The GST rationalisation has fuelled healthy premium growth across life and health insurance segments, while for multi-line general insurers, it has driven growth in motor insurance.
The value of new business (VNB) margin — a key measure of life insurers’ profitability — is likely to remain under pressure in Q3FY26 due to the ITC loss. However, a shift in product mix towards non-participating (non-par) and protection products, distributor negotiations, and improved operating efficiency are expected to cushion the impact, analysts said.
“VNB margins will be an interplay of product mix changes (higher protection offset by higher Ulips year-on-year), the drag from ITC losses, and the labour code. The base effect will play a key role in year-on-year margin expansion or contraction, ranging from a decline of 300 basis points (bps) to an increase of 100 bps for the quarter. Most companies have called out a 175–350-bp impact on VNB due to ITC losses following the GST exemption,” analysts at Kotak Institutional Equities said.
Meanwhile, annualised premium equivalent (APE) growth for life insurers is expected to remain healthy, aided by GST changes and the normalisation of base effects following the implementation of revised surrender value norms.
“Among private listed players, Axis Max Life is likely to remain the fastest-growing insurer, followed by SBI Life, HDFC Life, and ICICI Prudential Life. Life Insurance Corporation of India (LIC) is expected to report strong APE growth, supported by a favourable base in retail and robust growth in the group business. VNB margins are likely to remain under pressure due to GST-related ITC losses, partially offset by a shift towards non-par and protection products, distributor negotiations, and improved operating efficiency,” Emkay Global Financial Services said in a report.
According to Emkay estimates, SBI Life is expected to report a VNB margin of 26.3 per cent in Q3FY26, compared with 26.9 per cent in Q3 of 2024-25 (FY25). Its margin in the second quarter (July-September/Q2) of FY26 stood at 27.9 per cent. HDFC Life’s margin is likely to decline to 23.9 per cent from 26.1 per cent a year earlier; it stood at 24.09 per cent in Q2FY26. ICICI Prudential Life’s margin is expected at 22.9 per cent, up from 21.2 per cent in Q3FY25, though lower than 24.44 per cent in Q2FY26. Axis Max Life Insurance’s margin is estimated at 23 per cent, compared with 23.4 per cent a year earlier; it stood at 25.5 per cent in Q2FY26.
Similarly, state-owned LIC’s margin is expected to expand to 20.4 per cent from 19.4 per cent in the year-ago quarter. “We expect LIC to deliver 40 per cent APE growth, driven by robust growth in the group segment. In retail, LIC is likely to see healthy growth in non-par products,” analysts said. LIC’s margin in Q2FY26 was 19.33 per cent.
For general insurers, combined ratios are expected to edge up marginally due to higher claims ratios, despite gains in operational efficiency. A lower combined ratio indicates higher profitability.
Multi-line insurers are expected to see healthy growth across segments following GST changes that lifted new-vehicle sales, leading to strong growth in the motor own-damage segment.
“For general insurers, we expect gross written premium growth to remain steady, with improvement in loss ratios, particularly in health. Competitive intensity in the motor segment remains high,” Nuvama Research said.
Health insurers are also expected to report strong premium growth, supported by tax incentives and the normalisation of changes in 1/N accounting norms.
“Combined ratios are expected to remain elevated, led by higher commission ratios, though select players may see marginal improvement in claims ratios. Profitability should be supported by healthy investment income, driving strong growth in profit after tax,” Emkay analysts said.
According to Emkay estimates, ICICI Lombard’s combined ratio is expected at 103 per cent, compared with 102.7 per cent in Q2FY25. Star Health is likely to report a combined ratio of 102.4 per cent, down from 103.3 per cent, while Go Digit’s combined ratio is estimated at 108 per cent, broadly flat year-on-year.
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