GST exemption boosts health insurance coverage, average sum insured jumps 31%: Report

The government’s move to exempt health insurance from the 18% Goods and Services Tax (GST) has triggered a significant surge in coverage amounts, with Policybazaar’s latest report revealing a 31% expansion in average protection levels.

According to the findings, average coverage amounts rose from ₹14.5 lakh before the tax removal to ₹19 lakh post-implementation. The elimination of GST appears to have made comprehensive coverage more accessible, prompting individuals to select more substantial health protection plans.

Demand patterns shifted markedly toward higher coverage brackets following the policy change. Mid-range plans (₹10-25 lakh coverage) saw 47% growth, while premium policies (₹25 lakh+) experienced extraordinary 85% uptake. Conversely, entry-level plans (below ₹10 lakh) registered a 24% decline, highlighting consumers’ preference for more robust coverage.

Comparative year-over-year data reinforces this transformation. Basic coverage purchases fell 29%, while mid-tier plans surged 55.6% and premium offerings grew 49.3% between 2024-2025.

The analysis also identified heart conditions, cancer treatment, and cataract procedures as leading claim causes, alongside seasonal illnesses, daycare treatments, and accident-related injuries. Longer-term health policies gained substantial traction as consumers prioritized extended protection periods and cost efficiency.

Age distribution data revealed balanced demand across generations: 18-35 year olds comprised 30% of purchasers, followed by 35-45 (26%), 46-60 (23%), and seniors over 61 (21%).

Geographic trends showed insurance adoption spreading beyond major urban centers. Tier 3 cities accounted for 70% of 2025 purchases (up from 63.5%), while Tier 2 cities grew marginally to 14.3%. Tier 1 cities’ share declined to 15.7%. Among metropolitan areas, Delhi and Bengaluru led policy purchases, followed by Hyderabad, Pune, and Mumbai.

Published on December 26, 2025