The industry will largely pass on the entire benefit of GST rationalisation to policyholders, says Tapan Singhel, managing director and CEO, Bajaj Allianz General Insurance. He tells Geeta Nair that in the short term, it is a wait-and-watch approach, while affordability will drive growth in the long run.
Will there be a reduction in premiums for policyholders? How much will the premium be reduced, and what will be the pass-through of the GST rate cuts? Will affordability drive demand?
Yes, customers will see an immediate reduction of 18% in the premium outgo because the GST has been brought down to zero. For new purchases made on or after September 22, and for upcoming renewals, this benefit will be directly passed on to policyholders. Most health policies are annual, so people will experience the benefit during renewals. This is a significant move as insurance becomes more affordable, and I believe it will encourage more families to come under the protection of health cover.
Health retail policies have been exempt from GST, but not the input tax credit. Insurers will have to incur additional costs, such as commissions. What will be the impact, and how will you offset these costs?
I believe that the impact on the input tax credit would be around 3–8%, depending on the quantum of retail health business volumes for each of the companies. However, when you weigh that against the 18% GST exemption, the customer still significantly gains. If hospitals also pass on their GST relief, claim costs will reduce, further offsetting financial pressures for customers. Our commitment, as an industry, will be to largely pass on the full benefit to policyholders. We will focus on efficiency, technology and stronger collaboration across the value chain to offset these costs. Distributors are critical partners in taking insurance to every household and will continue to play a key role. Overall, the industry’s role is to ensure that the entire benefit reaches the customer, which is the spirit of this move, and we must honour it.
Do you see a short-term impact between now and September 22, as customers pause fresh purchases or delay renewals?
Health insurance is a protection product. People buy it to safeguard themselves and their families, not to time the market. I don’t see a meaningful pause in purchases. At best, there may be a short wait-and-watch approach from some customers. But in the long run, affordability will improve and demand will only grow.
Will higher auto sales drive motor business for you and other general insurance companies?
We will have to wait and see if rate rationalisation does have a direct impact on auto sales. If that happens, an upward trend is likely, as every vehicle requires insurance. At the same time, the reduction in GST leaves more money in the hands of consumers, allowing them to safeguard their security by purchasing health insurance. Together, these factors contribute to building a financially progressive and resilient India.