The Insurance Regulatory and Development Authority (Irda) has set new hygiene standards for insurance Web aggregators in order to make them factual, unbiased and strictly information oriented.
Beginning February 2012, Web aggregators and insurance brokers that maintain websites will not be able to display ratings, rankings, endorsements or best-sellers of insurance products. Currently, in addition to providing information about insurance products, these portals also give rankings or top picks among products. This is typically based on the popularity of products on their websites or on the basis of internal valuation of products.
They have also been told to desist from commenting on insurers or their products in their editorials or at any other location in their websites. Instead they will need to provide only information pertaining to the product in a set format.
Illustration by Shyamal Banerjee/Mint.
According to the circular, the home page of the websites of web aggregators shall clearly provide links to product comparison charts and tables for each category of products covered by them. The comparison chart will have columns that will display four sets of information related to the product. One, the premium quoted by each insurer relevant to the age, health and other personal details of the client for the policy term and the amount of cover chosen by the customer. Two, default underwriting requirements such as medical examination, diagnostics or other documents. Three, exclusions, limits or other conditions. Four, key features of the product chosen.
This information will need to be up-to-date and collected from the insurers directly.
The guidelines say that the portals can’t have any advertisements or sponsored content. Since Web aggregators also function as lead generators for insurance companies, Irda has asked them to prominently display on the home page the message that the visitor’s particulars could be shared with insurers or brokers.
Additionally, the Web aggregators will not be able to transfer leads randomly. They will have to transfer the leads only to the insurers preferred by the visitor. However, if the client does not have a preference, then the aggregator is allowed to transmit leads to just three insurers in the same class of insurance business or one insurance broker.
Remuneration woes for aggregators
Though aggregators have welcomed transparency, the guidelines on remuneration have not gone down well, so much so that most are contemplating shutting shop.
Says Yashish Dahiya, CEO, Policybazaar.com: “The guidelines will result in the end of insurance aggregation in India. Under such guidelines the regulator is making sure that the only distribution channel which consistently reduces the cost of acquisition and provides customers a chance to compare before buying in the industry will seize to exist.”
According to the guidelines, an insurer will pay not more than Rs 1 lakh per year towards each product displayed by the Web aggregator in the comparison charts of its website. For leads, the insurer will pay Rs 10 per lead transmitted by the Web aggregator. However, if a lead gets converted into sales, where the customer buys an insurance product, the insurer can pay not more than 25% of the commission on the first-year premium of the policy.
Currently, for lead generation, Web aggregators charge Rs 50-250 per lead and if the lead is converted into sales, the portals also get to pocket the commissions, especially for non-life products. The guidelines have not only axed the remuneration from leads but also capped the remuneration from commissions.
Says Deepak Yohannan, founder and CEO, MyInsuranceClub.com: “On average we incur a cost of Rs 100-150 to generate a lead. It does not make any business sense to pay that kind of money for a remuneration of Rs 10 per lead. Even the commissions will hardly help. Once we pass on the lead, it becomes very difficult for us to track how many leads have been actually converted into sales. Under the current guidelines, it is hard for any Web aggregator to function.”
What it means for you?
The guidelines will bring in more transparency and equip you with unbiased information.
However, the balance commission—only 25% is payable to the Web aggregator—will not get passed to the customer. Explains Suresh Agarwal, executive vice-president and head (distribution and strategic initiatives), Kotak Life Insurance Co. Ltd: “It may apparently seem to be an income source but an insurer also needs to pay an annual fee of Rs 1 lakh and Rs 10 per lead. This expenditure will get compensated by the balance commission.” So don’t expect a premium cut.