GST Removed on Insurance

The Indian government’s recent decision to remove the 18% GST from life and health insurance premiums has been widely celebrated as a step toward making insurance more affordable. On paper, lower premiums should encourage more citizens to protect themselves and their families. But a closer look reveals a far more complex—and controversial—story.

Cheaper Premiums Vs Hidden Risks:

While the GST cut reduces upfront costs, it may not translate into better coverage:

• Insurers might remove key benefits such as coverage for pre-existing conditions, maternity, or critical illnesses to maintain profit margins.

• Hidden administrative fees and optional add-ons could offset the apparent savings.

• Stricter claim conditions may leave policyholders vulnerable, with delayed or rejected claims becoming more common.

In short, cheaper premiums could mask reduced protection, leaving policyholders exposed when they need it most.

Who Really Benefits?

The policy disproportionately favors high-income individuals:

• Wealthier citizens buying high-value insurance policies see significant savings from the GST cut, while low-income families, many of whom remain uninsured, gain little.

• This widening gap raises questions about the equity of the tax reform—are the benefits trickling down, or are they simply padding the profits of insurers and agents?

The Importance of Policy Literacy

Many citizens may assume that lower premiums equal better or equivalent coverage—but:

• Knowledge of policy terms, exclusions, and claim procedures is critical.

• Without understanding the policy, people could be lulled into a false sense of security, paying less but receiving less in actual protection.

The Role of Government
To ensure this reform benefits all citizens—not just the wealthy or insurance companies—the government must:

1. Mandate transparency: Insurers should clearly disclose removed coverage, additional charges, and claim restrictions.

2. Set minimum standards: Even basic policies must provide essential coverage to protect all citizens.

3. Promote insurance awareness: Citizens need education on policy terms, claim procedures, and comprehensive coverage options.

4. Support low-income families: Subsidies or incentives should encourage meaningful insurance purchases among those who need it most.

Conclusion:

"Removing GST on insurance may seem like a win for policyholders—but in reality, it risks reducing coverage, creating hidden charges, and disproportionately benefiting the wealthy. Cheaper premiums don’t guarantee better protection. True reform requires transparency, policy literacy, and safeguards to ensure every Indian—not just the rich—gets the coverage they need."