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Budget 2025 Expectations: With medical costs soaring and insurance penetration remaining low, the sector is calling for bold measures
Budget 2025 Expectations: One of the primary concerns is the high GST rates on insurance premiums
Budget 2025 Expectations: As Union Budget 2025 approaches, the insurance sector has voiced a range of expectations aimed at improving health insurance penetration and addressing affordability challenges. Key demands include reducing GST on health insurance premiums, revising tax exemptions under Section 80D, and establishing a dedicated health regulator to manage rising medical inflation.
Insurance industry leaders like Tapan Singhel, MD & CEO of Bajaj Allianz General Insurance, and Srinivasan Gopalan, MD & CEO of Galaxy Health Insurance Company, emphasise that these reforms are crucial for protecting the “missing middle” segment, ensuring financial resilience, and promoting equitable healthcare access.
With medical costs soaring and insurance penetration remaining low, the sector is calling for bold measures to make health coverage more accessible and sustainable.
What’s the Insurance Sector Expecting From the Union Budget 2025?
Singhel said that one of the primary concerns is the high GST rates on insurance premiums, which have discouraged many individuals from securing necessary insurance coverage.
This issue particularly affects the “missing middle” population segment, which lacks adequate protection. Insurance should be viewed as an essential service rather than a luxury, Singhel said.
GST Cut On Health Insurance Premium
“Reducing the GST on health insurance premiums would make them more accessible. If a reduction isn’t feasible, alternative measures, such as allowing a complete tax deduction for health insurance premiums under Section 80D, could encourage broader adoption without negatively affecting government revenues,” Singhel urged.
Reforms Under Section 80D of Income Tax Act
Srinivasan Gopalan, MD & CEO Galaxy Health Insurance Company, too highlighted that a large section of the population is not insured at all or not adequately insured for health insurance.
“Section 80D limits need to be increased to Rs 50,000 for all and Rs 1,00,000 for senior citizens. Section 80D should also be allowed in the new taxation regime to increase health insurance penetration Rule 6E which currently allows unexpired premium reserves to be calculated at 50% to be changed to the 1/365 method as permitted by IRDAI in preparation of Financial Statements of insurance companies,” Gopalan added.
More Tax Exemptions
Singhel added that a broader initiative could involve providing a 100% tax exemption on premiums for all protection-oriented products, including health insurance, home insurance, personal accident coverage, and term life insurance.
“Such measures would incentivise individuals to seek personal protection and enhance insurance penetration, establishing it as a vital tool for financial security. Ultimately, these changes would bolster financial resilience among citizens while ensuring continued GST revenue for the government,” Singhel said.
Health Regulator
Another significant expectation is the creation of a health regulator, Singhel pointed out. Rising medical inflation, fueled by escalating hospitalisation costs, presents a challenge for insurers, who can only adjust their product prices every three years.
“Medical inflation can increase substantially during this period—sometimes by nearly 15%. To combat this, it’s crucial to establish pricing consistency at the hospital level,” Singhel underlined.
A regulatory body to oversee hospitals would ensure parity in pricing and service standards, facilitating fair and transparent access to medical treatment for all citizens. There have been ongoing discussions among the ministry, the National Health Authority (NHA), the Insurance Regulatory and Development Authority of India, and industry stakeholders.
“We are hopeful that we will see progress on this front soon. Ultimately, there is a strong need for a regulator for hospitals to ensure equitable healthcare access.”
