Page 52 - The Insurance Times July 2025

Life Insurance

Pay-As-You-Go Life Insurance: A Disruptive

Model for the Digital Age

I n an era where personalization, flexibility, and digital con- Z seek on-demand, flexible, and transparent financial
products.
venience are paramount, traditional life insurance mod-
els are being challenged. Enter Pay-As-You-Go (PAYG) Life 3. Gig economy growth: With increasing non-salaried,
Insurance-an innovative approach that aligns premium pay- short-term, or freelance employment, fixed long-term
ments with lifestyle, behavior, and real-time risk exposure. policies are often unaffordable or irrelevant.
Just as usage-based car insurance revolutionized motor poli-
cies, PAYG life insurance has the potential to disrupt and Opportunities of PAYG Life Insurance
modernize the life insurance industry.
1. Customer-Centric Flexibility
PAYG policies can be paused, extended, or adjusted
Understanding the Pay-As-You-Go based on the customer's financial conditions or health
Model journey. This makes life insurance more accessible, par-
ticularly for younger or lower-income populations.
Unlike conventional life insurance where policyholders pay
fixed premiums over long terms, PAYG life insurance allows 2. Data-Driven Personalization
premiums to vary based on: Insurers can harness data from wearables, medical
Real-time health data check-ins, and even digital footprints to offer hyper-per-
sonalized risk pricing. Those who maintain healthier
Lifestyle choices
lifestyles benefit from lower premiums, encouraging
Duration of coverage needed positive behavior change.
Financial capacity or changing life stages 3. Microinsurance Integration
The PAYG model complements microinsurance efforts
For instance, a 25-year-old active individual may pay less in rural or underserved communities. With digital
during healthy months and slightly more during high-risk onboarding and small recurring premiums, coverage
periods (e.g., illness or smoking relapse). It may even offer becomes possible for even daily-wage earners.
micro-durations like weekly or monthly coverages, appeal-
4. Financial Inclusion
ing to gig workers and young consumers with unpredictable
This model could expand insurance penetration in coun-
income.
tries like India, where traditional life insurance is often
seen as a luxury or a tax-saving tool rather than a fi-
Why Is It Relevant Now? nancial safety net.
The shift toward PAYG is driven by three key trends: 5. Lower Entry Barriers
1. Digital transformation: Proliferation of fitness Since PAYG often doesn't require heavy upfront com-
wearables, health tracking apps, and digital wallets en- mitments, it appeals to first-time buyers and younger
ables real-time monitoring and dynamic pricing. demographics previously untouched by the insurance in-

2. Evolving consumer preferences: Millennials and Gen dustry.

46 July 2025 The Insurance Times