Life Insurance Corp. (LIC) of India is hopeful of making up for the hit from the recent GST rationalization by managing its expenses and selling more policies, instead of increasing premiums or cutting commissions.

"We hope that the exemption of life insurance business from GST is going to result in a substantial increase in the business volumes and the topline growth as well as our continuous effort to optimize our expenses. We will be able to take care of the pressure on the margins and continue to be focusing on the margin growth as well as the profitability," managing director and chief executive officer R. Doraiswamy said at a media call to announce LIC's September quarter results.

While the insurer hopes to retain its market share going forward, the focus will be on growing the topline and sustained profitability over a period of time, he said.

Customer benefit

Retail life and health policies have been exempted from GST from 22 September, as against a tax rate of 18% earlier. While this is expected to encourage retail purchase of insurance policies, it has also raised expenses for insurers due to the loss of the benefit of input tax credit on such policies.

While some private insurers have guided that they are relooking commission payouts to agents and brokers to pass on some of the hit from the loss of input tax credit, LIC's management said it is "very clear" that it will pass on the entire benefit to customers on premiums, and won't pass on any of the GST liability to intermediaries.

Annualized premium equivalent (APE) of the country's largest insurer grew a muted 3.6% on year to ₹29,034 crore in H1 FY26 owing to a 5.5% fall in individual business APE to ₹17,170 crore. The slower growth was on account of a higher base in the corresponding period of last year, and lower sales volumes as people postponed buying new policies ahead of the implementation of the GST changes.

"The last eight days were not adequate to compensate for the business that could not be completed during the period between September 5-21, so that resulted in a muted or a low growth, particularly for the month of September," he said, adding that he expects growth to be "robust" in the second half of the current financial year. "This is already being witnessed in October, so we're seeing good traction in the second half."

Profit support

Value of new business (VNB) for the insurer rose 12.3% on year to ₹5,111 crore in H1 FY26 whereas the VNB margin grew 140 bps over this period to 17.6%.

Given that the GST changes were introduced towards the end of the quarter, the impact on VNB for the first half of the year was minimal, the management said, adding that even going forward, it doesn't expect the impact to be significant.

"As of now, all our assumptions put together on the operational expenses side is less than 1%. We are confident that we will be able to manage the impact of that with our efforts to increase the volumes," Doraiswamy said, adding that he expects this momentum to continue as the insurer focuses on profitability and margin growth.

"There will be some improvement over this automatically with whatever efforts we have taken in the past, even without our continuing to give extra focus on that. But we would like to have a kind of stabilizing somewhere nearer this in the days to come."

Steady margin growth combined with strong growth in investment income helped the life insurer's bottomline. LIC posted a net profit of ₹21,040 crore for H1 FY26, up 16.4% on year. Profit after tax for Q2 was up 31% at ₹10.098 crore. Income from investments rose 4.8% on year to ₹2.1 trillion for H1 FY26.

What also helped that is that the loss of input tax is only applicable on new policies, which means that LIC is still being able to avail the benefit on policies issued before 22 September, explained chief financial officer Sunil Agrawal.

"We are able to absorb the GST on policies issued before a particular date. This also gives us relief in that as well. So there is a small offset because of that. That is why we are comfortable that we will be able to manage without doing anything on that side with a good growth in the top line," Agrawal said, adding that input tax benefit for group health continues to be available.

"Besides, we also have rental income against which the set-off can be taken. So we are examining all of this based on which we will arrive at the final conclusion," he said, adding that however the "significant chunk is on the commission on individual business" to which extent the ITC benefit will be lost.

Some reports had suggested that LIC stands to lose ₹5,000 crore of ITC benefit due to the GST exemption. Without confirming the number, Agrawal said these estimates are likely calculated basis past public data and may not be accurate. LIC needs to undertake a fresh set of evaluation or recalculate this figure based on the changing product mix and sales trends given that commission rates are very different across various product segments.