Insurance companies have always been on the wrong side when it comes to their distribution/ sales channel and expense management. They have often been an eyesore for the exorbitant commission that they reward to distributors and sellers of the policies, which in turn also lead to lot of miss-selling. But now things are changing bit by bit –
More and more life insurance companies are aggressively looking to sell policies online in an effort to make their operations more cost effective and keep a check on expenses.
In order to encourage online sales, life insurance companies are offering various incentives to customers including policies at cheaper premium, easier and hassle-free buying procedures and instant verification. Some insurers have launched products to be sold exclusively through the online mode. This is a win – win situation for both the customers and the company.
Here is list of some incentives & exclusive online plans from different Life insurance companies:
Aegon Religare iTerm policy – Depending on the age, tenure and value of the policy, it is cheaper 7-40% cheaper than the next best term insurance. This policy is not available through the company’s agents, and payment has to be made online on the company’s website only. You can read the review here.
Bajaj Allianz offers its iGain Ulip policy exclusively online. This policy has lower charges than comparable policies from its own stable. I found that for gross yield of 10% the Net yield for iGain- II policy was around 8.53% as compared to 8.25% for other similar policies from Bajaj. This comparison was for 28 years male, 30 year term, Rs. 50,000 premium & 30X multiplier insurance.
HDFC Standard Life offers online purchase for three of its plans, and offers the benefit of lower charges and bonuses for customers buying online. The plans from HDFC stable are:
- Young Star Super Suvidha
- Pension Super
- Endowment Super Suvidha
If you buy online, there is a special discount of 40 % on 1st and 2nd year premium allocation charges allowing a larger part of premiums to be invested. These also pay back the first year annualized premium through a Bumper Addition. For policies with a term of 11 years and more you get your entire annual premium base and for policies with a term of 10 years you get 50% of original annual premium as Bumper Additions.
ICICI Prudential Life Insurance and Reliance Life Insurance now offer the online purchase option for some of their insurance plans, though, unlike Aegon and HDFC Standard Life, these plans are available through their agent network as well.
There are four plans available from ICICI Pru Stable:
- ICICI Pru ACE – This is till date the cheapest ULIP plan available in India. I had reviewed the same here.
- ICICI pru Pure Protect
- ICICI Pru Life Stage Pension Advantage
- ICICI Pru Hospital Care Plan A
Reliance Life offers two plans for online purchase:
- Life premier Basic Plan
- Life Premier Term 10 Plan
I checked and saw these plans have a better net yield (around 0.25% on gross yield of 10%) than other similar plans from Reliance.
I have noticed that the plans available online have low Premium Allocation charges as compared to normal plans from the same Life Insurance company which in turn leads to more investment and higher returns.
Other than the life insurance companies, some of the top general insurance private firms like ICICI Lombard, Bajaj Allianz, Reliance General, Tata AIG (travel policy only), Cholamandalam (car policy only) and Royal Sundaram, etc. offer health, auto and travel insurance to be bought online. Even a PSU like Oriental Insurance offers its retail policies online.
Why should you go for Online Buying?
As you have seen in the above examples companies are actually offering incentives in terms of lower charges and higher bonuses. But other than these there are a lot more other advantages. A big benefit of buying policies online is that you can see the best rates on offer as the internet is a transparent mechanism and companies need to offer the best rates to ensure the consumer does not go away.
It empowers consumers to make decisions on their personal investments at their own pace without being pestered by someone. Instant access to tools and calculators on respective websites also assist to make a well researched decision regarding financial needs.
You can buy policies at any time during the day Also, most of these sites offer a 24/7 chat facility to enable you to clarify doubts. It enables easy payment. And last but not the least there is almost no miss-selling in this channel and also the privacy is guaranteed.
This is not to say that the online experience cannot be bettered. First, there are irritants such as some online buy pages do not working on browsers other than Internet Explorer. Second, some benefits that are available in the offline world are not available in the buy-online option due to fraud control requirements.
But such disadvantages are few and far and the immediate advantages are substantial enough for most consumers to go online. A good example would be those buying health insurance policies at the last minute (before March 31, 2010) for tax reasons. It is possible to instantly get the digital copy of the policy in your mailbox even in the evening of March 31.
The new online channel is not only beneficial for customers but has helped Insurance companies too in a big way:
- There is no major advertising cost and so a lot of it can be passed on to end users.
- Internet helps them reach to far flung areas where appointing an agent may be difficult
- It’s obviously low cost for them too as no commission to agents is involved!
I feel the new online channel is the way forward and Insurance companies are able to offer a lot more value for its customers through this – For e.g. – both the cheapest Term Plan (Aegon Religare iTerm) and the Cheapest ULIP (ICICI Pru ACE) are available online. This would also help in curbing the biggest menace of the industry – miss-selling of insurance products to unsuspecting customers.
So next time you need to buy “Cheap & Best” insurance just be a bit net savvy and do a quick search – it would not only give you plans & options, that your neighborhood agent didn’t know but would also save you a few thousand rupees!