GST Exemption Drives Shift to Higher Health Insurance Cover; Average Sum Insured Rises 31%

The data indicate that improved affordability has prompted buyers to move toward more comprehensive health insurance plans.

The government’s decision to exempt health insurance from the 18 percent Goods and Services Tax (GST) has led to a marked shift in buying behaviour, with policyholders opting for significantly higher coverage amounts.

The average sum insured rose 31 per cent following the tax exemption, according to a report released by Policybazaar.

The report stated that the average health cover increased from ₹14.5 lakh in the pre-GST period to ₹19 lakh after the exemption came into effect. The data indicate that improved affordability has prompted buyers to move toward more comprehensive health insurance plans.

Demand growth was most pronounced in higher coverage brackets. Policies with a sum insured between ₹10 lakh and ₹25 lakh increased by 47 percent, while policies offering coverage of ₹25 lakh and above jumped by 85 percent. In contrast, policies with coverage below ₹10 lakh declined by 24%, highlighting a clear shift away from lower-value plans.

Year-on-year comparisons further underscored the trend. Between 2024 and 2025, policies with sums insured below ₹10 lakh fell by 29 per cent. During the same period, policies in the ₹10–25 lakh range rose by 55.6 per cent, while those with coverage of ₹25 lakh and above increased by 49.3 per cent.

The report also outlined key claim trends observed during the period. Heart-related ailments, cancer, and cataract emerged as the most common claim reasons. Claims linked to seasonal and infectious diseases remained high, alongside day-care procedures and accidental injuries.

Another notable trend was the growing preference for multi-year health insurance plans. Buyers increasingly opted for longer policy tenures, reflecting a shift toward extended protection and cost predictability.

Age-wise data showed that younger buyers continued to account for a significant share of purchases. Individuals aged 18–35 years made up 30 per cent of buyers in 2025, followed by the 35–45 age group at 26 per cent. Buyers aged 46–60 years accounted for 23 per cent, while those aged 61 years and above represented 21 per cent.

Geographically, demand growth was strongest in smaller towns. Tier 3 cities increased their share of total purchases from 63.5 per cent in 2024 to 70 per cent in 2025. Tier 2 cities saw a marginal rise from 13.8 per cent to 14.3 per cent, while Tier 1 cities’ share declined from 22.7 per cent to 15.7 per cent. Among individual cities, Delhi and Bengaluru recorded the highest number of health insurance bookings, followed by Hyderabad, Pune, and Mumbai.

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