Online Insurance: Cleaning the web

IWAs like click2insure.com,insurancemall.in and policybazaar.com compile information on the various features and pricing of the products. A customer can compare the premiums and policy features to get the best deal. However,the urgency to bring in regulations for IWAs comes from the fact that many websites were not giving latest and correct information to users and are instead collecting personal information of potential customers and were sharing the data with the insurance companies. It is estimated that at present,the IWAs do a business of R150 crore every year.

The panel headed by A Giridhar,executive director,Irda,is also examining a wide range of issues such as a mechanism of electronic issue of policies,the legal implications,cost-benefit analysis and operational procedures,among others. It has invited comments from various stakeholders on the draft guidelines and will come out with the final version soon.

Deepak Sood,managing director and chief executive officer of Future Generali India Life Insurance,says online marketing is rapidly evolving new distribution channels that show greater promise as it will help insurers reach customers in a cost-effective manner. Initially,at least,the online market market will be characterised by simple products. Complicated products which will need professional advice in choosing various features and options of the product may not be suitable for online sale unless the customer is highly informed, he says.

The insurance regulator has proposed that IWAs be registered under the Companies Act and must have a minimum net worth of R50 lakh at any time during the previous three consecutive years. It has also proposed that they should not have any referral arrangement with an insurer and most importantly,that they will not be an insurance agent,corporate agent,micro-insurance agent or an insurance broker. Further,they should only display information pertaining to insurance products and price comparisons of different insurers approved by Irda. The draft guidelines also underline that IWAs will have to ensure that if a customer evinces interest in buying an insurance product but does nor prefer any insurer,the IWA will not transmit the customers details to the insurer.

Insurance experts say the proposal will help customers who source insurance information from the net to decide on a particular insurance. If the Irda proposals are implemented,customers will get authentic information and in case of any misrepresentation of information,the IWAs will be hauled up, says Pramod Awasti,an Irda-certified insurance agent.

While the IWAs give information about the products,they do not do the final transaction and instead routes customers personal information to the insurance companies. Some companies route the customer to the website of the insurer where one can download the KYC or know your customer form,fill it and upload it on the site. Payments can be made through credit card or online bank transfer. The insurance company mails the confirmation of the transaction and the bond is issued to the customer.

However,customers above 40 years of age cannot buy a term policy or a health insurance online,as the customer will have to give a medical certificate to the insurer. Also,if the customer wants to switch the insurance company and wants to avail the no-claim bonus,he will have to do it offline. At present,insurance companies sell simple products online and more complex unit-linked insurance products are still sold offline,where a distributor or the agent has to explain every detail and the risk associated with market-linked investments to the customer.

In fact,banks took the early lead in developing web-based transactions through internet banking to enhance efficiency and reduce transaction costs. Analysts say that with internet penetration set to grow in the country,online products will command a large market size as they are not only convenient,given the time and space independence involved in their purchase,but are also cheaper than their offline counterparts because of the high cost involved for the initial acquisition.

Moreover,the online medium ensures greater geographic dispersion. Analysts say the online channel in India would contribute to over 10 of the industrys business in the next five years or so. In some of the advanced markets such as Australia,the figure is already around 18. Insurance companies will now have to develop efficient online models which will help customers to buy the suitable policy at cheaper rates and ensure the safety of the transaction.