The way we buy and use life insurance is changing rapidly. From GST exemptions and updates in the tax regime to the upcoming launch of Bima Sugam, many developments are reshaping the industry.
In an interview with Moneycontrol, Mahesh Balasubramanian, Managing Director of Kotak Life Insurance, called the GST exemption on individual life insurance a historic move.
He explained that it has made insurance more affordable, helped companies reach more people,
and expanded coverage across the country. He praised the Finance Minister and GST Council for this decision.
In the short term, insurance companies will need to reconsider some financial aspects like input tax credit, but overall, this decision strongly supports the Life Insurance Council’s message “Life Insurance First.” It will make insurance more accessible to people.
Balasubramanian added that more clarity is expected, but he believes that from September 22, even renewal premiums will be GST-exempt. As for actuarial calculations and expenses, companies are reworking them. It’s too early to confirm details, but once rules are clear, insurers will make the necessary changes.
Tax Benefits and Customer Behavior
Balasubramanian clarified a common misconception—that people buy insurance only to save tax.
While March remains a busy month, customers today do not purchase policies solely for exemptions.
However, annual tax exemptions of ₹5 lakh for traditional plans and ₹2.5 lakh for ULIPs are still important factors.
On changing customer preferences, he explained that choices shift depending on interest rates and market cycles:
When long-term rates were high, traditional products performed better.
During bullish markets, ULIPs grew in popularity.
Overall, the shift has been modest (around 5–6%). Strong insurance companies maintain a balanced mix of term, ULIP, and traditional plans, and this strategy is also followed by Kotak Life.
Impact of Interest Rates
Higher long-term interest rates benefit insurance companies, especially when the yield curve is steep. In such times, guaranteed products become more attractive.
Despite rate fluctuations, insurers like Kotak Life continue to offer products with guaranteed returns, which remain an essential part of financial planning.
Bima Sugam – The UPI of Insurance
Talking about Bima Sugam, Balasubramanian called it a historic initiative, similar to UPI in the payments industry.
This industry-driven digital platform will bring insurers, intermediaries, Aadhaar, KYC, and data repositories into a single ecosystem.
It will make buying and managing insurance simpler and more user-friendly. Over the next 3–4 years, Bima Sugam has the potential to transform the way insurance is sold in India.
