To buy insurance without an agent is unheard of in India, though quite common abroad. For the financially-savvy consumer of insurance products in India, buying life insurance is frustrating. We know that a term insurance plan is the cheapest and most flexible way to buy life cover. But this cover is almost impossible to buy because no agent is willing to sell it. They try and push a unit-linked insurance plan (Ulip) that gets them a higher commission since the premium ticket size is much larger.
Two insurance companies have dared to disturb the cosy arrangement with the agents and are now offering a policy each online. Aegon Religare Life Insurance Co. Ltd has a term plan called iTerm plan and Bajaj Allianz Life Insurance Co. Ltd offers a Ulip called iGain II online only. Other insurers such as ICICI Prudential Life Insurance Co. Ltd sell some of their regular products online.
This space is fast developing as many insurers are gearing up to roll out online products. You get to save on agent commissions (that are as high as 40% for a normal offline plan) and the company is able to service you directly, stepping over the agents that keep changing insurance companies. And of course, the paperwork is less.
Says Yateesh Srivastava, chief marketing officer, Aegon Religare Life: “Our online term plan is cheaper than other plans in the market by 6-70% depending upon the age and the sum assured.” He’s right (see Cheaper Bet). However, the process is not entirely online yet. There are formalities to be done in the physical world. First, let’s see what you can do online.
Also See | Cheaper Bet (Graphics)
What you do online?
You can fill the proposal form online and personal details like your age, occupation, any pre-existing diseases and habits like alcohol consumption and smoking, which tend to make the premiums higher.
For buying iTerm, you need to choose a sum assured, the money that your beneficiary gets if you die before the policy tenure ends. Do that and the software churns out a premium that would apply to you. You can pay the premium through a credit card, debit card or through Internet banking. Once you have made the payment, you get a cover note, almost instantly, in your mailbox. A cover note is a valid insurance document that is used in lieu of a policy document till it reaches you.
In case of iGain II, the process has some more layers. You decide the premium (investment) amount as well as the sum assured. Now, choose the funds in which you want to invest. iGain II offers two investment options: You could either invest in seven funds ranging from pure equity to pure debt option, or choose a “wheel of life” portfolio strategy that reallocates your premium depending on your age.
On keying the information, the software will sketch out an illustration to show how your policy would perform year-on-year, assuming that the funds grow at either 6% or 10%. Your costs are reflected in the effective yield mentioned in the illustration. You can then pay the premium and you will get a receipt. Bajaj Allianz does not issue the cover note immediately.
Even after all this, the policy would be still a few offline transactions away.
What you do offline?
Offline, a company representative will call you to collect your documents for the know your customer (KYC) norms. You need to keep proofs of your identity, address, income and date of birth handy. The policy comes three to four days after the documents are processed by the insurer.
While iGain II covers you only after your documents are processed offline, iTerm covers you right from the time you make a payment. Says Srivastava: “The minute the customer makes the payment, he is covered except in the case where medical tests are required. On death, we make a payment to the beneficiary after collecting KYC documents from him.”
The medical test depends on a variety of factors, such as age, pre-existing diseases, family history and consumption of alcohol or smoking.
Says Mahima Tankha, head (websales), Bajaj Allianz Life: “Typically, there are no medical tests till the age of 45 years. But, we may insist on a medical check-up, depending on the sum assured, the term of the policy and whether you have harmful habits.”
Once you do your paces on the treadmill and get your blood sucked out for testing, the insurer will process your policy documents. However, if you are unfit, the insurer may ask you to settle for a lower sum assured or a higher premium. Says Srivastava: “In such cases, we make a counter-offer depending on how much sum assured we can offer after the due underwriting process gets completed. If the cover is acceptable to the customer, we go ahead and issue the policy or we refund the premium.”
If you are buying iTerm, the difference in price is startling. For instance, a 30-year-old opting for a sum assured of Rs10 lakh for a term of 25 years will pay a premium of Rs1,920 for iTerm. Compare this with their offline term plan and the difference is 21 percentage points. Go for a higher sum assured and the cost benefit increases. For a Rs50 lakh cover for a 30-year-old, a policy with a term of 10 years costs Rs17,200, 95% less than its own offline product and 73.45% less than other comparative products in the market.
The benefits are not so stark in iGain II. The costs are similar to a regular offline Ulip even as the policy saves on intermediary and other paperwork costs. Says Tankha: “Online is a nascent channel and we have had to incur costs in order to set up a robust back-end channel. So, currently, it may not be a very cheap channel but two to three years down the line the economies of scale will kick in. Although we do not pay commission, but we do incur cost, which is expected to come down.” For example, for a 30-year-old paying a premium of Rs1 lakh for 20 years, the fund value on maturity is Rs50.7 lakh, assuming the fund grows at 10% every year. This is a return of 8.21% per annum.
These are early days for the insurers to mature from showcasing their products online to actually selling them. If you know what you want, then online is the medium for you. And the Aegon Religare product does look good.
Illustration by Jayachandran/Mint
Graphics by Yogesh Kumar/Mint