Private life insurers see volume recovery in Q3 as GST exemption lifts demand: PL Capital

Private life insurance companies reported a recovery in business volumes during October and November 2025, aided by pent-up demand following the implementation of GST exemption on insurance premiums, according to a research note by PL Capital.

In its Oct–Dec 2025 earnings preview, PL Capital said private insurers recorded a 21% year-on-year increase in volumes during the first two months of the quarter.

The brokerage expects the momentum to continue in the December quarter, supported by stronger retail protection sales, steady non-participating (NPAR) business, and a gradual recovery in credit protection.

“Retail protection volumes are providing a strong tailwind for growth in Q3,” said Shreya Khandelwal, Research Analyst at PL Capital, in the report.

However, the brokerage cautioned that margins are likely to remain under pressure in the near term due to the loss of Input Tax Credit (ITC) following the GST exemption.

PL Capital estimates a 200–300 basis point drag on value of new business (VNB) margins for FY26 across insurers, though it expects companies to partly offset the impact through cost controls, commission adjustments, and product repricing.

Company-wise outlook

PL Capital noted divergent growth trends across insurers.

HDFC Life reported an 11% year-on-year growth in annualised premium equivalent (APE) on a year-to-date basis. The brokerage expects growth of around 12% in the December quarter, led by higher term insurance sales and a recovery in credit life, though muted ULIP and NPAR growth may cap upside.

The company has indicated a potential 300 basis point impact on FY26 margins due to the loss of ITC, and is working with distributors to mitigate the impact over the next few quarters. PL Capital has factored in a VNB margin of 22.5% for the quarter.

ICICI Prudential Life (IPRU Life) reported a 6% year-on-year decline in APE on a year-to-date basis, impacted by slower ULIP sales and flat protection growth.

PL Capital expects the decline to persist in Q3, though higher sum assured, increased rider attachment, and favourable yield curve movements could support profitability. The brokerage has assumed a VNB margin of 23% for the quarter.

Axis Max Life outperformed peers with an 18% year-on-year APE growth on a year-to-date basis. PL Capital expects the company to sustain the outperformance, supported by strong retail protection demand and a recovery in credit life disbursements. Newly launched products across NPAR, participating, and annuity segments are seeing early traction, the report said.

The brokerage estimates a VNB margin of 22.5% for Q3, factoring in the GST-related margin impact.

SBI Life recorded a recovery in volumes during October and November, with year-to-date growth of 14%. However, PL Capital expects Q3 growth to moderate to around 5% year-on-year due to a high base. The brokerage expects margins to remain broadly stable, with minimal impact from the GST exemption.

Key monitorables

PL Capital said investor focus will remain on growth guidance for Q4FY26 and FY27, management commentary on margin recovery, and the pace at which insurers absorb the impact of the GST exemption.

“While margins may stay subdued in the near term, strong growth in protection, improved ULIP margins, and repricing in NPAR products could help offset part of the drag,” the report said.