Quick Summary
In the aftermath of the government's decision to completely remove 18% GST on retail life, health and accident insurance policies, several private insurers have reduced agent commissions by 18%, sparking backlash from distributors who say the move undercuts their livelihood and threatens the insuran
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FAQ :
Insurers have reduced commissions by 18% after the government removed GST on retail insurance policies. This is largely to offset the loss of Input Tax Credit (ITC), which insurers could previously claim on business expenses when GST was applicable.
With the GST exemption on individual policies, insurers can no longer claim ITC. This is estimated to result in a significant financial loss for the industry, potentially around Rs 15,000 crore annually across the life insurance sector.
The commission cuts mean agents and distributors receive significantly less pay, impacting their working capital and ability to sustain their businesses. Some distributors now have to pay GST from their reduced commissions, leading to an effective pay cut of nearly 18%.
Agent federations are concerned that the commission cuts are detrimental to insurance distribution, could cripple the sector's backbone, and may slow down insurance penetration, particularly in smaller towns and rural India, potentially jeopardising the 'Insurance for All by 2047' goal.
Insurers state that the move is intended to pass the full tax benefits of the GST exemption directly onto policyholders, making insurance more affordable.
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