Managing directors and CEOs of major life and general insurance companies will meet Insurance Regulatory and Development Authority of India (Irdai) chairman Ajay Seth in Hyderabad on Wednesday, sources said. The issue of input tax credit on life and health insurance and renewal premiums is likely to feature in their discussions.
This will be the first formal industry-level interaction with Seth since he took charge as the head of the insurance regulator on September 1.
“All the life insurers and their appointed actuaries have been invited for the meeting with the Irdai chairman,” a senior executive at a private life insurer said. However, the executive said no specific agenda or discussion points have formally been shared so far.
The interaction assumes significance as insurers are still seeking clarity on input tax credit (ITC) for life and health insurance services following recent GST rate changes.
“We had a brief virtual meeting with the chairman last week, and he has now called us for a physical meeting on Wednesday,” a top official at a private general insurer confirmed.
Discussions with finance ministry
The meeting comes close on the heels of insurance company CEOs holding discussions with finance ministry officials last week to understand the applicability of the changes announced by the GST Council earlier this month.
At its 56th meeting, the GST Council approved full exemption for individual life and health insurance products. For life insurers, the exemption covers term plans, unit-linked insurance plans (ULIPs), endowment policies and reinsurance contracts. For health insurers, it applies to retail products including family floater policies, senior citizen covers and reinsurance.
While GST is exempted on reinsurance premiums, it will continue to apply on other major expenses of insurers such as distribution costs and commission payouts, which together account for nearly 90% of the cost structure of life insurers. For health insurers, reinsurance constitutes about one-third of overall costs and will now be free of GST.
“Reinsurance premiums are exempted from GST, but distribution costs on direct sales of individual policies are not. We are preparing a joint representation on behalf of life insurers,” Kamlesh Rao, chairperson of the Life Insurance Council’s Insurance Awareness Committee (IAC-Life), told in an recent interview.
Extend ITC benefits
Insurers have been urging the government to extend ITC benefits on renewal premiums and distribution expenses such as agent commissions, which they argue would allow them to fully pass on the benefit of the GST exemption to policyholders.
In their meeting with finance ministry officials, insurers said the new GST rules be applied prospectively, rather than retrospectively. They highlighted that GST has already been paid on servicing costs of policies issued in previous years, and sought clarity on ITC claims for renewal premiums. Renewal premiums made up over 54% of the life insurance industry’s Rs 8.3-lakh crore premium income in FY24.
However, according to people familiar with the matter, the Central Board of Indirect Taxes and Customs has indicated to insurers that ITC cannot be claimed on exempted services under the GST law.