Subscription-Based Insurance: Flexibility Vs Long-Term Security

Subscription-based policies can be looked upon as product bundles with increased flexibility to curate your own policy as per your requirements. You can modify or add demand options. The premium payment can be chosen from the options given, or can be simply a monthly payment cycle. They come with the tag of being cost-effective. “With the consumer behavior changing from traditional to digitization-based buying, subscription-based policies would have a substantial pie in the days to come,” says Pradeep Funde, senior vice president, Anand Rathi Insurance Brokers.

Convenience Vs Risks: What Buyers Must Consider

Traditional policies lack the basic flexibility and work on a buy-one-time, continue-for-life, or till the end of fixed tenure concept. Changing the policy terms is often restricted, and options of opting out are mostly limited, tedious, and often require fresh underwriting. Traditional policies are normally designed for long-term benefits and consistency.

Convenience Vs Risks: What Buyers Must Consider

“The subscription-based policies can be advantageous for insurers in lowering the cost of distribution. Customers may like the convenience of a fully integrated customer experience, but there might be a few underlying issues that the buyers may face,” says Funde.

The onus to choose and design the product completely lies with the customer, and hence, underinsurance is one of the major factors the consumer may have to face. The buyers may try to lower the protection during financial strains, and the flexibility to choose the covers or to discontinue the policies in patches will create gaps in the coverage. Some of these gaps may be unintentional and may leave the buyer completely unaware and uninsured.

Weighing The Trade-offs And Future Outlook

The answer lies in the individual's lifestyle, the requirement, and, importantly, the need or hour factor.

The advantages can be summed up as follows: flexibility to choose the covers as required, flexibility to choose the premium, and the option to start and close as per requirements.

The disadvantages can be as follows: it can be a short-term saving on premiums, but in the long-term, it may be more costly, just because the insurers will run high risk in short durations, and corrections in premiums are sure to follow; there are chances of underinsurance or lower protection; and the features of cash value creation and wealth-transfer benefits would either not be available or would be at a very low range.

The consumer interest in the subscription-based models for policies is growing day by day and is gathering pace with insurance companies tying up with other subscription-based service providers in the industry to create varied bundles. “This, however, is in contrast to the efforts by the insurance industry to convince the population at large that insurance is essential and not merely an option. But seeing the success in the other markets, the subscription-based insurance bundling is sure to stay and grow in the future,” says Funde.