Following changes in the GST rate and the withdrawal of the ITC, analysts predict ongoing combined ratios for general insurers and 50–150 bps VNB margin compression for life insurers.
Analysts predict that the second quarter (July-September) of 2025-26 (Q2FY26) would see a decline in the profitability of life and general insurance firms due to the adjustments made to the goods and services tax (GST) rates last month and the elimination of the input tax credit (ITC).
Insurance firms are expected to share the pain of the withdrawal of the ITC with distributors, since they have already passed on the full benefit of the GST reduction to consumers.
A number of issues, including as changes in the product mix and the loss of GST ITC, are expected to have an influence on life insurance businesses’ profitability, as shown by the value of new business (VNB) margin.