Slow Growth, GST Pinch: PMO To Step In Amid Persisting Challenges In Health Insurance Sector

The Prime Minister’s Office (PMO) is preparing to step into the growing crisis in India’s health insurance sector, as coverage gains lose steam and affordability concerns are increasingly mounting.

A high-level meeting is scheduled for May 20, with Principal Secretary to the Prime Minister, Shaktikanta Das, expected to chair the session, according to a Moneycontrol report citing government sources. The Department of Financial Services (DFS) will make a formal presentation, focusing on the pain points currently plaguing the health insurance ecosystem.

Is this a timely intervention?

The non-life insurance market of India has expanded in the recent years but ‘health insurance’, a key driver of this growth, is hitting speed bumps.

A major concern in the health segment has been the steady rise in premiums while coverage has failed to keep pace. The numbers are telling. As per Insurance Regulatory and Development Authority of India (Irdai) data cited in the report, only 57.29 crore people were covered under health insurance as of financial year 2024 (FY24), up just 4.2 per cent from the previous year. This is slower than the 5.7 per cent growth seen in FY23 and a far cry from the brisk 18.7 per cent annual growth rate recorded between FY15 and FY18, when the total insured population rose from 28.8 crore to 48.1 crore.

What is dragging down the momentum?

Multiple factors appear to be restricting the growth of the insurance sector. One of the key culprits, insurers (and political leaders) argue, is the 18 per cent GST levied on health insurance premiums.

The sector has been lobbying for a rate cut for years, with backing even from leaders like Union Minister Nitin Gadkari. But consensus in the GST Council still remains elusive.

"A rationalised GST rate on health insurance will directly reduce the cost for policyholders, encouraging greater enrolment and renewals, thereby increasing insurance penetration," a source told Moneycontrol.

Other than taxes, the upcoming meeting is also expected to examine the broader ecosystem, ranging from the complexity of insurance products to consumer grievances and claim settlement delays faced by a majority of policyholders.