The government’s recent decision to abolish Goods and Services Tax (GST) on health insurance premiums has led to a remarkable rise in demand for health insurance coverage across India. According to a new report by Policybazaar, the overall uptake of higher-value health insurance plans has surged by an impressive 38 per cent since the implementation of the zero-GST policy. This development underscores a growing public awareness of the need for comprehensive financial protection against escalating medical expenses and unforeseen health emergencies.
Increased Preference for High-Value Health Plans
The report highlighted that individuals are now leaning toward policies offering broader protection. The average health insurance cover has jumped from Rs 13 lakh to Rs 18 lakh, reflecting a significant behavioural shift among consumers. Nearly half of health insurance buyers (45 per cent) after the GST exemption are choosing policies in the Rs 15–25 lakh range. In contrast, only 18 per cent of customers continue to prefer coverage below Rs 10 lakh, while 24 per cent are opting for plans in the Rs 10–15 lakh bracket. This trend illustrates a collective move toward comprehensive health security rather than minimal coverage.
Government Initiative to Make Health Insurance Affordable
The Central government introduced the GST exemption after its rate rationalisation meeting, with the policy taking effect on September 22, 2025. The exemption covers both health and life insurance premiums, effectively removing the additional tax burden from consumers. This step was strategically designed to enhance the affordability of insurance products, ensuring more people could access quality healthcare without financial strain. The move aligns with India’s broader goal of expanding health insurance penetration and strengthening financial preparedness for medical contingencies.
Tier-2 Cities Witness Strong Growth in Coverage
The Policybazaar report also revealed that the shift toward higher coverage is not limited to metropolitan areas. Tier-2 cities are now emerging as strong contributors to the surge. The preference for low-value coverage in these cities has dropped from 24.1 per cent to 16.8 per cent. Meanwhile, the share of customers opting for Rs 15–25 lakh plans has increased by 10.2 per cent, rising from 44.1 per cent to 48.6 per cent. This transition reflects growing health consciousness among residents of smaller cities, who are increasingly prioritising financial protection against medical uncertainties.
Millennials and Seniors Driving the Shift
Both younger and older generations are playing a pivotal role in this transformation. Millennials, known for their financial awareness and digital-first approach, are leading the demand for high-value policies. At the same time, senior citizens are demonstrating a growing inclination toward broader coverage. The report noted an 11.54 per cent increase in high-sum insured plans among customers aged 61 to 75 and those above 75 years. This change signifies a proactive attitude among the elderly, who are now recognising the necessity of comprehensive coverage to mitigate the impact of rising healthcare costs.
Popularity of Add-On Covers Strengthens
Another notable finding from the report is the rising demand for policy add-ons. Riders such as Day-1 Pre-Existing Disease (PED) cover and critical illness protection are gaining traction among consumers. These add-ons enhance financial security by covering specific risks that traditional plans might exclude. The growing popularity of such options highlights a maturing insurance market where buyers are seeking customised and robust health coverage solutions to meet their diverse needs.
Zero-GST Policy as a Catalyst for Change
Overall, the zero-GST policy has acted as a strong catalyst, driving a fundamental change in how Indians perceive and purchase health insurance. The Policybazaar report emphasised that the removal of GST has not only made health insurance more accessible but has also fostered a culture of proactive financial planning. Consumers across age groups and geographical boundaries are increasingly recognising the value of adequate coverage, marking a significant step toward a more insured and health-secure nation.
Conclusion
The surge in health insurance demand following the GST exemption reflects a pivotal moment for India’s healthcare and financial sectors. As awareness spreads and affordability improves, the trend of opting for comprehensive health insurance plans is expected to continue. With growing participation from millennials, seniors, and residents of smaller cities, the zero-GST policy is paving the way for a more resilient, health-conscious society prepared to face medical uncertainties with confidence.
Related topics
