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Zero GST Impact: Pvt sector general and health insurers start reducing their commission to brokers and agents by 18% from Oct 1

by AIP Online Bureau | Sep 30, 2025 | Banking & Bancassurance, Eco/Invest/Demography, Indian News, Intermediaries, Life, Non-Life | 0 comments

ICICI Lombard General Insurance, Tata AIG General insurer, Aditya Birla Health Insurer and Care Health Insurer have already announced their decisions to reduce commission

All the general insurers and stand health insurers had a virtual meeting, organised by the General Insurance Council,  on Monday to discuss whether all the players should cut down down their commission to the agents and brokers. However, no consensus could be arrived at on the issue

Mumbai: After passing on the full benefits of removal of 18 per cent GST(goods and services tax) to their retail health insurance customers since Sept 22, many general insurers and health insurers particularly from the private sector have decided to reduce their  commission to brokers, agents, bancassurance partners  by as much from Oct 1 to compensate their losses in the absence of input tax credit(ITC) on such premium.

Some of the insurers who have already announced their decision to reduce their commission for their are distribution partners,ICICI Lombard General Insurance, the second largest non-life insurer in the country, Tata AIG General insurer, Aditya Birla Health Insurer and Care Health Insurer.

Other insurers except the PSU general insurers are expected to follow suit soon.

In fact all the general insurers and stand health insurers had a virtual meeting, organised by the General Insurance Council,  on Monday to discuss the issue whether all the players should cut down their commission to their distribution partners.

However, no consensus could be arrived at on the issue. While some insurers opine that insurers are free to adjust their commission under the permissible expenses of management (EoM), others had suggested a consensus the in the industry on the issue.

Meanwhile, ICICI Lombard General Insurance in a communication to its distribution partners said,“Insurers are now required to pass on the entire GST benefit to customers, however, they can no longer claim ITC on expenses including commissions, administrative and operational expenses impacting margins. 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 by reducing it by 18 per cent,’’ said ICICI Lombard General  Insurance in a communication to distribution partners. 

Tata AIG General Insurance said , “with the new guidelines in place, insurance companies are no longer eligible to claim ITC. This will lead to an increase in costs impacting P&L and EOM of insurance companies. Starting 1st October 2025, commission rates will be revised to align with the GST changes. We will be rolling out the updated commission grids shortly”,  

Care Health Insurance said,“ for Health and General Insurance companies there are many components like rent, technology and contractual manpower for which GST has to be applied. We will absorb the impact of GST on all these expenses, however we are constraint the impact of GST on commission will be passed on to the distribution partners,’’

Aditya Birla Health Insurance (ABHI) also issued a similar notice stating that starting October 1, 2025, the GST cost will have to be borne by distributors.

The stand alone health insurer said that with GST exempt on individual health and life insurance policies, “the input tax credit (ITC) will no longer be available on Commission, Rewards & Equivalent and other corporate expenses and going forward, GST will now be a cost for health insurers.

“This will have a major impact on the finances of the Health Insurance companies, wherein the GST will now be a cost, and this would impact the profitability and EOM of the insurers”, said ABHI .

ABHI proposed that the “commission, rewards and equivalents payable on the business done by the distribution partners shall be inclusive of GST w.e.f October 1, 2025.”

This means that effective October 1, 2025, the GST on commissions, rewards and equivalents on all fresh and renewal business shall be borne by the distributors.

For instance, if the commission received for a particular sale is Rs. 100, the same shall reduce by 18% and Rs. 84.74 shall be payable effective Oct 1, 2025, explained ABHI in its circular.

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