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Bite-sized health insurance plans offering small premiums and cover size have turned popular during the coronavirus pandemic, bringing together innovative insurance companies and payment apps with their massive reach.

Payment apps PhonePe and Paytm already sell large numbers of these insurance plans and, soon, WhatsApp will offer such plans from SBI General Insurance Co. Ltd through its new payments feature.

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“Payment apps offer a lot of convenience in a customer’s journey. Tying up with them lowers the cost of acquisition for insurance firms as they don’t have to open branches in tier-II and -III cities where a lot of penetration is actually happening," said Manav Sachdeva, senior principal analyst at Gartner Inc.

Unlike comprehensive health insurance plans, a sachet-sized plan is focused on a specific health need. For instance, the covid insurance plan sold on Paytm by Reliance General Insurance offers a sum assured of as low as 50,000 on an annual premium of 466. It covers pre- and post-hospitalization medical expenses for people under 55 who have contracted covid-19.

PhonePe’s Corona Care plan starts at 199 for an insurance cover of 50,000. PhonePe is also offering a Hospital Daily Cash insurance plan, which gives an assured amount to subscribers in case of hospitalization due to injury or other illnesses including covid. It provides a cover of 500-5,000 per day for an annual premium starting at 130.

PhonePe’s other bite-sized plans include dengue and malaria plans with premium starting at 24 per annum and 49, respectively. Paytm also has a plan that provides malaria or dengue-related hospitalization benefits of up to 10,000 for one year and costs 49.

“Sachet health insurance products contribute around 70% of our current insurance distribution portfolio in value. Covid insurance was our first big product and has contributed significantly to our early volumes. We have so far sold around 700,000 sachet health policies, and are aiming to reach 1 million covers soon," said Gunjan Ghai, vice-president and head of insurance at PhonePe.

The pandemic has raised awareness about the value of health insurance in India, where a large chunk of medical expenditure is still financed out of pocket.

Jeneshree Sahoo, an insurance analyst at data analytics and consulting company Global Data, said covid has driven demand for health insurance in an otherwise under-penetrated market.

A lot of uptake of micro health insurance has come from towns and small cities. PhonePe said many of its health insurance customers were first-time buyers from cities such as Visakhapatnam, Ahmedabad, Nashik and Vijayawada.

However, Gartner’s Sachdeva said the profit margin for payment apps from these plans is not much—10-20% of the entire ticket size.

Profitability will depend on volumes, and with more payments apps coming in, it becomes key for established names to stay relevant, Sachdeva said.

However, he doubts if payment apps will continue to see the same traction for micro-health insurance in 2021. “We can’t assume 2020 as a baseline as we saw a lot of panic buying as people were scared. Many people lost corporate insurance covers from the office," he said.

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