FAIR Innovation Survey
Payments
Insurance access can be enhanced by providing flexible payment options that meet the needs and situations of lower-income customers. For lower-income individuals, the problem of income is not only the overall level of income, but also the way that income is earned and how earnings are distributed over time. For those whose earnings are seasonal or periodic, regular premium payments can be problematic. Considering the irregular flow of income that many lower-income households experience, payments should be correspondingly flexible.
Current Industry Practices
Insurance companies currently offer a range of payment arrangements that are designed to meet the needs of lower income customers including:
a) Variable Payment Options: Insurers provide various payment plans, including annual, monthly, quarterly, and sometimes semi-annual payments, to accommodate different financial situations. This flexibility allows policyholders to spread their insurance costs over time, making it easier to manage their budgets.
b) Grace Periods: In some cases, insurers may offer grace periods or extensions for premium payments to policyholders experiencing financial difficulties. This temporary relief provides individuals and communities with more time to recover and stabilize their finances before resuming regular premium payments.
Product and Service Innovations
Some product and service innovations that can improve the ability of low-income and barriered individuals to make policy and premium payments include:
a) Cash: Accepting payment of premiums in cash from those without access to traditional financial mechanisms;
b) Use of Non-traditional Intermediaries: Deducting payments from other receivable payments or collected through non-traditional intermediaries, such as cell phone providers (MAPFRE Economics, 2020);
c) Micro-payments: This could include pay-as-you-go models that calibrate timeframes to the size of the payments. For example, the Swedish insurer BIMA offers 3, 6 or 12 month terms (Cheston, 2018).