Insurance regulator issues draft norms on payments to Web aggregators

New Delhi: The Insurance Regulatory and Development Authority (Irda) issued a new set of draft regulations on Web aggregators in July that relate to how they get paid.

add_main_imageAccording to the new regulations, insurance Web aggregators will not get any money for generating leads and referrals but will be paid only if a product is sold through their services or leads provided by them. However, their remuneration won’t exceed the stipulated cap on commissions prescribed under section 40A of the Insurance Act, 1938.

“Online, we generally promote low- or zero-commission products. Our costs are seen as cost of acquisition by insurers, which now must be within the limits set under section 40A. This does not mean any extra cost to the policyholder,” said Yashish Dahiya, chief executive officer (CEO), Policybazaar.com, an insurance Web aggregator. In order to procure sales, the Web aggregator can make use of telemarketing and distance marketing.NextMAds

In the earlier guideline issued on Web aggregators in November 2011, the insurance regulator had axed the remuneration on lead generation to ₹ 10. According to the guidelines, an insurer was allowed to pay up to ₹ 1 lakh per year towards a product being displayed by a Web aggregator. The remuneration per lead was ₹ 10 and if a lead got converted into sales, the insurer could pay up to 25% of the commission on the first-year premium of the policy.

These guidelines were not well received by Web aggregators and many of them changed their business model from lead generation to a sales-driven model.

“When we began, we could only sustain the lead model because there weren’t enough insurance policies for online sales. But the lead model has not been very successful because we don’t know if the lead actually gets converted into sales. The cost of generating a lead is ₹ 80 to ₹ 300 per lead. So it made sense to focus on sale. Regulations so far were quiet on it but now the regulations make sale legitimate. In that sense, the regulations are forward looking,” said Deepak Yohannan, CEO, MyInsuranceClub.com, a Web aggregator.

The fact that Web aggregators won’t make money on lead generation is contrary to the fact that monetizing lead generation is a widely accepted business model in e-commerce.

Yet, Web aggregators don’t seem upset. “The idea was to bring parity between online and offline models. Offline referrals don’t get paid extra,” said Yohannan.

However, hope floats that eventually the lead model will get the desired push.sixthMAds

“Insurers need to improve their lead conversion ability; all insurers do not have the same maturity and capability. Until that happens, the assisted sale model is fair. But, eventually, Web aggregators will move to the lead model because we sell zero- or low-commission plans online and the cost of acquisition comes down with time. Hopefully, then the regulations will evolve,” said Dahiya.

The new set of draft guidelines have brought down the annual fee to ₹ 50,000 from the ₹ 1 lakh proposed earlier. Other aspects remain the same: Web aggregators will not be able to display ratings, rankings, endorsements or best-sellers of insurance products. They will need to provide only information pertaining to the product in a set format.

Further, the portals will not have any advertisement or sponsored content. In terms of leads, the Web aggregators will have to prominently display on the home page the message that the visitor’s particulars could be shared with insurers or brokers. Moreover, they will not be able to transfer leads randomly but 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 three insurers in the same class of insurance business.

The regulations are in the draft stage and Irda has invited public comments till 8 August.