Guest Column

The key reason for the slow pace of change in theinsurance industry is primarily insurers8217; perception that customers don8217;t buy insurance unless it is sold to them by an informed agent or other intermediaries. This is true for most insurance products that are complicated and require much more than an application form such as a medical check-up or underwriting. Insurers8217; worry that the new medium could clash with the interests of the current intermediaries agents or brokers. This is probably countered with the argument that Web attracts only those customers who are averse to dealing with agents, leading to an expansion of the insurers8217; customer base. The most successful products sold on the Web till date are simple products such as homeowners8217; insurance, automobile insurance and term life.

The internet has made it possible for customers to do comparison shopping8217; for getting the best price for these products, some of which are mandatory. In the case of term life, insurance companies are able to charge higher rates for their brand value, superior ratingsand superior features.There are several constraints to be overcome, before selling products / services on the Web becomes common place. Technology for providing security of identity, of personal information and of money transaction and the laws associated with these issues are only some of them. Insurance industry will also benefit from improvements taking place on these fronts.

Forecasters already put a figure of 4 billion premiums achievable by 2003 for insurance products sold on the Net. This maybe contested by many insurers a survey revealed that only 12 per cent of them have ever sold a product on the net and 40 per cent of them don8217;t find it a viable medium. What most insurers seems to agree though is that the internet is here to stay and a lot of customer/agent servicing will take place through this medium. The prospective new entrants to the Indian insurance market cannot ignore the importance of the internet as a medium of selling products as well as servicing their customers andintermediaries. This is more true in the Indian context, as alternative channels are not currently available to them.

Prospective life insurers will be able to develop agency force of their own. But other alternative channels such as banks, post offices, and corporate agents which are currently not used by the public sector insurers might be permitted by the IRA. Hence the new insurers will have to develop these channels. For non-life insurance, prospective entrants will find the internet an attractive medium for developing awareness about their products and servicing their agent and customer network.

The author is Associate Vice President, Business Consulting Group