Life insurers are expected to report a mixed performance in the third quarter. While the GST rate cut is expected to boost premium growth and profitability, margins may come under pressure due to the loss of input tax credit (ITC), according to industry analysts.
According to analysts at Motilal Oswal Financial Services, life insurers are projected to post year-on-year growth of 14% in premium and 17% in profit after tax (PAT).
Year on year growth
Life insurance companies reported a 23% year-on-year jump in new business premium (NBP) in November, the highest in the current fiscal, to ₹31,119.64 crore. The growth came after the government fully exempted GST on all individual life insurance premiums, including term plans, ULIPs and endowment products. Private life insurers also reported 15% and 28% year-on-year growth in individual annualised premium equivalent (APE) in October and November, respectively, driven by the GST rate cut.
Analysts at Motilal Oswal expect double-digit year-on-year APE growth in the third quarter for life insurers under their coverage, including HDFC Life, ICICI Prudential Life, Max Financial and SBI Life Insurance.
“We expect VNB margins to be impacted by the loss of ITC, which should be offset by a tilt toward non-linked products, rising demand of term products and higher attachment rates,” they said.
Insurers had been claiming ITC on distribution commissions, reinsurance, promotional spends and operational expenses. However, they can no longer claim ITC as the final product was exempted from GST from September 22, 2025.
PL Capital expects a 200–300 basis point drag on value of new business (VNB) margins across life insurers in the third quarter. According to PL Capital analysts, HDFC Life is expected to report 12% growth in APE in Q3, driven by term life volumes and a recovery in the credit life segment, while ULIPs and the non-participating segment are likely to remain muted. The insurer has earlier indicated a 300 bps gross impact on its FY26 margins due to the loss of ITC. Analysts expect HDFC Life’s VNB margin to decline to 22.5% from 26.1% in the same quarter last year.
ICICI Prudential Life, meanwhile, is expected to report a 7.8% year-on-year decline in APE to ₹2,247 crore in Q3FY26, although its VNB margin is projected to improve to 23% from 21.2% a year earlier, supported by higher sum assured, better rider attachment and favourable movements in the yield curve, which are expected to partly offset the impact of ITC loss.
General insurance companies are expected to deliver 19% year-on-year premium growth in the third quarter, while PAT is likely to decline 5% year-on-year, driven by the health insurance segment following the GST rate cut, according to Motilal Oswal.
The non-life insurance industry reported a 23% year-on-year growth in premium collection in November following the full exemption of GST on individual health insurance policies. Standalone health insurers such as Star Health and Niva Bupa reported 22% and 55% growth in retail health premiums, respectively, during the month.
What do analyst at Motilal Oswal say
According to Motilal Oswal, strong growth in health insurance premiums and stable motor insurance premiums should also support PB Fintech’s core online and new business premiums, resulting in 45% year-on-year revenue growth. However, the lower contribution margin of fresh health insurance business is expected to weigh on the online insurance aggregator’s profitability.
“MAX Financial is our preferred play in life, while Niva Bupa stands out in general insurance,” they said.