GST exemption increases health insurance coverage, average sum insured increases by 31%: report

The government’s decision to exempt Goods and Services Tax (GST) on health insurance from 18 percent to zero has led to a sharp increase in the size of health insurance, with the average sum insured increasing by 31 percent, according to a report by Policybazaar.

According to the report, after the abolition of GST, the average health insurance has increased from ₹14.5 lakh in the pre-GST period to ₹19 lakh in the post-GST period. This indicates that people are now opting for higher levels of healthcare coverage as insurance has become more affordable.

The data shows that after the abolition of GST, there was a strong demand for policies with higher sum assured. Healthcare covers in the range of ₹10-25 lakh have increased by 47 per cent, while policies of ₹25 lakh and above have increased by as much as 85 per cent. In contrast, policies with a sum assured of less than ₹10 lakh fell by 24 per cent after the GST exemption, indicating a clear shift towards more comprehensive coverage.

The trend became even more apparent when comparing data from 2024 and 2025. Policies with a sum assured of less than ₹10 lakh fell by 29 percent year-on-year. At the same time, the policy of ₹10-25 lakh rose by 55.6 per cent, while the policy of ₹25 lakh and above rose by 49.3 per cent.

The report also shared that the most common claim reasons were heart-related conditions, cancer and cataracts. Seasonal and infectious diseases were also high, along with day cases and accidental injuries. The report also found a significant increase in the popularity of multi-year health insurance. Buyers are increasingly opting for longer protection periods to ensure stability and savings.

By 2025, buyers between the ages of 18 and 35 would account for 30 percent of purchases. The 35 to 45 age group accounted for 26 percent, followed by the 46 to 60 age group with 23 percent. Buyers aged 61 and over made up 21 percent of total purchases.

City-level data indicated growing demand in smaller cities. Tier 3 cities increased their share from 63.5 percent in 2024 to 70 percent in 2025. Tier 2 cities saw a slight increase from 13.8 percent to 14.3 percent, while Tier 1 cities fell from 22.7 percent to 15.7 percent. Among the cities, Delhi and Bengaluru recorded the highest health insurance bookings, followed by Hyderabad, Pune and Mumbai.

Published on December 26, 2025