How do monthly payment options make health insurance more economical?

Health insurance, once viewed as an afterthought in financial planning, is now recognized as a vital safety net for everyone. Rising healthcare costs, increased awareness and innovation in the industry are causing more people to view health insurance as a necessity rather than a luxury.

But changing perceptions requires not only raising awareness, but also developing solutions that offer greater value to consumers, particularly addressing affordability. One such recent example is the move towards flexible payment options, especially monthly or quarterly, to make health insurance more affordable and accessible. This flexibility helps break down barriers and encourages more people to easily afford insurance coverage, especially in tier 2 and tier 3 cities and among younger new age consumers who prefer lower payments over higher upfront costs.

Demand for monthly payments has more than doubled compared to last year. Let’s delve into the factors driving this demand;

Flexibility and accessibility for better implementation

Traditionally, health insurance required policyholders to pay annual premiums. While this model worked better for higher-income households, it kept many middle- and low-income families from investing in health insurance. Monthly premium options, now widely available, have changed that.

The monthly payment regime breaks down one-time financial obligations into manageable smaller parts. Recent rules have made health insurance more flexible, such as removing the age limit for entry or shortening the moratorium period.

IRDAI is also focusing more on affordability and a move like flexible payment mode could be a huge step forward in ensuring more families can opt for health insurance. They no longer have to worry about one-time upfront costs. They are more likely to integrate health insurance into their monthly budgets.

This model is particularly important for expanding access to insurance in tier 2 and tier 3 cities, where disposable incomes may be lower and financial planning is often done on a monthly basis. Flexibility in monthly premiums aligns with this economic reality, ensuring that even people with limited income can provide for their family’s health.

Expanding outreach to low-income groups

Insurance penetration in India has long been a challenge, especially among low-income groups living in tier 1 cities. The cost of the traditional annual payment regime often causes potential consumers to consider a more affordable and feasible alternative. Monthly premium options bridge this gap by offering an affordable and practical solution. For example, a 30-year-old will have to pay a one-time annual premium of Rs 12,000, but shelling out Rs 1,000 per month is much more feasible.

Government-backed programs and digital platforms have played a key role in popularizing monthly payment options. Partnerships between insurers and fintech companies have enabled seamless premium payments through mobile wallets, UPI and other digital channels. This makes health insurance not only more cost-effective, but also available through more channels.

Best Appeal to Young Consumers

In addition to affordability, the monthly payment model is very popular with young, digitally savvy consumers. Millennials and Gen Z, who prefer subscription services and short-term financial commitments, find the flexibility of monthly payments more consistent with their financial habits. For them, the monthly bonus seems manageable and tailored to their lifestyle.

Increased adoption of monthly premiums is also helping insurers expand their market presence. By offering flexible payment terms, insurers are expanding their customer base, especially in areas 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 of people into poverty every year, increasing monthly health insurance premiums is a much-needed solution. He helps individuals and families take proactive steps to ensure their health without sacrificing their financial stability.

-The writer is Head of Health Insurance, Policybazaar.com. The opinions expressed are personal.

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