HDFC Life, SBI Life, LIC other insurance stocks in focus after GST exemption on policies

Shares of life and health insurance companies, such as HDFC Life Insurance Ltd., SBI Life Insurance Ltd. Niva Bupa Ltd. among others, will be in focus on Thursday, September 4, after the GST Council, in a decision late-Wednesday night, exempted the individual life and health insurance from the Goods and Services Tax (GST).

In addition to this, the GST on reinsurance cost has also been exempted. All of these proposals confirm multiple CNBC-TV18 newsbreaks from the last few weeks.

Which means, that life and health insurance policies will no longer attract any GST. Here's how much GST is currently levied on health and life insurance policies:

Here's why this is a double whammy for insurance companies:

Insurers incur various costs like reinsurance, commissions, and claims processing. With GST exempted, insurers cannot claim Input Tax Credit, increasing their net cost of operations. This could impact profitability or lead to higher policy costs in the future.

Additionally, Reinsurance, which is also exempt, is only 30–35% of an insurer’s cost base. Most individual policies are not even reinsured. Therefore, with the reinsurance exemption and inverted duty structure still not fixed, policies will get cheaper for a policyholder by close to 15% if all the benefits are being passed on. However, every policy will increase the cost for insurers by 5% to 7%.

Shares of HDFC Life have gained over 5% in the last one month, while those of SBI Life are down only 1%. Both these stocks though, have gained between 25% and 30% so far in 2025. Shares of ICICI Prudential have underperformed both these stocks, having declined 7.5% so far this year. Niva Bupa's shares are just above their IPO price of ₹74 apiece.

Also Read: Insurers warn GST exemption without removing inverted duty structure may raise costs