Online purchase of insurance policies through web aggregators is fast gaining momentum. Quick and hassle-free process, instant issuance of soft policy copy on submitting the form, offering the customer cheaper options by optimising costs, saving on expenses by comparing prices, comparing policy benefits of multiple insurance companies at the click of a mouse are some primary reasons why customers are buying insurance policies from an online platform. "By 2021, around 40 per cent of customers buying insurance will purchase their policy through an online platform," says Tarun Mathur, Co-founder & CBO, Policybazaar.com.
In the digital era, where customers are used to online transactions/shopping, it only makes sense for them to buy their insurance policies via an online platform. "For instance, an online car insurance plan for a new car can be at least 40 per cent cheaper than that obtained through a dealer. It not only offers convenience and transparency, but also the power of choice and access to low-ticket products," says Mahavir Chopra - Chief Business Officer, Coverfox.com. Buying online is by far the cheapest option as compared to any physical platform where the cost of distribution is high due to an agency model.
Digitisation in buying insurance and claims settlement has contributed to the shift in buying trends. Millennials are more inclined to buy a product where buying and claims settlement processes are simple and convenient. The ease of connectivity and simplicity is the key factor that has influenced the change in the buying patterns from the agent-based sale to an online sales model. Online buying helps one buy a plan at their convenience. In case of a claim, one can raise it instantly. Through the implementation of advanced technologies by insurers, one can instantly upload the supporting documents for a claim from their cell phones, and the insurer can settle the same within a few hours and transfer the amount of the approved claims in the bank account of the customer.
Policybazaar's Self Video Cashless Claims feature on its app has enabled many PSU insurers to enhance their motor insurance claims settlement process in a more centralised way. Now, any customer with the claim amount of less than Rs 50,000 can come online and upload the video of his car. The survey is done instantly through the app and the claim is paid instantly. Moreover, 45 per cent transactions on the Policybazaar app are happening for the nationalised companies themselves. "On the life insurance side, the online policy issuance process is quite simple and fast. The major focus is on Death, Disability and Disease (3D's). The online plans have been designed effectively to serve the purpose. It gives you more clarity on the coverage and premium," adds Mathur of Policybazaar.com.
Web Aggregators have invested heavily in reaching out to insurance seekers through various digital as well as traditional marketing campaigns to leverage the growing digital ecosystem, with increased internet and smartphone penetration. The overall change in consumer behaviour to online retail, food delivery and ride-sharing transportation have brought in increased comfort among the wider range of users in the country. "Regulatory changes have also impacted the growth. For instance, demonetisation brought in a surge in offline customers moving online. The new motor insurance act resulted in a 5-8 times surge in two-wheeler insurance traffic," adds Chopra of Coverfox.com.
The switch to purchasing insurance policies online will impact the industry as a whole in the medium term. With digital distribution, the insurance industry has a better reach with millennials who prefer only online purchase and potential customers in Tier-II cities without any physical branches. The industry will benefit from the mid to long-term cost efficiencies in this model, which will help them build more cost-effective products that would have otherwise been impossible to build in the offline world. "Digital distribution also brings in better controls to insurers with respect to picking the right profiles and risk, which have a direct impact on the profitability of the industry," says Chopra of Coverfox.com. Further, the level of declaration from the customer on an online platform is far better, which helps in an effective underwriting process and minimising the risk for the insurance company.
In contrast, the physical distribution has always been an agent-led process where most of the time agents omit to declare each and every detail of a customer. On the online platform, when a customer is filling up the form himself, the level of the declaration is higher and accurate. For instance, 50 per cent health insurance policies that are issued through Policybazaar go through some or the other medical tests (physical or telemedicine), hence ensuring full disclosure from the customer's end. "We have seen that claims ratio on the online side is better due to the better declaration. This, in turn, pushes insurance companies to yield better products online. Hence, the customer looking for a good product will eventually come online," concludes Mathur.
(The writer is a Delhi-based expert, specialising in banking and financial services)