No-GST rule fuels 2.5x jump in term plans,2.2x surge in health cover demand

Tax reform expected to broaden insurance reach in the country, say experts

The government’s decision to scrap the Goods and Services Tax (GST) on health and term insurance has triggered a surge in policy purchases. Demand for term plans has increased 2.5 times and that for health insurance 2.2 times since the announcement in early September, according to Policybazaar, an online insurance marketplace.

 

Policybazaar said the data marks the highest traction it had recorded and surpasses pandemic-era peaks. Demand for insurance has remained steady weeks after the tax announcement, with health policy interest up 1.7 times and term cover enquiries up 1.8 times.

 

Insurance coverage

 

India’s insurance penetration is below global average, largely due to cost sensitivity and limited awareness. The GST waiver is expected to change that equation by reducing the entry cost for first-time buyers.

 

 

Sarbvir Singh, joint group chief executive officer of PB Fintech, said the zero per cent GST move has “converted latent demand into active interest”. The reform underlines the government’s message that “health and life insurance are essential products for the economy and now GST exempt.”

 

Industry experts view this as a structural boost to financial protection. The removal of GST, which earlier added 18 per cent to premiums, makes basic risk cover more affordable for middle-income families.

 

Who’s buying and why

 

Policybazaar noted three broad consumer groups benefiting from the change:

 

Active buyers: expanding their coverage while costs are low

 

Procrastinators: finally completing long-delayed purchases

 

Fencesitters: nudged by the lower tax into buying their first cover

 

The timing of the GST exemption has also worked in favour of insurers. The reform coincided with the Navratri season, traditionally seen as auspicious for new investments, which further accelerated insurance buying.

 

A step towards wider insurance inclusion

 

With the policy shift, the government aims to deepen social security and reduce household financial vulnerability. For India’s middle class, the removal of GST on health and term insurance signals a turning point, making essential protection both accessible and aspirational.