India's general insurance sector recorded strong performance in December with gross direct premiums rising significantly across all major categories, driven by robust growth in both private and public sector insurers.

Overall Sector Performance

The general insurance industry demonstrated solid momentum with total gross direct premiums reaching ₹28,447.00 crore in December, representing a 13.7% year-on-year increase according to data from the General Insurance Council.

Private Sector Leads Growth

Private sector general insurers outpaced the overall market with premiums rising 14.8% to ₹23,748.00 crore. State-owned insurers also posted strong results, underwriting ₹10,126.00 crore with a 14.7% year-on-year increase. Other general insurers contributed ₹13,621.00 crore, marking the highest growth rate at 14.9%.

Health Insurance Segment Excels

Standalone health insurers emerged as the standout performers, recording exceptional growth of 38.8% with gross direct premiums jumping to ₹4,260.00 crore during December. This segment's strong performance was attributed to policy shifts, including GST rationalisation on health insurance, which boosted demand.

Individual Company Performance

Among major insurers, performance varied significantly across companies:

In the standalone health insurance category, Niva Bupa Health Insurance led with premiums surging 52.7%, while Star Health & Allied Insurance recorded a 23.7% year-on-year increase.

Nine-Month Performance and Outlook

For the April-December period, gross direct premiums underwritten by non-life insurers rose 8.6% to ₹2.50 lakh crore. However, this data is not strictly comparable with the previous year due to IRDAI's revised reporting formats implemented in October, which now reflect only annual premiums for long-term policies.

Industry analysts expect continued momentum in motor and retail health insurance segments, supported by the positive policy environment and growing consumer awareness in the insurance sector.

In a significant move for the insurance sector, general insurers have approached the finance ministry with a request for GST relief on health insurance commissions. The industry is currently grappling with an 18% tax on these commissions, prompting insurers to seek exemption in a recent meeting with the Department of Financial Services.

Key Points of the Request

• GST Exemption: Insurers argue that commissions should be exempt from GST, as they are considered procurement costs embedded in premiums.
• Comparison to Reinsurance: The industry draws a parallel between health insurance commissions and reinsurance commissions, which are already exempt from GST.
• Input Tax Credit (ITC) Concerns: The new GST regime has removed input tax credit, further burdening the industry.

Potential Impact on Consumers

Without the requested relief, the insurance industry estimates a significant impact on consumer premiums:

• Premiums could increase by ₹3.00-5.00 per ₹100.00 of cover.
• This increase would directly affect the affordability of health insurance for many Indians.

Market Size and Commission Structure

The health insurance segment in India is substantial, with distributor payouts playing a crucial role:

• The retail market for health insurance is estimated at ₹40,000.00-50,000.00 crore.
• Distributor payouts in this segment range from 15-20% of the market value.

Life Insurance Sector Also Seeking Relief

The life insurance sector is facing similar challenges and is also seeking GST relief:

• The potential financial impact on the life insurance industry is estimated at ₹15,000.00 crore.
• In the previous fiscal year, the life insurance sector:
  • Collected ₹24,000.00 crore in GST
  • Claimed ₹14,000.00 crore in ITC credits

The elimination of ITC has created a significant financial gap for life insurers as well.

Industry-wide Implications

The request for GST relief highlights the broader challenges faced by the insurance sector in India:

1. Balancing Affordability and Profitability: Insurers are striving to keep premiums affordable while maintaining sustainable business models.
2. Regulatory Adaptations: The industry is calling for regulatory changes to adapt to the evolving tax landscape.
3. Consumer Impact: Any changes in tax structure could have direct implications for insurance penetration and coverage in India.

As the finance ministry considers this request, the outcome could have far-reaching effects on the insurance landscape in India, potentially influencing both the industry's financial health and the accessibility of insurance products for consumers.