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Pune’s Prerna Pathak was itching to go for a trek during the 2020 monsoons but could not due to the Coronavirus (COVID-19) outbreak. Once things unlocked from October onwards, Pathak went on a short one-day trek nearby but injured her foot.

What looked like a regular sprain turned out to be a fracture and Pathak spent Rs 40,000 on the medical bills. She regrets not having a proper health policy and says there should have been one-day covers for treks especially for people like her.

Usage-based insurance as a concept has slowly been introduced into the Indian market through the pilot products under the sandbox method. This means that these products only have validity of six months which can be extended further if required by the regulator.

But what is needed is for these covers to be widely available in the market.

Even 21 years after the insurance sector was privatised, the product continues to be a push product. Policies like motor third-party are purchased only because it is mandatory under law while health policies seem to be a favourite for tax saving purposes.

What if every general insurance product could have a category of pay-per use? Say someone who doesn’t step out of home wouldn’t typically buy a personal accident policy. But say for example if he/she is going by road from Mumbai to Nashik on bad roads and needs insurance only for the drive period of 3.2 hours (total 6.4 hours). Wouldn’t it be feasible to offer this seven-hour accident insurance cover on a low premium?

Kolkata-based amateur mountaineer Saptirshi Das says that it is almost impossible to get a short-term cover if the insurer is told he is going on a climbing expedition to the Himalayas.

“Even if is only a one to two weeks insurance cover only for the climbing duration, insurers are quick to decline a policy. When I am ready to pay the higher premium, why can’t they offer a product,” he asks. Das adds that he would prefer a custom-made health plus personal accident cover for his treks.

Insurers, however, are quick to point out that the idea is to buy a long-term cover to ensure that policyholders are protected against any untoward incidents.

“There is a risk of injury, illness or accident at all times. Encouraging customers to buy short-term covers as a general practice is not viable considering that this could also impact our books negatively. For instance, when treks are popular during monsoons or say marathon-related health complications during monsoons and winters, there could be a rush to buy covers. But what about the rest of the year? How did we sustain premiums on our books?” questions the underwriting head at a general insurer.

But it would be incorrect to presume that all customers would only opt for short-term covers. Those with adverse medical history in the family including lifestyle illnesses like stroke, diabetes may buy regular one-year or multi-year policies to cover risks.

Similarly, individuals using their vehicles on a daily-basis or working in risky environments like locomotive drivers, miners, armed forces personnel would be forthcoming to buy a regular long-term insurance plan.

Tying up with the service providers could be a good starting point to ensure wider availability of products and improve non-life insurance penetration in the country which stood at a dismal 0.94 percent of GDP in FY20.

For example, a person registering for a marathon could buy a one-day health insurance cover or someone renting a car for an inter-city drive could buy car-plus-personal accident cover only for the drive duration.

Denying the option to customers to buy the cover duration of their choice will only increase the insurance gap in the country. Pricing these covers appropriately depending on the risks involved will ensure that insurance business is sustainable on one hand while customers get their required products on an as-needed basis.