Investors guide to online insurance

Last Updated 18 September 2016, 18:32 IST

Over the past few years, India has emerged as one of the top nations in terms of the number of internet users. Currently, it competes with countries like the US and China in terms of internet usage.

As per the latest numbers, India has approximately 462 million internet users, second only to China. As we have witnessed, such advancements in internet usage have opened up the online space rapidly to increasing business opportunities.

The internet as a platform has come as a disruption to existing business models and most businesses have adopted their models to have an online counterpart. Ecommerce has boomed to such an extent that it is expected that the share of e-tail will go up to 3% of all retail business by the year 2020. This will translate into orders per month more than doubling from the current levels of five million per month to 12 million per month in 2020. To understand the scope of such business models, we can look at China where the share of e-tail business is around 8-10% of all retail business.

The life insurance industry in India has similarly adopted to the advent of the internet. Today, it is a must for life insurers to have an online presence and along with that ensure that there are tailor-made plans for the online consumer. Life insurance products that are available for online purchases have unique benefits, offering customers the incentive to shift to the digital platform:

l The primary reason that consumers should opt for purchasing insurance online is lower costs. The equation is simple — customers who directly come to the company’s online portal remove the entire cost of intermediaries for the insurer. This benefit is thus passed on to the customer in the form of lower premiums or charges. Further, the mortality costs assumed for an online buyer is almost always lower than that of an offline buyer as online customers are expected to be of better profile. This further helps in reducing the associated costs of the policy and the consumer ends up gaining.

l Secondly, an online purchasing experience offers the customer all the information about the policy that he may require before purchasing. During offline purchases, the customer is often totally dependent on the seller (agent, bank, etc.) to explain the benefits and wordings of the policy.

In case of an online purchase, the customer has all the information at his disposal and he can take his own time to compare policies of various companies, as well as costs of similar policies offered by different companies before the final purchase. Many insurers also offer a live chat facility, wherein one can clarify doubts regarding certain aspects of the plan. All of this enables and empowers the customer to make an informed decision and makes the buying process totally transparent.

l Finally, the technological edge that can be provided on the online platform cannot be matched by its offline counterpart. Currently, there are certain insurers who use application forms which are dynamic in nature. Given the responses to certain questions, the subsequent questions in the application change, making it more relevant to the customer and also cutting down the time required by eliminating redundant questions.
Also, online forms remove the chances of human error and ensure better quality of data which is of utmost importance during claims processing.

While we have discussed the benefits of buying insurance online, it is also to be understood that the online platform is ideal for customers who are tech-savvy and comfortable with financial products. In India, we still have large sections of the population where financial literacy is low and there will always be a need to assist such customers during the purchasing process — right from understanding the customer need, to selecting the correct plan and paying the correct premiums on time. As we move to a more digitally-enabled buying environment, focus should not be taken away from this offline customer.

The online buying process, on the other hand, is bound to garner more popularity with time, given the wide gamut of benefits it has to offer. In the near future, we expect to see customised products specifically designed for certain customer needs as well as competitive pricing driven by higher levels of transparency and supported by operational efficiency.

(The writer is VP of Products at HDFC life)

(Published 18 September 2016, 16:26 IST)

Follow us on