The government’s decision to exempt Goods and Services Tax (GST) on individual health insurance premiums has led to a notable increase in coverage, as consumers opt for larger health policies following the tax cut, according to a Policybazaar report. After GST was reduced from 18 % to nil, the average sum insured jumped by around 31 %, rising from approximately ₹14.5 lakh in the pre-GST period to about ₹19 lakh in the post-exemption phase.

Key Highlights

• GST exemption on health insurance premiums drives 31% jump in average sum insured, boosting coverage.
• Consumers increasingly opt for higher-value and multi-year health plans amid rising healthcare awareness.

The data show a clear shift in buyer preference toward higher-value plans. Policies with a sum insured between ₹10 lakh and ₹25 lakh saw demand increase significantly, and coverage above ₹25 lakh surged sharply after the GST benefit took effect. In contrast, plans with coverage below ₹10 lakh declined, reflecting a growing inclination among individuals to secure more comprehensive health protection.

Comparisons between 2024 and 2025 highlight this trend more starkly: while lower-coverage policies fell, mid- and high-coverage segments posted strong year-on-year growth. The report also noted that common reasons for claims included heart-related conditions, cancer, and cataract treatments, alongside seasonal and infectious illnesses, day-care procedures, and accidental injuries.

Another important trend emerging from the data is the rising popularity of multi-year health insurance plans, as buyers seek extended protection and potential premium savings over time. Demographically, younger policyholders aged 18-35 formed a substantial share of purchases, followed by buyers in the 35-45, 46-60, and 61+ age groups.

Also Read: GST on Health and Life Insurance Cut to 0%: Here's What It Means to You

City-level analysis shows growing demand beyond major urban centres, with Tier 3 cities increasing their share of policy purchases, and Tier 2 cities also registering modest growth. Meanwhile, some Tier 1 markets saw a relative decline in share, even as major cities such as Delhi, Bengaluru, Hyderabad, Pune, and Mumbai remained top contributors to health insurance bookings.

Overall, the GST exemption appears to have encouraged a shift toward higher health insurance coverage, making comprehensive health plans more accessible and appealing to a broader range of consumers.