Healthy result: The removal of GST has made health insurance premiums about 18% cheaper for individual buyers.
| Photo Credit: Getty Images/iStockphoto
When the government announced a 0% GST on retail health insurance premiums on September 22, it was welcomed as a move that would make protection more affordable. But in the weeks since, it has come to represent something far more significant.
The reform has not only reduced the cost of buying health insurance but has also reshaped how Indians think about coverage itself. For the first time, the focus is shifting from “how much premium do I pay” to “how much protection do I have.” The early signs of this behavioural shift are unmistakable. Following the GST waiver, demand for high-value health insurance plans has jumped sharply. At Policybazaar, we have seen a 38% increase in purchases of policies with higher sum insureds, with the ₹15-25 lakh range now dominating new sales. The average cover size has risen from ₹13 lakh to ₹18 lakh in a short span. This points to a deeper change in how people are approaching financial preparedness in the face of medical inflation.
The removal of GST has made health insurance premiums about 18% cheaper for individual buyers. Yet what is truly encouraging is how customers are responding. Instead of merely pocketing the savings, many are using it to upgrade to more comprehensive plans. This reflects a growing understanding that health insurance is not a cost to be minimised but a financial safeguard to be strengthened.
The pandemic played a big role in shaping this awareness. It exposed the real scale of medical costs and how quickly hospitalisation expenses can erode savings. The GST exemption seems to have built on that awareness, giving families the final nudge to secure policies that truly match their healthcare needs.
Awareness deepens
Interestingly, the appetite for better protection is no longer confined to metropolitan India. Smaller cities and towns are showing a sharp rise in the adoption of higher-value covers.
In Tier 2 markets, there has been a noticeable shift away from low-sum insured plans, with more customers now choosing policies that offer ₹15–25 lakh in coverage.
This is an important cultural moment in India’s insurance journey. For years, non-metro consumers have tended to prioritise affordability over adequacy, but that equation is changing. With rising awareness and easier access to digital platforms, families are opting to secure higher coverage earlier in life. The zero-GST move has given this shift a tangible push, removing one of the key barriers to entry.
What is heartening to see is that this surge is cutting across age groups. Millennials and mid-life earners are leading the upgrade trend, investing in plans that can protect them from lifestyle-related illnesses and unforeseen medical emergencies.
But even among senior citizens, there is a visible change in mindset.
More customers in their sixties and seventies are choosing comprehensive covers instead of limited ones, recognising that long-term financial independence depends as much on health security as on income.
This growing alignment across generations is a strong indicator of how the insurance mindset in India is maturing. Younger buyers are planning early, while older ones are ensuring they are not left vulnerable. Both are making informed choices rather than reactive ones.
Alongside the move toward larger covers, we are also seeing a rise in the adoption of add-ons and long-term plans. Riders such as Day-1 Pre-existing Disease and critical illness cover are gaining traction, as buyers increasingly prefer policies that provide immediate and comprehensive protection. Similarly, more customers are opting for multi-year policies.
These trends together suggest a clear shift from transactional buying to thoughtful financial decision-making.
The zero-GST reform has, in effect, unlocked the value perception of health insurance. By making it more affordable, it has also made it more aspirational, a product people now want to invest more meaningfully in.
The government’s move to exempt health insurance from GST may have started as a fiscal reform, but its true impact is behavioural. It has widened the accessibility of health coverage and encouraged a national rethink on what adequate protection means.
The GST reform has helped add something far more enduring, trust, awareness, and a willingness to plan for health proactively.
(The writer is Head, Health Insurance, Policybazaar)
Published – November 17, 2025 06:02 am IST