Online sales of term insurance policies on the rise

Sales of online term insurance plans are slowly increasing. And this is proving a win-win for both the customer and the insurance companies.

While companies are reaping benefits through lower costs by selling online, customers can buy life cover at the mere click of a mouse.

Further, lower premia for a given sum assured and customers going in for higher coverage are key features of online sale of term polices, say insurance industry veterans.

Online customers are also more open about disclosing existing illnesses or habits such as smoking and drinking. This is probably prompted by the fear that the claim may be rejected if it is discovered later on that a customer had withheld information, said industry officials.

Officials also pointed out that often agents selling the policies wrongly advise the customer not to disclose vital information so as to ensure lower premium.

Aegon Religare Life Insurance Company, which was the first to offer online term plans, now sells an equal number of policies online and offline, said Mr Yateesh Srivastava, Chief Marketing Officer. Last fiscal, the company sold 25,000 term policies online.

“We found that online has helped to build a robust portfolio,” he said.

Kotak Mahindra Old Mutual Life Insurance has seen its online sales grow five-fold since this medium was launched in November 2010, said Ms Elizabeth Venkataraman, Senior Vice-President.

“During the last fiscal, term insurance sold online was approximately 15 per cent of that sold through the offline channel. We are hopeful that this medium of sale will increase substantially this year,” she said.

Technology crucial

According to Mr B. Madhivanan, Executive Director, ICICI Prudential Life Insurance, technology will be a big driver of sales for insurance companies. “Online sales of term insurance plans has caught on because it is very transparent and, therefore, the easiest to sell,” he said.

Premium difference

By doing away with the intermediary, that is, the agent, companies are able to reduce their costs, which they pass on to customers by offering lower premium rates.

“Since the entire activity of sale happens online, the company saves on its distribution cost. The product sold online is priced better and rewards the customer for his efforts of independent buying,” Ms Venkataraman said.

According to Mr Srivastava, the premia for customers buying online can be “marginally to significantly” lower than those buying offline.

“If the customer is over 45 yeas of age, the difference between online and offline premium can be 5-6 per cent. But if the customer is around 30 years of age, the difference can be up to 50 per cent,” he explained.

Higher sum assured

Most companies are also seeing higher covers or sum assured (SA) for online policies. For Aegon Religare, the average SA for offline policies is Rs 13.5-14 lakh, against Rs 65 lakh for online policies. Similarly, ICICI Prudential currently has covers as high as Rs 65 lakh and even upwards of Rs 1 crore.

In the case of Kotak, the average sum assured for online version is close to Rs 60 lakh and for the offline version, around Rs 55 lakh.

The online medium gives companies access to a certain kind of customers who cannot otherwise be easily reached through the regular distribution channels, said Mr Srivastava. For Aegon Religare, most of its online customers are employed professionals with an average age of 30 years.

Mr Madhivanan said, “Our online customers are evolved customers, who understand the online medium. We have a dominant percentage of our customers for this plan from Mumbai alone and in the age group of 35-40 years.”