With internet access rising and a young generation of working middle class professionals reaching the cusp of adult life, online insurance business is gathering momentum. In mid-2010, when online distribution of insurance policies started, only four insurers were in play. Today, ten life insurers offer online term plans; and six firms focus on online health and motor insurance. Around 35,000 policies a month were sold in 2011, up from 10,000 policies a month in 2010.
Insurers are loving it. “For insurers, online sales are 20% to 25% cheaper compared to the one happening offline. Also, it is a convenient medium of sale from the customer’s point of view as there is no scope for mis-selling. The online sale is completely driven by decisions made by policy-buyers,” says Yateesh Srivastava, chief marketing officer, Aegon Religare Life Insurance.
Most insurers agree that the online platform is cost-effective and has tremendous potential to be an effective channel for distributing wide-ranging insurance policies in coming years. Currently, however, insurers offer online-friendly products that are simple to administer.
Reasons abound why India’s insurers continue to keep complex insurance products offline, unlike developed countries where the online platform is well established already. For one, prospective policy-holders in India still have some way to go before they could be compared with informed consumers in developed countries. For another, the Indian market is characterised by rules and regulations that are different from those in other markets.
For instance, unlike in the UK where comparison websites are free to aggregate and compare information on various financial products and render advice to consumers accordingly, India’s insurance regulator IRDA had, in October 2011, banned web aggregators from offering similar services and capped commission charges on online sales done through them.
The very nature of online insurance in India is changing as well. Earlier, term plans were offered and in high demand in cyberspace. Now, motor and health insurance plans are popular among online buyers. So much so that insurers see cyberspace as an emerging distribution channel for motor and health insurance. (More about that in a bit.)
Both life- and non-life-insurers say the online platform offers them an opportunity to pare their operational cost by saving on intermediary commission. So, even market leader Life Insurance Corporation, which has so far kept itself to the offline market, is planning to join other life insurers in the online space.
LIC will offer a pure protection plan online shortly. It is expected to target youngsters who are the drivers of online insurance. According to a Policy Bazaar.com survey, 79% of online insurance sales happen through customers in the 25-35 age-group. Also, young consumers buy higher risk covers for longer terms. For instance, average sum assured has increased from `65 lakh to `70 lakh. And young customers look for an average term of 25 years and longer.
“Online term plans and motor insurance policies are mainly picked up by youngsters and HNIs (high networth individuals). As policies offered online are easy to understand, they enjoy much demand,” says AS Narayanan, chief distribution officer, Bajaj Allianz Life Insurance.
Demand for health and motor insurance through online policies is rising, according to a report on insuringindia.com. More than 50% of online health insurance policy-buyers prefer a cover size of Rs3.5 lakh to Rs4.5 lakh. And almost 90% of prospective buyers of online motor insurance are interested in getting a comprehensive cover.
While signs from consumers suggest the online insurance market is set for a big expansion, India’s regulatory climate poses a few challenges though. The IRDA regulations, for instance, have made comparison websites unviable.
“Unfortunately, the IRDA guidelines on insurance comparison websites are making the online channel unviable as well. The worry is that without such helpful sites, insurers will find it very difficult to promote sales online,” says Akshay Mehrotra, chief marketing officer, Policy Bazaar.com.
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