LIC, SBI Life, HDFC Life, and Niva Bupa surge as GST Council removes 18% tax on life and health insurance premiums

Insurance Stocks Rally: Shares of major insurance companies surged nearly 10 per cent on Thursday following the GST Council’s announcement exempting life and health insurance policies from Goods and Services Tax (GST).

LIC, HDFC Life, SBI Life, Niva Bupa Surge

Life Insurance Corporation of India (LIC) rallied over 5 per cent to hit Rs 914.90, while SBI Life and HDFC Life climbed sharply to Rs 1,899 and Rs 814.90 respectively. Health insurer Niva Bupa led the pack with a jump of more than 10 per cent, hitting Rs 91.39.

Why insurance stocks are rising today: GST changes for life insurance sector

Previously, life and health insurance policies were taxed at 18 per cent GST, which in effect makes premium more expensive. The GST Council’s decision removes this tax and makes it 0 per cent, making these policies more affordable for customers. Other insurance products like endowment plans, which had GST rates ranging from 1.8 to 4.5 per cent, are also now exempt.

What's coming up for life insurance companies

While the GST exemption is a big positive for the sector, brokerage Jefferies points out a catch — commissions paid to agents will still attract 18 per cent GST, creating a slightly uneven tax structure. This could slightly affect the profitability of existing policies since insurers may find it hard to increase prices.

Insurers might need to raise premiums by 2-4 per cent or accept a slightly lower return on new business. However, lower GST is expected to boost sales of protection plans and add-ons, which generally have higher profit margins.