Private Insurers Slash Agent Commissions Amid GST Changes on Health Insurance from October 2025

Private insurers cut agent commissions after GST changes on health cover from October 1, 2025, the government is making two big changes:

• No GST on health insurance premiums: Earlier, people had to pay 18% Goods and Services Tax (GST) on individual health insurance premiums. Now, this tax will be removed, so customers won’t have to pay GST on these policies.
• Changes in input tax credit (ITC) rules: Insurance companies used to get some benefits known as input tax credit on the GST they paid while running their business. But with the new rules, they won’t get the same benefits anymore.

Because of these changes, some non-life insurance companies like ICICI Lombard, Care Health Insurance, and Aditya Birla Health Insurance have decided to cut down the commission they give to agents or partners who sell their health insurance policies. This means the people who help sell these policies will now earn less commission than before.

Under the new GST rules, health insurance companies will no longer be allowed to claim input tax credit (ITC) on expenses such as commissions, rewards, and other corporate costs. As a result, the GST paid on these items will now become an added expense for insurers.

Insurers are required to pass on the GST benefits to customers by keeping premiums affordable. To manage the financial impact of losing ITC benefits, some non-life insurance companies have started reducing commission payouts to agents and distributors by around 18%.

In an official communication to its channel partners, ICICI Lombard General Insurance explained that “To ensure a fair balance between the interests of customers, distribution partners, and ICICI Lombard, we will absorb the impact of ITC on non-commission-related expenses. However, the commission structure for GST-exempt policies will be revised.”

Care Health has also communicated to its partners that, starting October 1, 2025, commission rates will be inclusive of GST. The health insurer said. “For all health/general insurance companies, there are many components like rent, technology, and contractual manpower, etc., for which they will have to bear GST. We will absorb the impact of GST on these. However, we are constrained; the impact of GST on commission will be passed on to the distribution partners. This is being done to maintain a right equilibrium in customers’ interests.”

Aditya Birla Health Insurance has told its distribution partners: “Effectively, GST on commission, rewards & the equivalent on all fresh and renewal business shall be borne by the distributors effective October 1, 2025.”

The insurance companies had not replied to the emails by the time this report was published.

In the financial year 2024–25 (FY25), the total health insurance premium collected was Rs. 1.18 trillion. Out of this, retail health insurance made up about 40%, or Rs. 47,291.7 crore, while group health insurance added up to Rs. 60,818.72 crore. Standalone health insurance companies collected about 57% of the retail premiums, which came to Rs. 27,254 crore.

From April to August 2024, the premium collected from retail health insurance was Rs. 19,708.55 crore, and the total health insurance premium for that period was Rs. 53,459.72 crore.