Online term insurance plans, launched as a 'liberating' product that will free buyers from the clutches of agents and known for their low costs, have turned a full circle.
Agents are slowly making a comeback as insurance companies find them 'irreplaceable' for ensuring customer stickiness and minimal application rejection.
Many insurers have started selling online terms plans through agents as they believe that buying online is difficult for those who are not comfortable navigating the internet. So, their agents help customers buy online plans, as these are cheaper than the offline versions. The attempt is to mix the service of an agent with the low price of an online plan.
Named "assisted online sells", it seems that re-routing of online term plans through agents is becoming an accepted industry practice. This assisted purchase may, of course, cost more.
While some insurers are offering this (assisted online purchase) as an option (other than direct purchase), one is offering online plans only through agents.
Birla Sunlife Life Insurance's Easy Protect Plan is a term plan that you can buy online only through an agent. HDFC Life offers the choice of 'assisted purchase'. Bharti AXA Life, which sells eProtect Term Plan, has an option for assisted purchase on its website. However, the company says that this feature has been disabled.
According to the company, Bharti AXA Life eProtect cannot be sold through agents. However, in future, if the company decides to launch more products that need agents' help, it will activate the 'assisted by an agent' option. That is why, says the company, it has built this feature, although it is currently disabled.
Spokespersons for Aegon Religare, Aviva Life, Bajaj Allianz Life and ICICI Prudential Life said they do not sell online term plans through agents, though insurance customers as well as agents say some of these insurers allow sale of online plans through agents.Harshal Shah, director, marketing, Aegon Religare Life, says, "We believe that online plans are to be bought without intermediation. The customer is better off doing research himself and calling the company for assistance during the buying process." He says direct purchase forms have much more disclosures. This helps the customer at the claim stage.
WHY DO YOU NEED AN AGENT?
Insurers say that only a small number of individuals who enquire about online plans buy on their own. The rest drop off. Insurers want to target this segment by roping in agents.
"As per our understanding, less than 2% who inquire about online term plans buy on their own. Hence, there is a huge opportunity in providing services to customers who wish to buy an online term plan but require some assistance to complete the sale," says Sanjay Tripathy, senior executive vice president, marketing, products & direct channels, HDFC Life.
Another argument in favour of such online assistance is that the application form has many lifestyle- and medical-related questions, which most buyers find it difficult to answer on their own. Even if they manage to fill the forms on their own, there is a high chance of error(s) creeping in, leading to rejection of the application.
Rajesh Soi, a New Delhi-based insurance agent, says, "There are many technical points that you need to follow while filling the application form. Often, investors commit errors, due to which applications get rejected."
Another reason insurers are roping in agents for selling these plans is that they want to prevent polices from lapsing. Since one needs to renew the insurance cover every year, insurers think that without reminders/encouragement from an agent, people often lose interest in renewing policies, causing them to lapse.
Manish Jain, a Gurgaonbased certified financial planner, says companies offer online term plans through agents probably because they think it's necessary for better persistency.
According to insurers and distributors, people also prefer to go through agents for better postsale servicing.
"In the event of death, you would not want your family members to be left at the mercy of a faceless organisation for claim settlement. If you have an agent, your family can always take help from him for claim settlement," argues Harsha Roongta, CEO, Apnapaisa.com, an online personal finance service provider.
DO YOU PAY MORE?In some cases, the insurer may charge more if you are taking help from its agent. HDFC Life says the cost of the online term plan goes up if it is purchased through an agent. However, it refused to give the extent of the increase, saying that it differs on a case-to-case basis.
Birla Sunlife Life Insurance's Easy Protect Plan is priced more than the online term plans because of the fact that an agent is involved.
According to Roongta of Apnapaisa.com, the premium does go up, but only marginally. "If you are availing of services from an agent, you would not mind paying a little more for the convenience," he says.
However, unofficial estimates suggest that the premium can go up by 5-10% depending upon the kind of assistance you are taking. This is still cheaper than offline term plans, which are 25-30% more expensive than the online products.
However, not all insurers may charge more for assistance. This is because, in an online term plan, agent commission (10-15% of the premium) is part of the price. In direct sales, insurers save this amount. Most insurers launched online plans in the hope that people would prefer to buy directly through their websites. But it did not happen.
But why would an agent sell an online term plan when he can earn a 25-30% commission on selling offline plans?
A simple answer to this is - anything is better than nothing. With increasing awareness about online term plans, if a customer is not interested in buying a product an agent is pushing (usually plans offering higher commissions), and instead insists upon buying an online plan, the agent can facilitate the purchase for a 10-15% commission.
Anil Rego, founder and CEO, Right Horizons, a financial planning company, says if the cost is not high, it is always better to purchase online plans with help from an agent because of the complex details one has to fill in the application form.