Shares of insurance companies took a hit on Monday, declining by as much as 6% in intra-day trading on the BSE. The downturn followed the Goods and Services Tax (GST) Council’s decision to defer discussions on reducing GST rates for life and health insurance premiums. Consequently, the existing GST rates on insurance remain unchanged.

The Council, which also postponed a decision on rationalizing taxes for 148 other items, cited the need for more time to finalize its reports. Union Finance Minister Nirmala Sitharaman, during a post-meeting briefing, explained that the Group of Ministers (GoM) is awaiting crucial inputs from the Insurance Regulatory and Development Authority of India (IRDAI) regarding insurance premium rates. Once these inputs are reviewed, the finalized reports will be submitted to the Council for further deliberation.

As a result, key insurance stocks experienced significant declines. Shares of New India Assurance Company dropped 6% to ₹200.80, while General Insurance Corporation of India slipped 3% to ₹485.55. These declines reversed some of the gains from last Friday when General Insurance Corporation surged 14% and New India Assurance rose 4% despite a sluggish market.

Other major players like ICICI Prudential Life Insurance, ICICI Lombard General Insurance, SBI Life Insurance, HDFC Life Insurance, Star Health, LIC, and Niva Bupa Health Insurance saw stock prices dip between 1% and 2%. Over the past month, life insurers such as ICICI Prudential, HDFC Life, and SBI Life have reported declines of 6% to 10%, compared to a 2% dip in the broader market index.

ICICI Securities noted that the delay in the GST Council’s decision and the lack of a clear timeline for implementation have created uncertainty, keeping insurance stocks under pressure in the short term.

Despite these immediate challenges, analysts remain optimistic about the sector’s long-term growth potential. India’s insurance penetration remains below global averages, but factors such as a significant protection gap and rising per capita income are expected to drive future growth. Additionally, the demand for credit protection products is in its early stages and is poised for expansion as retail loan penetration increases.

Experts believe that companies with a strong product mix, robust services, and extensive distribution networks will emerge as key beneficiaries in the sector. However, they caution that regulatory changes and intensified competition may pose risks to profitability in the long run.