Is subscription-based insurance the right way forward amid COVID-19?

Pune-based IT consultant Abhinav Sable, who had to face a 20 percent pay cut at his workplace due to the coronavirus lockdown, is wondering whether to renew his Rs 20 lakh medical insurance that attracts a Rs 30,000 premium per year.

As per Sable, his health insurer does not offer an option to pay on a monthly basis and Rs 30,000 is a high amount considering that his finances are in a precarious position.

A subscription-based insurance model that is now coming into the insurance industry could offer some respite to the customers battling job losses and pay cuts amid the coronavirus outbreak. This model involves paying on a monthly, quarterly basis like you would pay for your Netflix subscription or like a bank loan EMI.

Insurance corporate agent Vital is of the view that having a subscription model would make health insurance more affordable for customers.

Jayan Matthews, co-founder and CFO at Vital told Moneycontrol that while the Insurance Regulatory and Development Authority (IRDAI) has allowed monthly mode of payment, not all insurers offer it. Vital is offering a monthly subscription model for health insurance premium payment.

“When you break down premium payment to a monthly mode, the adoption rate is higher among customers. This is why the average ticket size of health insurance products is Rs 3 lakh in the industry while ours is Rs 10 lakh,” he added.

Now, how will this benefit customers?

Instead of paying a large chunk of money once a year, a customer can pay very thousand rupees every month and get a Rs 15 lakh or 20 lakh cover. Add a deductible and the premium comes down further.

For example, if you take a Rs 20 lakh health policy from Vital (39-year-old) for yourself, spouse and two children, you would need to pay only Rs 790 per month. This is subject to a one-time deductible of Rs 35,000.

Deductible is the amount that you as a policyholder need to pay a fixed amount before your insurance payout for a claim. For example, if there is a Rs 35,000 deductible and a claim of Rs 2.35 lakh is incurred, the policyholder will pay Rs 35,000 while the insurer will pay Rs 2 lakh.

Buying a product on easy monthly subscriptions ensures that a policyholder is covered even if there is a financial stress. At a time when COVID-19 cases and allied hospitalisation is on the rise, insurance is a must-have product.

Insurtech firm Toffee Insurance has launched the Toffee Plan which is a monthly insurance subscription plan for a single person or a family that provides the benefits of life insurance, health insurance and household insurance in one bundle. Monthly subscription starts at Rs 600.

The solution by Toffee Insurance is backed by Tata AIG General, Religare Health, ICICI Prudential Life, and IndiaFirst Life Insurance and offers health cover from Rs 3 lakh for each family member, life cover starting from Rs 50 lakh and household insurance starting from Rs 1 lakh. COVID-19 led hospitalisation is also covered.

Among insurance companies too, the shift has begun. Bajaj Allianz General Insurance has launched a premium instalment facility available with their health insurance product ‘Health Guard’.

Here, customers having net premium of Rs 12,000 or more would be able to opt for the monthly instalment option. Similarly, customers with net premium of Rs 6,000 or more can opt for the quarterly & half-yearly instalment options.

Tapan Singhel, MD & CEO, Bajaj Allianz General Insurance said that this should hopefully encourage more customers to opt for health insurance which according to him should be a critical part of financial planning of every family.

Even a year ago, customers would postpone buying health covers saying that the employer provides medical insurance for self and family. Now that the job market is uncertain and close to 11 million Indians have lost their jobs since the March 25 lockdown, it only makes sense to opt for a subscription model.