The insurance industry in 2025 is evolving faster than ever. With regulatory reforms, GST cuts on premiums, and InsurTech innovations, this year is transforming how people buy and use insurance. From AI in insurance to risk-based capital frameworks, here are the latest insurance industry updates 2025 that you need to know.

GST Cut on Health and Life Insurance Premiums

One of the biggest insurance updates in India 2025 is the reduction of GST on health insurance and life insurance premiums from 18% to 0%.

  • This reform makes insurance more affordable for millions of households.
  • Policyholders will now pay lower premiums, which is expected to boost insurance penetration in India.
  • The government has directed insurers to pass on GST benefits to existing and new customers.

No Input Tax Credit for Commission Costs

Along with the GST reform, insurers can no longer claim Input Tax Credit (ITC) on commissions and brokerage fees for individual health and life insurance policies.

  • This means insurance companies must absorb additional costs, which could impact agent commissions and policy pricing strategies.
  • Insurers are expected to optimize distribution costs while focusing on digital insurance platforms to manage expenses.

IRDAI’s Regulatory Overhaul: Insurance Act & FDI

The Insurance Regulatory and Development Authority of India (IRDAI) has announced a massive regulatory overhaul in 2025:

  • A review of the Insurance Act 1938 with proposals for 100% FDI in insurance.
  • Introduction of composite licenses to allow insurers to operate across multiple segments.
  • Lowering of capital requirements for micro-insurers and niche insurers, encouraging financial inclusion.
  • Adoption of Risk-Based Capital (RBC) norms starting in August 2025, aligning solvency with actual risks like underwriting and market risks.

InsurTech Trends Driving 2025

Technology is reshaping the insurance sector. The latest InsurTech trends in 2025 include:

AI and Machine Learning in Insurance

  • AI is being used for fraud detection, claim automation, and personalized policies.
  • Predictive analytics helps insurers assess risks more accurately.

Embedded and On-Demand Insurance

  • Embedded insurance offers coverage during online shopping, travel bookings, and financial services.
  • On-demand insurance gives gig workers and digital nomads flexible coverage for short durations.

IoT and Usage-Based Insurance

  • Telematics in motor insurance allows usage-based pricing.
  • Wearables in health insurance encourage healthy lifestyles with rewards and lower premiums.

Blockchain and Smart Contracts

  • Blockchain insurance is enabling faster, transparent, and tamper-proof claims settlement.
  • Parametric insurance automatically pays out when specific conditions (like floods or earthquakes) occur.

Insurance Market Growth & Challenges

While reforms are promising, India’s non-life insurance premium growth slowed to 6.5% in May 2025, compared to nearly 15% last year.

  • Rising healthcare costs, hospital overcharging, and inflation continue to pressure insurers.
  • IRDAI is strengthening oversight of the National Health Claims Exchange to stabilize premiums and prevent fraud.
  • Digital adoption is accelerating, with more consumers buying insurance online via apps and aggregators.

What This Means for Policyholders

For consumers, 2025 brings both opportunities and challenges:

  • Lower premiums due to GST cuts = more affordable policies.
  • Better digital experiences with AI chatbots, quick claims, and transparent policies.
  • More choices with micro-insurance, embedded products, and usage-based plans.

For insurers, the future means greater competition, regulatory compliance, and a push toward digital transformation.



Tags: Insurance updates 2025, Insurance industry trends, GST cut insurance India, IRDAI reforms 2025, InsurTech innovations, Risk-based capital insurance, Affordable health insurance 2025, Digital insurance India