UPI Leads Charge As Most Preferred Insurance Premium Payment Method, Says Policybazaar Data

UPI has marked a significant presence in digital payment methods, being the choice for one-third of insurance premium payments, revealed Policybazaar's data. Notably, the surge in UPI adoption is evident in investment products, showing a 45%+ growth. In contrast, credit cards are reclaiming their space, particularly in term insurance, showcasing a 127% year-on-year growth.

This resurgence is even more pronounced in investment-cum-insurance products, with an almost 300% increase. Furthermore, the start of the year, especially the tax season from January to March, saw a 15% rise in digital premium payments, predominantly for term and investment plans. Additionally, monthly payment options are gaining traction across various categories, with health premiums through this mode seeing a more than 300% jump.

Exploring Diverse Payment Trends

The rise of UPI payments for insurance premiums on Policybazaar from 27.93% in FY'24 to 33.71% in FY'25 showcases its growing acceptance. This growth is most pronounced in insurance-cum-investment products, reflecting a comfort with UPI for significant, long-term financial engagements. Health insurance also witnessed a significant increase in UPI payments, accounting for a quarter of all premium payments in the category. However, term insurance, despite being less penetrated, has seen a 25% growth in UPI payments, indicating its popularity across different product types. Motor insurance, although already well-adopted, experienced a 15% growth in UPI payments.

Credit cards have made a notable comeback in the insurance payment sphere, particularly in term and life insurance. The use of credit cards for term insurance surged by over 127%, and for investment-cum-insurance products, it reached nearly 300% year-on-year growth. This trend underscores a shift towards leveraging credit cards for their rewards and financial flexibility. However, the growth in credit card use for health and motor insurance premiums is more modest, hinting at a stronger preference for UPI in these categories.

Net Banking and Tax Season Patterns

Net banking, often overshadowed by UPI and card payments, has seen significant growth. Figures like a 290% increase for term insurance and a 306% rise for investment plans highlight its enduring appeal. The tax season further amplifies digital payment activity, with a 15% increase in premium payments observed on the platform, especially for investment and term plans.

Non-Resident Indians (NRIs) exhibit a strong inclination towards credit cards, particularly for health insurance, where the preference remains around 74%. However, a slight decrease in total NRI credit card usage from 61.25% to 57.53% has been noted. Conversely, NRI debit card usage has increased, suggesting a shift towards simpler payment methods or regulatory changes favoring foreign-issued debit cards.

Emerging Preferences in Payment Modes

A decline in debit card usage across most categories indicates a move away from immediate out-of-pocket expenses. This trend is reversed in investment-linked plans, where a 41% increase is observed, reflecting a growing sophistication among insurance buyers. Monthly premium payments are becoming increasingly popular, with health insurance experiencing a 307% jump. This preference extends to other categories, indicating a shift towards more manageable and flexible payment options.

Harsh Vardhan Masta, Head of Payments at Policybazaar.com, highlights the evolving consumer behavior towards insurance payments. "We are seeing a clear shift in how people plan to pay for insurance. Beyond going digital, they are also actively making smarter, more intentional choices. One of the most telling shifts is consumers warming up to UPI not just for everyday spending, but for long-term financial commitments like insurance. Also, the sharp rise in monthly premium payments points to a demand for greater control over cash flow, especially in health and life insurance. Overall, the way people pay for insurance is becoming a reflection of how the new-age consumer is managing their money."

The landscape of digital insurance payments in India is undergoing a significant transformation. With UPI emerging as a popular choice and credit cards making a strong comeback, consumers are demonstrating a preference for payment methods that offer both convenience and rewards. This shift is further supported by the popularity of net banking and the strategic use of digital platforms during the tax season. As payment preferences evolve, they mirror the broader trends of digital adoption and financial planning among Indian consumers.