Whalesbook
Demand Rebounds Amid GST Exemption
Private life insurance companies witnessed a robust recovery in business volumes through October and November 2025. This resurgence followed the implementation of Goods and Services Tax (GST) exemption on insurance premiums, which stimulated pent-up demand.
According to a research note by PL Capital, private insurers collectively recorded a 21% year-on-year increase in volumes during the first two months of the fiscal third quarter. The brokerage anticipates this positive momentum to persist, further supported by strong retail protection sales and steady non-participating business.
Margin Squeeze Looms Post-GST
Despite the sales uplift, the exemption has introduced margin challenges. The loss of Input Tax Credit (ITC) following the GST implementation is expected to impact profitability. PL Capital estimates this will cause a 200-300 basis point drag on Value of New Business (VNB) margins for fiscal year 2026.
Insurers are anticipated to partially offset these margin pressures through stringent cost controls, adjustments in commission structures, and strategic product repricing. These measures will be critical in navigating the evolving profitability landscape.
Company-Specific Performance
Performance varied across key players. HDFC Life Insurance Company reported an 11% year-to-date increase in Annualised Premium Equivalent (APE), with expectations for 12% growth in the December quarter. The company highlighted a potential 300 basis point impact on FY26 margins due to ITC loss.
ICICI Prudential Life Insurance Company experienced a 6% year-on-date APE decline, primarily due to slower Unit Linked Insurance Plan (ULIP) sales. Profitability may find support from higher sum assured and favorable yield curve movements.
Axis Max Life Insurance outperformed peers with an 18% year-to-date APE growth, driven by strong retail protection demand and a recovery in credit life disbursements. Newer products in non-participating and annuity segments are also showing early traction.
SBI Life Insurance recorded a volume recovery, showing 14% year-to-date growth. However, Q3 growth is projected to moderate to around 5% year-on-year against a high base. Margins are expected to remain broadly stable with minimal GST impact.
Investor Outlook
Investor focus will likely remain on the growth guidance for the final quarter of FY26 and FY27. Management commentary regarding strategies for margin recovery and the pace at which insurers absorb the GST exemption's impact will be closely watched. While near-term margins may be subdued, growth in protection products and repricing could offer partial offsets.