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  • Payment of Health Insurance Premium in Installments

    In a regulatory move, to make all ends meet IRDAI (Insurance Regulatory Development Authority of India), now allows the health insurance providing companies in India to accept monthly premiums for their health insurance policy. Earlier people had to pay a one-time premium unless the policy was to be renewed. This led many, including the IRDAI to believe that perhaps it was necessary that monthly installments was necessary to be introduced in the system.

    Why Has the Provision been Introduced?

    As per the Annual Report released by IRDAI for FY-2014-15 the general insurance industry has witnessed the issuance of approximately 1,09,00,000 health insurance policies. These policies are supposed to cover 28.80 crore people as policyholders. The data further showed that there is a major number of people who are covered by government schemes as well as group insurance policies, while the individual health insurance business has fallen marginally.

    The main idea behind this regulatory move is as simple as it seems: making health insurance a more affordable product so that people who were unable to pay lump sums earlier may now be able to afford medical insurance. The other options also include payment of premiums on monthly, quarterly or half yearly as well as the currently in practice annual basis of instalments. Insurance policies which have higher amounts of sum assured earlier had multiple annual premiums to be paid for coverage. But is this move a great move or just not quite what it seems?

    Pros of Being Able to Pay Monthly Installments for Health Insurance Policy:

    We often come with the precarious idea that every move made by the IRDAI has got to benefit ordinary masses. It sure is intended to, which is why it generally works out. Here are some of the reasons why this new idea could actually help the health insurance sector grow and benefit the product consumer base at the same time:

    • More accessibility of the product in small towns and rural areas of the country is something that people can expect from this move because the investment for health will get a lot cheaper this way. As it based on the reports by NSSO (National Sample Survey Office) rural population in India whose health has been insured is only 14.1%.
    • It is not any better in the urban areas since NSSO’s numbers for the statistics for urban regions in India is a mere 18%. This means that there is still a huge opportunity for the health insurance industry to grow in the cities as well.
    • With the advent of internet, making payments online has also become easier with higher penetration of the medium in made remote places. This was not the case even a decade back. Internet has evolved to a state today where it is no longer a luxury or want but a poor necessity and hence paying premium installments will not be a cumbersome job for people anymore.
    • With premium installments, people can now opt for different policies or change it in the future, when they are able to afford higher sum assured.
    • In fact, people who have policies currently that barely cover their health expenses will now be able to afford higher coverage, since they will have a higher buying power with lower premiums having to being paid.
    • If the health insurance industry experiences a boon through this move, then it will automatically offer more competitive products. This will improve everything the industry, starting with the basic customer service and an enhanced claim process.

    What Could Go Wrong When Paying Monthly Installments for Health Insurance Policy?

    Though this list is smaller and may not be too important to some, is still essential to be aware of, especially for people to know what they are getting into:

    • Not only for health insurance, but if you come to think of any other product, even if it is buying a cell phone with EMI, installments always make the actual cost of the product much higher. The policyholder in such cases ends up paying approximately 3 to 5 percent more which is a big amount if you consider the sum assured. The quarterly premium rates will be around 3% higher while the monthly premiums will make the product 5% more expensive.
    • Also people will have to opt for an insurance which is at least requires 2 to 3 years of policy term.
    • To add more oil to the fire, people cannot claim the insurance money before at least a year of premiums have been paid. This was not the case with annual premiums being paid earlier.

    However, all parties in question are positive about this move because of the major affordability factor and maybe this general insurance will actually be more accessible to lower income groups now.

    GST rate of 18% applicable for all financial services effective July 1, 2017.

    Disclaimer: Premiums may vary depending upon factors like age, location and prevailing taxes/GST.

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