A recent report by Policybazaar has revealed a remarkable 38% surge in demand for health insurance policies following the Indian government’s decision to eliminate Goods and Services Tax (GST) on health and life insurance premiums. The move, which took effect on 22 September 2025, has prompted a wave of new buyers seeking enhanced financial protection against rising healthcare expenses.
According to the report, consumers are increasingly prioritising comprehensive coverage over minimal protection, signalling a major behavioural shift in how Indians view health insurance.
Growing Demand for High-Value Coverage
The report titled “Zero GST Sparks 38% Rise in High-Value Health Plans; Demand for Add-ons Also Catches Up” found that the average health insurance cover has increased from ₹13 lakh to ₹18 lakh, illustrating heightened awareness of the need for substantial financial protection.
Almost 45% of policyholders who purchased plans after the GST exemption are now opting for coverage in the ₹15–25 lakh range. Meanwhile, 24% of buyers are choosing plans worth ₹10–15 lakh, and only 18% continue to prefer lower coverage below ₹10 lakh.
The GST exemption, introduced after a rate rationalisation meeting by the Central Government, aims to make health and life insurance more accessible and affordable, as consumers no longer pay additional taxes on premiums.
Tier-2 Cities and Millennials Fuel the Growth
The study highlighted that millennials and older citizens are driving the shift towards higher-value policies. In smaller Tier-2 cities, the preference for low coverage has dropped sharply from 24.1% to 16.8%, while the share of customers opting for ₹15–25 lakh coverage has climbed from 44.1% to 48.6%.
This trend underscores a broadening awareness beyond metropolitan regions, as consumers in smaller towns become increasingly proactive about securing robust healthcare protection.
Rising Popularity of Add-Ons and Senior Citizen Coverage
Another prominent pattern is the surge in demand for add-on covers such as Day-1 Pre-Existing Disease (PED) and critical illness protection. These add-ons are becoming particularly popular among policyholders seeking enhanced financial resilience against sudden or chronic health crises.
The report also observed an 11.54% increase in high-value plans among senior citizens, particularly those aged 61 to 75 and above. This marks a significant shift in mindset among elderly customers, who are now opting for larger coverage amounts to shield themselves from escalating medical expenses.
Many individuals in smaller towns are also choosing to purchase comprehensive health insurance at an earlier age, aiming to secure better coverage before developing age-related or pre-existing conditions.
Shift in Consumer Behaviour
Overall, the findings suggest a fundamental change in consumer attitude towards health insurance in India. The zero-GST policy has acted as a powerful catalyst, encouraging people across age groups and income levels to invest in more inclusive, high-value health insurance plans.
As Policybazaar’s report concludes, the decision to remove GST has not only boosted affordability but also fostered a culture of financial preparedness, ensuring that more citizens are protected from the burden of unforeseen medical costs.