GST exemption has increased net return across savings- oriented products: Sumit Rai of Edelweiss Life Insurance

Sumit Rai, MD & CEO Edelweiss Life Insurance

• GST exemption boosts returns for life insurance policyholders
• Protection segment to grow faster due to increased awareness
• Income-oriented and long-term products gaining popularity

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India’s life insurance sector is undergoing shifts from changes in taxation and rising awareness around protection to evolving customer preferences for income-oriented products. Insurers are also navigating regulatory changes such as higher foreign direct investment limits and the growing role of multi-channel distribution.

In this conversation with Moneycontrol, Sumit Rai, MD & CEO, Edelweiss Life Insurance, talks about the company’s growth momentum, the impact of GST changes on policy returns, why protection is likely to grow faster in the coming years, and the key trends shaping the future of India’s life insurance industry

What was your growth in December, and how is your distribution structured today?

We saw a strong momentum in Q3. Our individual APE grew 38 percent, faster than the industry by a wide margin. For FY26, we are targeting approximately Rs 650 crore in new business premium and a total premium income of about Rs 2,400 crore. Over the next 2-3 years, we expect double-digit growth in the range of 12-16 percent, with a clear path to breakeven by FY27. From a capital standpoint, we remain well capitalised, with paid-up capital of roughly Rs 2,800 crore.

On distribution, our business today is evenly split between proprietary and partnership channels, reflecting our positioning as a multi-channel insurer. Our focus has been on building a diversified and stable distribution model, rather than driving growth through any single channel. The same balance is visible in our product mix.

India remains a structurally large opportunity. Our strategy is to grow across channels without skew, with an emphasis on customer-appropriate solutions, strong persistency, and disciplined cost management.

Apart from the GST change, what other factors are driving growth in life insurance? Has it impacted higher IRR post GST changes?

GST has definitely brought a lot of attention to life insurance. It gives distributors a clear and tangible conversation point with customers, because there is a visible 18 percent benefit. Over the long-term, this improves the IRR for customers and on an average, the uplift can be in the range of 25 to 50 basis points, though it will vary from product to product.

Earlier also, customers were effectively getting the same return; the difference now is that the premium outgo has come down. For example: earlier, a customer was paying Rs 1.18 lakh (including 18 percent GST) to receive Rs 15 lakh at maturity, now with GST reduced to zero, the customer pays only Rs 1 lakh and still receives Rs 15 lakh at the maturity- so effectively their IRR has increased. The impact, however, depends on the product structure.

In products that start paying income from first or second year, the IRR impact may not be very significant. But for customers who are willing to stay invested for the long-term, the improvement in IRR is clearly visible. Overall, the GST exemption has increased the net return for policy holders across savings- oriented life insurance products. Even on the protection side there could be a meaningful upside though that will play out over time.

Protection forms only about 1 percent of your overall business today. Why is that, and how do you see protection evolving going forward?

Yes, if we look at protection purely through the lens of term insurance, it appears to account for about 1 percent of the overall portfolio by premium. But that view is incomplete. Protection is also embedded within savings and long-term insurance products, where a portion of the premium goes towards life cover. When looked at this way, the number of lives covered through protection is far more meaningful - closer to 20 percent, while the premium contribution may look modest, the coverage impact is significantly higher.

But in the coming years, protection will grow faster than the industry because the mindset of the Indian customer is changing. Earlier, there was a view that in protection you get nothing back, so the focus was more on savings. That mindset is changing now. The value of protection products, and the benefit of buying life insurance at a younger age, is much better understood at an industry level.

Events like COVID has also had a strong impact. Protection has grown faster across the industry since then, and this momentum is continuing. This is a long-term story that will keep playing out as customers become more aware. If customers know even a little more than what they knew 10 years ago that itself makes a difference. When I started almost 20 years ago, we did not even have protection products in the way we do today. That change is very clear now.

With FDI moving from 49 percent to 74 percent and now 100 percent, why haven’t we seen many new players - and what does this mean for policyholders?

There are two or three parts to this. First, on the commercial side, even at 74 percent FDI, you still need to find a partner who is willing to invest meaningfully. The Indian partner at 26 percent also needs to have patience and ability to stay invested for 10-12-14 years, because this is a long-gestation business and a highly capital- intensive business.

Secondly, in some cases, 100 percent ownership can help in building the kind of distribution they want or sticking to a particular distribution model. That flexibility can make a difference. Also, this is a business where the more you grow, the more capital you need. There are also issues around management, control and governance, which have been addressed under the 100 percent structure recently.

If companies are able to come in with 100 percent ownership and complete on equal footing with existing players – whether Indian- owned or otherwise- then it does create a more competitive environment. Which means better offering and diverse choice of customers.

From a broader perspective, Asia is one of the fastest- growing insurance markets globally. While insurance in developed markets grows at ~2-4 percent, Asia grows at ~ 7-8 percent, and India grows at around 15 percent. That itself makes India an attractive long-term market.

Did open architecture for banks really make a difference to the insurance industry?

Yes, absolutely. When we started in 2011, we would never have been able to do any bank partnership because most banks were already locked into excusive arrangements. Open architecture changed that.

It gave more insurance companies the opportunity to distribute through banks and reach more customers. That, in turn, created competition. When there are three insurers working with the same bank, each one has to offer better products and better services. Through this process, customers end up with better choices.

This has been one of the best developments in creating greater equality in the industry and in driving innovation and service standards for customers. Many products features and guaranteed offerings would not have been demanded earlier.

What competition does is simple. If I am the only insurer working with a bank, I can say, this is what I can offer, and there is no pressure to change. Even if a product is possible, I can say no. But once competition comes in, companies have to respond. That responsiveness has made the industry more mature and more adaptable to customer needs in distribution. Overall, it has been very beneficial.

What are the trends in the life insurance industry to watch?

The first clear trend I see is that the protection segment will grow faster, driven by multiple factors. Awareness around protection has increased, recent, recent events have reinforced the importance of cover, and changes such as GST- related benefits have improved affordability.

At the same time, income-oriented products have always been popular in the life insurance industry. In recent years, however, we are seeing a stronger preference for early repatriation of money. Customers are increasingly looking for steady income products, with payouts starting from the first or second year. As discretionary spending rises following the GST reduction, these income -oriented products may become even more popular.

Second growth will be driven not just by awareness, but by affordability. As disposable income rise, we are seeing higher ticket sizes and wider participation. Customers are choosing higher sums assured and moving towards more adequate levels of coverage, not just entering the category.

Third, there is a clear shift towards long-term products, for many years, customer preference was skewed towards short-term products and quicker returns. While that mindset has not disappeared, a declining interest rate environment is pushing customers to think long-term. Insurance allows customers to lock in today’s interest rates for 20-40 years, which helps manage reinvestment risk and inflation over time.