How online plans benefit buyers

Life insurers are finally waking up to the potential of the Internet as they launch online products in quick succession. Customers are giving these plans a thumbs-up.

G Murlidhar        Print Edition: December 2010

Life insurers are finally waking up to the potential of the Internet as they launch online products in quick succession. Customers are giving these plans a thumbs-up as they find it convenient and cheaper to buy life insurance policies online.

This is because there is high initial acquisition cost involved in selling policies through distributors, which is absent in the case of an online life product. So, the savings accrued by the insurance company can easily be passed on to the customer.

International experience has shown that premiums for term policies have dropped 8-15% with the introduction of online option. Also, such products can be easily compared with similar offers from competitors, making the process transparent.

The independent buying of financial products and services online is expected to increase exponentially over the next few years. Currently, the Internet penetration in the country is about 7%.

This is slated to grow several times over the next decade, aided by technologies that allow faster access, such as 3G, and the decreasing cost of access. The Net, mobile banking as well as e-shopping have made tech-savvy consumers comfortable about online transactions.

Also, the crucial aspect of online security, which had kept many people away from the medium when it came to monetary transactions, has undergone a significant improvement in the past few years.

Until now, life insurance companies had not leveraged the medium's potential fully, given the financial maturity required to understand a life insurance product.

However, the increasing usage of the Net for the transaction of more evolved and complex financial products, especially in general insurance which shares a nearly similar process, has made them reconsider its potential.

While the euphoria about online life products is well-deserved, the channel is new and insurers must brace themselves for challenges. These could stretch from the mundane-technical glitches affecting spot performance-to the more complex, affecting pricing and revenues.

However, the online channel will only evolve and get better over time.

G. Murlidhar
COO and CFO, Kotak Life Insurance

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