Insurance Sector Set for Growth Despite Margin Challenges in December Quarter, ETCFO
Mumbai: The insurance sector is likely to report a steady performance for the third quarter of this financial year, aided by strong premium growth across life, general and health insurers after goods and services tax (GST) relaxations, even as margins remain under pressure, according to analysts.
Most large life insurers, including state-owned Life Insurance Corporation (LIC) and private insurers such as HDFC Life, Axis Max and SBI Life, are expected to report double-digit growth in annualised premium equivalent (APE) for October-December 2025, aided by GST-related tailwinds and an easier base following the implementation of revised surrender value norms.
Lower effective prices, particularly for term protection products, have supported demand, helping private insurers sustain momentum. LIC is expected to benefit from a low base and see growth of more than 40% in APE, especially due to an increase in group business.
Profitability, however, remains a challenge. Value of new business (VNB) margins are expected to stay under pressure due to the loss of GST input tax credits, alongside higher employee-related costs following labour code implementation. Insurers are attempting to cushion the impact through a gradual shift toward higher-margin non-participating and protection products, as well as tighter distributor negotiations. These measures are expected to partially offset margin compression during the quarter.General insurers are likely to post double-digit growth in gross written premiums, mainly driven by continued strength in motor and health insurance. The reduction in GST rates has supported new vehicle sales, lifting demand in the motor segment, while retail health insurance has benefited from improved affordability following GST exemptions.
From September 22 last year, the government did away with the 18% GST levied earlier on individual term insurance and health insurance premiums.
Despite strong revenue growth, combined ratios for general insurers are expected to remain elevated, largely due to higher commission payouts.
