BackWhy can’t we compare insurance online in India?
After good growth in the initial years, things have been stagnant for the past couple of years
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E-commerce is finally a way of life in India. Personally, I do not remember the last time I bought a movie ticket over the counter or walked into a bookshop to buy the best-seller of the season. In financial services, too, I have not visited my bank branch for years now. The biggest need of the e-commerce experience is a product that customers are aware of and wish to buy, and innovative business models that offer significant convenience and flexibility to consumers.
Online insurance has grown 30-fold in the past four years, but still forms only 1% of the industry due to lack of consumer-pull products and weak adoption of new business models. The ball has been set in motion by insurers that have launched multiple online products, which have proved popular with customers because these are easier to buy and cost effective. A bigger reason, however, is the convenience it offers, and reduces mis-selling as everything is written or recorded.
Since the customers who buy online tend to do their own research and seek out the policy they need, chances of being sold a policy they do not want or need is extremely low. In life insurance, over 80% of the policies sold offline are traditional endowment products, whereas over 80% of the online segment is pure term insurance. Data proves that customers who buy policies online have higher persistency, while offline sales see high lapsation and cancellation (about 60% of these policies are cancelled before maturity).
With more than 50 life and general insurance companies offering a host of products online, there was a natural need of comparison so that customers can compare and contrast the features and make an informed choice. Online insurance comparison sites set up shop in India in 2008. But after good growth in the initial years, things have been stagnant for the past couple of years, and the segment has faced a lot of regulatory uncertainty and challenges. Owing to these, the sector has not been able to receive funding to support the investments in technology and marketing.
There are two clear business models across the world for price comparison sites, and referral has been the far more successful one.
In the intermediary model, a customer comes, is explained the product and sold that product on the intermediary website—this process is on the lines of travel portals such as Makemytrip and Yatra. Here, the customer has no interaction with the insurance company, and is not redirected to the insurance company’s website. The customer and her contact details stay with the comparison website, which manages her from a lifetime value perspective.
The referral or introduction model, on the other hand, is like Kayak or Ixigo, where a customer comes, compares, selects, and is redirected to the insurer’s website. The buying experience is managed by the insurer. The transaction may happen over a period of two-six weeks. There are two key aspects to the success of this mechanism. One, insurers need a good follow-up mechanism. Two, tracking and clear attribution rules, as any marketer would establish for marketing efforts.
The referrals model has, however, not been successful. Till a few years back, most insurers did not have robust follow-up mechanisms for the online customer. So, a referral system would cause drop-outs and aggregators were needed to step in and manage a larger part of the sales process. Today, most of the prominent companies (that account for 80% of sales) have taken their customer management processes to a higher level.
However, there is another challenge—robust tracking mechanism. Insurers know that listing on prominent Web aggregator sites help Web sales, but fall behind on tracking.
It is not difficult to track a customer who saw your advertisement, and bought six weeks later, via a cookie, email, mobile number, name-plus-date of birth combination. But there has to be a will to do so. Insurance is a considered product and will not be bought in a single session. So, introducers and influencers must be tracked in some detail. At present, the call centre does this. So, about 40% of the call centre’s job is to track sales, audit the fact that a sale has happened and is reported. This is a wasteful activity, and one that must be done away with.
If tracking is sorted, there will be no need for the customer to provide a mobile number, and the entire focus can be on good comparison. But regulation needs to allow for such a model to evolve.
The guidelines for Web aggregators released in 2013 put a blanket ban on such entities for advertising and giving reviews or ratings of products on their websites. Charging for lead generation was also banned, when this is a widely accepted business model in e-commerce. The regulations further prevent Web aggregators from selling non-insurance products. Even unit-linked insurance plans (Ulips) cannot be sold over the distance mode, even though these plans are emerging strongly post revisions. The model is so tightly defined by the guidelines that it leaves very little space for innovation.
Let us take a look at some other countries where these models have evolved. MoneySuperMarket, the leading Web aggregator in the UK, makes 46% of its revenue through non-insurance products. It doesn’t have a call centre, and all sales happen on the insurers’ websites. A bulk of its revenue is made from applications, which is akin to referrals. Scout24 in Germany operates in loans and mortgages apart from insurance. Independer in the Netherlands is in the credit cards, loans and insurance. Insurers such as Admiral in the UK, Blue Mountain in the US and Covea in France have invested in aggregators because it is widely understood that comparison engines in insurance lead to growth of the digital industry as a whole.
According to a report by Boston Consulting Group (BCG), globally, insurance is among the top five product and service categories where respondents shop via Internet. According to this report, in the US, the digital influence has reached 75% in motor insurance. In the UK, consumer research (BCG analysis, Datamonitor) shows that 51% of consumers surveyed bought their most recent policy through the Internet. Life insurance digital channel sales in terms of annualized new business premium are at around $2 billion (4%) in the US and around $500 million (4%) in Germany. As opposed to this, online sale of insurance in India stands a merger 1%. It is here that online insurance comparison becomes important.
By making information readily available, and allowing interested consumers to compare policy features and get the best value for their money, insurance aggregators help in better spread of insurance. This addresses the problem of underinsurance also. Online insurance also delivers better quality. However, Indian regulation has taken a tough view on aggregators and seen them with suspicion.
Comparison in any business leads to growth, be it airline tickets or other product categories, as it allows the market to expand by drawing new interested underserved customers. Insurance is no different. The online insurance business in India needs support to grow, and create value for customers.
We need good consumer centric products, as it has the potential to take us away from stagnant growth, high incidence of mis-selling, and increasing lapse rates, on to a level where consumers buy post-research and analysis, without increasing sales pressure.
We have 1-3 million agents, who can interact with customers locally. But current guidelines forbid aggregators to provide introductions to agents and brokers. This is how it works elsewhere: customer comes, compares, selects a product, and is then informed of the nearest service provider. These service providers are then rated, so future customers can choose with confidence. Half of UK aggregators’ revenue comes from other distributors not insurance companies.
If I were the regulator, I would do three things:
Control content and its veracity. For example, ratings should be allowed if there is a published logic to them. Customer reviews are fine as long as there are control mechanisms in place. These would essentially remove subjectivity.
Let business dynamics evolve business models. To build any Internet business of scale, you must put customers first, and successful Web aggregators will do that.
Ensure Web aggregators publish listings in a transparent and prominent way. Leave it open to comments by experts. Such transparency will ensure customers know the basis of any comparison and favouritism, if any, is removed altogether. For example, a Web aggregator should be allowed to compare products on prices, claims ratios, service standards (claims and issuance timelines), features and other parameters, but the basis of such comparison should be declared.
Yashish Dahiya is founder and chief executive officer, Policybazaar.com
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