Shares of Insurance companies were off to a strong start on Thursday after the GST rationalization announcement, but the momentum could not sustain. Infact a number of stocks, which had opened up to 9 per cent higher, were seen tumbling, slipping into red as the session progressed. However, analysts remain positive on the stock in the long and have cherry-picked stocks.
The GST council announced exemption of GST on all individual life and health insurance policies from later this month. However, it also went away with the input tax credit (ITC) benefit for the sector. As GST is exempt, till the time the premiums remain the same, general insurers lose out on the ITC (Input Tax Credit) they availed earlier.
Life Insurance players including Life Insurance Corporation of India (LIC), SBI Life Insurance Company, HDFC Life Insurance Company, ICICI Prudential Life Insurance Company and Max Financial Services gained 5 per cent each at opening before giving up their gains. Only the former two managed to hold their gains as the session progressed as others fell into red.
Among others, Star Health and Allied Insurance Company and Niva Bupa Health Insurance Company rose 9 per cent each. However, both stocks turned flat as the session progressed. ICICI Lombard General Insurance Company, The New India Assurance Company, General Insurance Corporation of India and Go Digit General Insurance also rose 5-6 per cent each before turning flat.
The government is focusing on the ease of doing business and ease of living by bringing in several structural reforms in the GST structure and streamlining/expediting processes. New rates will become applicable for most products/services from September 22, 2025, thus striving to pass on the benefits to end consumers during the festive season, said Motilal Oswal Financial Services.
For the insurance sector, the exemption of GST on health and life insurance products marks a revolutionary structural shift for the industry, though the actual benefit that will eventually pass on to policyholders remains uncertain as insurers may lose some input credit advantages, said Puneet Singhania, Director at Master Trust Group.
“Overall, the reforms by the government are meant to boost Indian consumption, with tax reliefs expected to have a wide-ranging effect on the economy and lift demand across multiple sectors,” he said.
While reports had suggested a reduction in GST rates for term and health plans, the exemption on savings plans is a positive surprise and benefits players who are strong in the traditional business – Max Financial Services and HDFC Life, said JM Financial. With the exemption, traditional savings products will become more competitive vis-à-vis fixed deposits and mutual funds, it said.
“In health insurance, profitability is impacted in the medium term but that will also be contained with GST reduction/exemption in the healthcare value chain. It should improve penetration in the medium term – Star Health Insurance is likely to benefit,” it added. JM prefers life insurers over general insurance names.
In the light of Insurance sector, Motilal Oswal see the move positive for retail health insurance companies including Niva Bupa, Star Health and ICICI Lombard, along with life insurance player including HDFC Life, SBI Life, ICIC Prudential Life, Life Insurance Corporation of India and Max Financial Services.
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