• 25% people are taking break-in coverage for 8-10 days, restarting from Sep 22 
• 75% continuing with policy without taking any break
• Insurance industry working on updating premium collections on various systems and portals