India’s life insurance industry is witnessing growing interest in higher-value term insurance policies following the removal of Goods and Services Tax on individual life insurance premiums. The change has made protection-oriented insurance more affordable and encouraged consumers to reconsider their existing coverage levels.

Industry disclosures indicate that demand for term insurance policies offering coverage above ₹3 crore has increased, with a reported growth figure of approximately 25%. Interest in policies exceeding ₹5 crore also appears to be strengthening, although the precise industry-wide growth rate requires further confirmation.

The policy change took effect on September 22, 2025, following recommendations made at the 56th GST Council meeting. Individual life insurance premiums became exempt from the earlier 18% GST, reducing the tax component of insurance costs for policyholders.

The exemption covers individual term insurance, endowment policies and unit-linked insurance plans. However, group life insurance policies, including employer-sponsored group term insurance, generally remain subject to the applicable 18% GST.

For consumers, the financial impact can be meaningful. A term insurance policy with an annual base premium of ₹30,000 previously attracted ₹5,400 in GST, taking the total payment to ₹35,400. With the exemption, the tax component is removed, assuming the underlying premium remains unchanged.

This reduction becomes particularly relevant for customers considering larger insurance coverage. Higher sum-assured policies generally involve greater absolute premium commitments, making the elimination of GST an important affordability factor.

Demand for ₹5 crore and higher coverage may also reflect changing financial responsibilities among urban households. Rising incomes, housing liabilities, education expenses and long-term family obligations can influence the amount of financial protection consumers consider appropriate.

Term insurance provides life coverage for a specified period, with the insurer paying the contractual benefit to beneficiaries when an eligible claim arises. Unlike investment-oriented insurance products, pure term plans primarily focus on financial protection.

The government’s decision is part of a broader effort to improve insurance accessibility and financial inclusion. Policymakers expect lower premium costs to encourage more households to obtain adequate protection against unexpected financial disruption.

For life insurance companies, the policy creates opportunities to attract new customers and increase coverage among existing policyholders. However, higher policy sales do not automatically translate into proportionate improvements in profitability.

One important challenge involves input tax credits. Because individual life insurance premiums are GST-exempt, insurers generally cannot claim input tax credits on certain taxable expenses associated with providing those policies.

These expenses can include distribution commissions, technology services and other operating costs. The resulting increase in effective expenses may place pressure on insurers’ profitability unless offset through operational efficiencies, pricing adjustments or higher business volumes.

The impact is particularly relevant to the value of new business margin, commonly called the VNB margin. This measure helps investors evaluate the expected profitability of newly written life insurance policies.

Listed companies such as Life Insurance Corporation of India, HDFC Life Insurance, SBI Life Insurance and ICICI Prudential Life Insurance are important businesses to monitor as the industry adjusts to the revised tax structure.

HDFC Life has an established presence in individual protection products and digital insurance distribution. Increasing consumer interest in higher-value term policies could support protection business opportunities, although underwriting discipline and acquisition costs remain important.

SBI Life benefits from its bancassurance network and access to customers through banking relationships. The company may find opportunities to increase protection penetration, but actual growth will depend on product competitiveness and customer conversion.

ICICI Prudential Life Insurance also operates across protection and savings-oriented insurance categories. Changes in consumer preferences could influence its product mix, making protection premium growth and VNB margins important indicators.

LIC remains a major participant in India’s life insurance market, supported by its extensive distribution network and established brand. The company’s ability to expand individual protection products will depend on customer demand, pricing and distribution execution.

Competition across the industry could intensify as insurers seek to capture demand for larger coverage amounts. Product features, claim settlement experience, underwriting requirements and premium affordability may become increasingly important competitive differentiators.

Higher-value policies also require careful risk assessment. Insurers must evaluate applicants’ financial circumstances, medical underwriting information and coverage requirements to maintain sustainable claims experience and appropriate pricing.

For stock market investors, the key indicators include individual protection annualised premium equivalent, new business growth, VNB margins, persistency ratios and operating expenses. These measures provide a clearer picture of profitability than headline policy sales alone.

The zero-GST regime represents a meaningful structural change for India’s life insurance market, potentially supporting higher coverage and broader financial protection. Nevertheless, the long-term benefits for listed insurers will depend on sustainable premium growth, disciplined underwriting, expense management and the ability to balance affordability with profitability.