Govt can waive off GST on health cover, step up focus on insurance penetration: FGII CEO Anup Rau

The Insurance regulator has been extremely supportive, consistently working towards reducing compliance burdens, supporting product innovations, streamlining product approvals and subsuming a number of regulations. This in turn has allowed companies more freedom to innovate and grow, which is a positive shift.

There are areas where the industry needs support , particularly around GST and motor third-party rates. Removing GST on health insurance would make it more affordable, driving higher penetration and reducing the government’s burden to provide coverage. Motor third-party premiums have been unchanged for five years. These rates need to be revised. However, the fact is these decisions are not solely under the regulator’s purview; they need intervention, involvement, and decision-making from the government.

It’s not an easy decision to make. After all, 18 per cent GST on health insurance represents significant revenue for the government, making it difficult to relinquish. However, I believe there is a solution to every conundrum. In this case, taking away GST and focusing on improving penetration is the key, as this would shift much of the burden of healthcare coverage to the private sector. This would also allow market forces to drive better outcomes—a win-win for all. In fact, we have already seen this in the telecom sector, where private players have delivered affordable services and widespread coverage without heavy state intervention.

Yes, premiums have increased primarily due to two factors: rising hospital and medical costs, and a
significant increase in the average sum insured. At FGII, for example, the sum insured has more than
doubled between 2020 and 2024. While inflation plays a role, however, the full impact of inflation
may be mitigated by intense competition in the market. This is because insurers are cautious about
raising prices too much to avoid putting all the burden on the customer

At this point, it’s essential to view the larger picture. In India, the general insurance business is often
seen as an asset-under-management (AUM) business rather than one driven by underwriting profits.
The focus is on building a large AUM, which generates interest income, with profits primarily coming
from there. For shareholders, profit is typically viewed as fungible—whether it’s from underwriting
or AUM, what matters is the return on equity. Underwriting profits remain rare and relatively low, but they are offset by investment income. The current focus is on building the business, acquiring customers, and scaling up before shifting focus to profitability

Correct. Health insurance portability has not gained as much traction as expected, largely due to customer inertia. Many a times, even when presented with a better product elsewhere, familiarity
and comfort are factors that drive policyholders to stay with their existing insurer. However, here I
must add that we do see a level of portability within the same company when customers opt for
upgraded or differentiated products.

IPO is not an immediate priority for most promoters of insurance companies as they usually hold a
long-term vision, often spanning 20 to 30 years. Most European-American players see IPO as a
residual payoff for three-to-four decades, reflecting a focus on patient capital. This perspective
makes insurers adopt a more conservative approach regarding listing. On the positive side, it also
allows businesses to focus on growth and development without the pressure of short-term returns.
However, as the market matures more and more firms will get listed.