Zero GST policy triggers 38% surge in health insurance demand: Policybazaar report

The government’s decision to remove Goods and Services Tax (GST) on health and life insurance premiums has led to a significant rise in demand for health insurance, with overall uptake for higher coverage plans surging by 38 per cent, according to a report released by Policybazaar.

The GST exemption, which came into effect on September 22, 2025, following the government’s GST rate rationalisation meeting, has made insurance policies more affordable by eliminating tax payments on premiums. The move is aimed at encouraging wider adoption of health and life insurance across the country.

The Policybazaar report noted that individuals are increasingly prioritising financial security amid rising healthcare costs and medical emergencies. The average health insurance coverage has increased from ₹13 lakh to ₹18 lakh, reflecting a stronger awareness among consumers about the importance of comprehensive protection instead of minimal coverage.

Nearly 45 per cent of health insurance buyers after the GST exemption are now opting for policies in the ₹15–25 lakh range, while around 24 per cent are selecting coverage between ₹10–15 lakh. Only 18 per cent of customers continue to prefer lower coverage below ₹10 lakh, the report stated.

The study highlighted that both millennials and older age groups are driving the surge in higher sum insured (SI) plans. In smaller cities, the preference for low coverage has dropped from 24.1 per cent to 16.8 per cent, indicating a notable shift in insurance awareness beyond major metros. The share of customers in Tier-2 cities opting for coverage in the ₹15–25 lakh range has also risen by 10.2 per cent, from 44.1 per cent to 48.6 per cent.

A growing interest in add-on benefits has also been observed. Add-ons such as Day-1 Pre-Existing Disease (PED) cover and critical illness coverage are gaining traction among policyholders seeking enhanced protection. The Day-1 PED add-on, in particular, allows coverage for pre-existing conditions from the start of the policy, eliminating the usual waiting period of two to four years. This feature has become increasingly popular among individuals with chronic illnesses such as diabetes or hypertension.

Critical illness covers, which provide lump-sum payouts for severe conditions such as cancer, heart attack, or organ failure, are also seeing rising demand. Experts attribute this trend to growing health awareness and the desire for financial preparedness against costly medical treatments.

The report further observed that senior citizens are becoming more inclined towards high-value plans. There has been an 11.54 per cent increase in high-sum insured plans among customers aged 61–75 years and above 75 years. This shift indicates a change in mindset among older individuals, who are now opting for broader coverage to protect themselves against escalating medical expenses.

Consumers in smaller towns are also increasingly purchasing higher coverage policies earlier in life to ensure protection before the onset of age-related or pre-existing health conditions.

Overall, the report underlined a fundamental change in consumer behaviour, noting that the zero-GST policy has acted as a catalyst in expanding access to comprehensive health insurance. Indians across age groups and regions are now more aware of the need for adequate health coverage and are investing in high-value plans that offer extensive protection and add-on benefits.