Health insurance, once seen as an afterthought in one’s financial planning, is now being recognised as a vital safety net meant for everyone. Rising healthcare costs, increasing awareness and innovations in the industry are driving more people to view health insurance for what it is – a necessity and not a luxury.
But changing the perception not only requires raising awareness, it also involves designing solutions that offer more value to consumers, particularly addressing the affordability issue. One such recent example is the shift towards flexible payment options, particularly in monthly or quarterly mode, to make health insurance more affordable and accessible. This flexibility helps break down barriers and encourages more people to afford coverage with ease, especially in tier 2 & 3 cities and also among younger, new-age consumers who prefer smaller payments over large, upfront costs.
The demand for monthly modes of payment has more than doubled as compared to last year. Let’s delve deeper into factors driving this demand;
Flexibility and affordability to drive better adoption
Traditionally, health insurance required policyholders to pay premiums annually. While this model worked better for higher-income households, it deterred many middle- and lower-income families from investing in health insurance. Monthly premium options, now widely available, have changed that.
The monthly payment mode breaks down a one-time financial commitment to manageable smaller chunks. The recent regulations have made health insurance more flexible, like removing the entry age cap or reducing the moratorium period.
The IRDAI has also placed greater emphasis on affordability and a step like flexible payment mode can prove to be a huge leap forward in ensuring more families can opt for health insurance. They no longer need to worry about the one-time upfront cost. They can rather integrate health coverage into their monthly budgets.
This model is especially crucial in expanding insurance access to Tier 2 and Tier 3 cities, where disposable incomes may be lower, and financial planning is often done on a month-to-month basis. The flexibility of monthly premiums caters to this economic reality, ensuring that even those with limited income can secure their family’s health.
Expanding coverage to the lower income groups
India’s insurance penetration has long been a challenge, particularly among lower-income groups residing in tier-1 cities. The cost of the traditional annual payment mode often leaves potential consumers wondering about a more affordable and feasible alternative. Monthly premium options are addressing this gap by offering an affordable and practical solution. For instance, a 30-year-old will have to pay an annual premium of Rs 12000 in one go, but shelling out Rs 1000 per month is a lot more feasible.
Government-backed programs and digital platforms have played a key role in making monthly payment options popular. Partnerships between insurers and fintech companies have enabled seamless premium payments through mobile wallets, UPI and other digital channels. This makes health insurance not just easier on the pocket but also available on more channels.
Better appeal for younger consumers
Beyond affordability, the monthly payment model appeals strongly to younger, digitally-savvy consumers. Millennials and Gen Z, with their preference for subscription services and short-term financial commitments, find the flexibility of monthly payments more in tune with their financial habits. For them, a monthly premium feels manageable and tailored to their lifestyles.
The broader adoption of monthly premiums is also helping insurers increase their market reach. By offering flexible payment terms, insurers are expanding their customer base, particularly in regions that were previously underinsured. This, in turn, has a multiplier effect: as more people become insured, the overall risk pool grows, allowing insurers to offer even more competitive premiums across the board.
For a country like India, where out-of-pocket healthcare costs push millions into poverty each year, the rise of monthly health insurance payments is a much-needed solution. It is helping individuals and families take proactive steps towards securing their health, without sacrificing their financial stability.
-The author is Head – Health Insurance, Policybazaar.com. Views expressed are personal.
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