Premium billing is the part of an insurer's core that collects the premium for each policy and follows up when a payment is missed. The premium is the amount a customer pays for insurance. It may be paid once a year, or in instalments: monthly, quarterly or half-yearly.
Billing sounds simple, but an insurer may have millions of policies, each with its own amount, due date and way of paying. When the policy administration system creates or changes a policy, billing works out what is due and when. It sends a reminder before each due date. It collects the money through a payment gateway, a bank debit or a UPI AutoPay mandate. A mandate is a standing permission that lets the insurer take a fixed amount from the customer's account each month. Then billing matches each payment to the right policy.
A policy that is not paid stops covering the customer. This is called a lapse. For life policies in India, the insurer must allow a grace period after the due date, during which the cover continues. It is usually 15 days for monthly premiums and 30 days for the other instalment periods.
Consider a term life policy with a monthly premium of ₹2,500, paid by UPI AutoPay on the 5th of each month. In March, the customer's account is short of money, and the debit fails. Billing retries two days later, and the debit fails again. Billing then sends the customer an SMS and an email with a payment link. On the 12th, the customer pays through the link. Billing records the payment, and the policy continues as before. If nobody had paid by the 20th, at the end of the grace period, billing would have marked the policy as lapsed.
Billing also sends money the other way. If a customer cancels a policy, billing calculates the refund for the unused months.
In America, car and home insurance is often paid monthly, so billing systems there handle many more instalments. Billing is one of the three parts of the insurance core system, next to claims management.