MC EXCLUSIVE Renewal premiums will also be exempt from GST from September 22: Kotak Life CEO Mahesh Balasubramanian

Mahesh Balasubramanian, managing director of Kotak Life Insurance

The way we buy and experience life insurance is evolving faster than ever. From goods and services tax (GST) exemptions and the shift to the new tax regime to the upcoming launch of Bima Sugam, what do these developments mean for policyholders and the industry?

In an interview to Moneycontrol, Mahesh Balasubramanian, managing director  of Kotak Life Insurance, discusses the impact of these policy changes and the key milestones from the insurer’s 25-year journey. Edited excerpts of the interview:

What will be the impact of the GST exemption on life insurance policies — traditional, non-traditional and term plans?

The GST exemption on individual life insurance is a landmark move. It makes insurance products more affordable, helping us reach more people and increase penetration across the country. We appreciate the finance minister and the GST council for this decision.

In the short run, insurers will need to rework some economics and examine areas like input tax credit but overall, this is a huge positive for the industry. It aligns with the Life Insurance Council’s message — Sabse Pehle Life Insurance — by making protection more accessible.

Around 60 percent of the total premium collected comes from renewals. Will the GST exemption apply to renewals? How will it impact actuarial calculations for products priced under the earlier GST framework?

We are awaiting clarifications but our understanding is that renewal premiums are also exempt from GST from September 22 onwards. As far as actuarial calculations are concerned, all insurers are reworking them. It’s still early to comment but we will adapt once more clarity comes in.

With the new tax regime the default choice, what impact do you see on insurance sales? Since insurance is often a push product linked to tax saving, how do you see this changing?

It’s a misconception that insurance is bought only for tax purposes. While March has traditionally been a busy month, customers today don’t buy policies just for tax exemptions. What matters more is the Rs 5 lakh annual exemption for traditional plans and Rs 2.5 lakh for ULIPs — these continue to attract customers. So, while demand still peaks in the Jan–March quarter, that’s more a legacy of industry practice than tax incentives.

Markets have been volatile. Are you noticing a shift in customer preference between term, ULIPs and traditional saving plans?

Shifts happen depending on interest rates and market cycles. For example, when long-term interest rates were high, traditional products did well. When markets were bullish, ULIPs gained but overall, the changes are marginal — 5-6 percent shifts either way. Good insurers maintain a balanced portfolio across traditional, ULIP and term products and that’s the approach we follow at Kotak Life.

How do falling interest rates affect policyholders and insurers?

The insurance industry benefits from higher long-term rates, especially when the yield curve is steep. Guaranteed products become more attractive in such environments. Even with fluctuating interest rates, insurers like us continue to offer guaranteed return products, which remain an important part of customers’ financial planning.

Kotak Life recently completed 25 years. What are your growth drivers as you look ahead to 2030?

Completing 25 years is a milestone but for a life insurer it’s just the beginning. Insurance is a long-term business as whole life policies often span decades.

Looking ahead, rising per capita income in India, IRDA’s “Insurance for All” mandate and the GST exemption will drive penetration. We’re focused on expanding across tier-1, tier-2, and rural markets, doubling our branch network in the next three–four years, and investing in digital, AI, and other new-age technologies to improve customer experience.

When was the last time term insurance premiums were hiked and do you see another hike this year?

Premiums rose after COVID due to reinsurer pressures but since then, pricing has stabilised. Individual companies may adjust rates based on their portfolio performance, but we don’t foresee any industry-wide hike in the near term.

The plan to introduce composite licence is in the works. Do you see more bundled life and health products coming?

Absolutely. Life insurers already do medical underwriting, so offering health insurance makes sense. With over two million agents, the distribution synergy is huge. How each company leverages this depends on its positioning but we see strong potential in offering comprehensive life and health solutions.

In health insurance, there’s constant product innovation. What about life insurance, what can customers expect in the next two–three years?

The industry has evolved significantly and at Kotak Life we have introduced several innovative products such as TULIP, a combination of term and ULIP for higher protection; Gen2Gen Protect, which covers two generations in a single policy; the Confident Retirement Savings Plan, a retirement-focused PAR plan; and Return of Premium options that address customer concerns of “nothing back” on survival. We have also launched the Happy You app, which integrates health and wellness benefits. At Kotak Life, we take product innovation very seriously, drawing on consumer insights and distributor feedback to design offerings tailored to different life stages and wallet sizes.

Bima Sugam is expected to go live this year. How will it change things for policyholders and insurers?

Bhima Sugam is a historic initiative, comparable to UPI in payments. It’s an industry-built, industry-run platform designed to improve insurance penetration and user experience.

It will bring together insurers, intermediaries, Aadhaar, KYC, and data repositories into one ecosystem, making insurance simpler to buy and manage. Over the next three–four years, it has the potential to transform how insurance products are sold in India.