Insurance stocks rally on hopes of GST cut for health, life policies

Shares of insurance companies rallied on Monday, August 18, amid expectations that Goods and Services Tax (GST) on health and life insurance may be reduced to 5% or given a complete exemption.Health insurers led the rally. Niva Bupa jumped 9.54% to ₹89.75 after touching an intraday high of ₹89.9, compared with a previous close of ₹81.93. ICICI Lombard rose 4.19% to ₹1,977.90, near its day’s high of ₹1,981, while Star Health gained 4.09% to ₹456.50 against a previous close of ₹438.55.

Life insurers also saw strong buying. SBI Life advanced 3.49% to ₹1,904.90 after hitting ₹1,912 intraday, compared with a previous close of ₹1,840.60. ICICI Prudential rose 3.78% to ₹650.30, HDFC Life gained 2.38% to ₹807.50, and LIC was up 2.10% to ₹906.40.

For health insurance, rationalisation may either be limited to senior citizens and lower sum assured products or extended across all policies. For life insurance, the question remains whether the relief will apply only to term plans or also to savings-linked products.The most critical factor for both health and life insurance is whether the Input Tax Credit (ITC) will be provided alongside a GST cut or exemption. At present, the 5% GST rate carries no ITC provision, and no exemption exists.

If GST is reduced to 5% or removed but without ITC, premiums will rise further. However, a GST cut or exemption with ITC will lead to lower premiums.

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