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PMO to take stock of health insurance challenges amid slow growth and high GST burden

Submitted by admin on May 27th, 2025

Most of India’s non-life insurance market consists of health insurance, but it is now facing two main obstacles – premiums are going higher and new insurance sales are slowing down. The PMO will look at the problems in health insurance since growth is slowing and premiums are rising on May 20, according to sources in the government.

The meeting will likely be chaired by Shaktikanta Das, Principal Secretary-2 to Prime Minister Modi.

“Shaktikanta Das, Principal Secretary to the Prime Minister of India, Narendra Modi will chair the meeting, where DFS secretary M Nagaraju will make a presentation on issues in the health insurance sector on May 20,” one source aware of the developments said.

This meeting is being held as the overall insurance industry is seeing less growth in non-life coverage, mainly for health insurance.

Most of India’s non-life insurance market consists of health insurance, but it is now facing two main obstacles – premiums are going higher and new insurance sales are slowing down.

“This meeting may pave the way for regulatory or policy tweaks to revitalise India’s health insurance ecosystem,” the official said. Discussions are likely to focus on measures that could boost health insurance coverage, which remains below 60 crore individuals. Premium rationalisation at a time of an ongoing debate around GST impact, need for simplified products and grievance redressal may find mention in the meeting.

A major worry for the industry is that health insurance premiums are taxed at 18 percent by the Goods and Services Tax (GST). According to stakeholders, high rates make insurance less affordable and discourage many from buying health insurance. Despite Gadkari and industry bodies arguing strongly to the GST Council, agreement on the issue has not materialized.

“A rationalised GST rate on health insurance will directly reduce the cost for policyholders, encouraging greater enrolment and renewals, thereby increasing insurance penetration,” the person noted.

The meeting may discuss broader sector challenges such as the complexity of health insurance products, delays in claim settlements, and consumer dissatisfaction, contributing to the slowing growth of the sector, the person further added.

Slowing Coverage

The group may turn their attention to challenges throughout the sector, pointing out the difficulty of understanding health insurance, delays for consumers in receiving claim payments and lowered consumer satisfaction, the person stated.

Slowing Coverage

Health insurance cover has only reached a small number of people in India since the pandemic. According to IRDAI’s figures from February, health insurance covered 57.29 crore people in 2023-24, representing a 4.2 percent increase over last year.

The rise was not as big as the 5.7 percent increase in health insurance coverage seen in the previous fiscal year.

Before the pandemic, between FY15 and FY18, the pace of addition of people under health insurance coverage was higher, at 18.7 percent per year on an average, covering 20 crore individuals. The period saw the number of people with health insurance rise from 28.8 crore to 48.1 crore by FY18.