GST-led ITC loss, market volatility may reflect in insurers' earnings
Profitability of insurance companies is expected to come under pressure in the January-March quarter of FY26 (Q4FY26), primarily due to the rationalisation of goods and services tax (GST) on retail life and health policies that has led to a loss of input tax credit (ITC), analysts said.
The impact, however, is likely to be relatively lower for general insurers, supported by a positive demand impulse in the health and motor segments following the GST cut.
Volatility in equity markets is also likely to weigh on insurers’ investment income during the quarter.
According to analysts at Emkay, margins are expected to remain broadly stable, as the impact of GST-related ITC losses has already been factored in.
A correction of about 14 per cent in the Nifty during Q4, along with a roughly 10 per cent decline in the second half (H2) of FY26 and a 40-basis-point rise in bond yields, is likely to result in a negative economic variance of 4-5 per cent for private life insurers and nearly 10 per cent for Life Insurance Corporation of India (LIC) in FY26.
