The government’s decision to exempt Goods and Services Tax (GST) on health insurance from 18 per cent to nil has led to a sharp rise in health cover sizes, with the average sum insured increasing by 31 per cent, according to a report by Policybazaar.
The report said that after the removal of GST, the average health insurance cover increased from Rs 14.5 lakh in the pre-GST period to Rs 19 lakh in the post-GST period. This indicates that people are now choosing higher levels of health coverage, as insurance has become more affordable.
The data indicate that policies with higher sum insureds experienced strong demand after GST was removed. Health covers in the Rs 10-25 lakh range increased by 47 per cent, while policies of Rs 25 lakh and above jumped by a sharp 85 per cent.
In contrast, policies with a sum insured below Rs 10 lakh declined by 24 per cent after the GST exemption, indicating a clear shift toward more extensive coverage. The trend became even clearer when comparing data from 2024 and 2025. Policies with sum insured below Rs 10 lakh fell by 29 per cent year-on-year. At the same time, policies of Rs 10-25 lakh increased by 55.6 per cent, while policies of Rs 25 lakh and above increased by 49.3 per cent.
The report also shared that the most common claim reasons included heart-related conditions, cancer and cataract. Seasonal and infectious illnesses were also high, along with day-care procedures and accidental injuries. The report also noted a substantial rise in the popularity of multi-year health insurance plans. Buyers are increasingly opting for more extended protection periods to ensure stability and savings.
In 2025, buyers aged 18-35 accounted for 30 per cent of purchases. The 35-45 age group accounted for 26 per cent, followed by those aged 46-60 years at 23 per cent. Buyers aged 61 years and above formed 21 per cent of total purchases.
City-level data indicated growing demand in smaller towns. Tier 3 cities increased their share from 63.5 per cent in 2024 to 70 per cent in 2025. Tier 2 cities saw a slight rise from 13.8 per cent to 14.3 per cent, while Tier 1 cities declined from 22.7 per cent to 15.7 per cent. Among cities, Delhi and Bengaluru recorded the highest health insurance bookings, followed by Hyderabad, Pune, and Mumbai.
