Articles

More than 100 million people have internet connections in India today. We spend more time on the internet than watching TV. We are the third-largest users of social networking sites like Facebook. These are interesting factoids. But what does this mean for financial services? It is an indication where this sector is headed in terms of distribution of its products and services. More than 45% of internet users search for financial services and insurance as a category.

Already, most of us are using net banking. We make our fixed deposits and mutual fund investments online, transact and pay our bills through net banking. And insurance is not far behind. From a humble beginning, like the banking sector, with online transaction facilities for existing customers, insurance companies are now rapidly moving towards selling products online.

The India growth story for e-commerce is on a fast track. The market for e-commerce grew from 8,146 crore in 2007 to 46,520 crore in 2011. E-commerce is catching up due to competitive pricing and the facility to compare products, and also because of reliable reviews of friends and peers and convenience.

From the initial baby steps with only simple term products, the industry is now exploring the online market for slightly more complex endowment products on the Ulip platform. Online as a medium has a lower distribution cost. Therefore, products offered through the internet are cheaper than the offline products, ensuring better IRRs. There are currently seven insurance companies in India offering online term plans.

Buying a plan online is a fairly simple process. All companies offer the option on their official websites. There are many comparator sites a prudent customer can visit to search on parameters of cost and features and buy the product that suits his/her requirement. In case of a high cover, the company will insist on a medical test for the customer, and the required documents, like income proof, nationality, etc, are to be uploaded.

The biggest advantage, perhaps, of buying an online plan is that it is very cost effective and the process is fairly simple. For example, a 30-year-old non-smoker can get a cover for as much as 1 crore in a term plan for an annual premium of as low as 8,000.

The only off-line step is getting a medical test done. Secondly, given the large section of urban population using net-based services and options to save time and effort, this can prove to be an ideal option for a more evolved and financial-savvy customer. Usually, the insurance companies give all the required information related to the plan online and many have online helplines to guide any potential or existing customer.

The online term plan is cost-effective as it works on the principle that you are literate, have researched and made an informed choice and the information provided is completely accurate. Hence, the quality of life covered is a lower risk. The distribution cost is negligible as the product is available directly from the company website.

Do keep in mind that the cover and claim settlement depends on the authenticity and accuracy of the information given when buying the plan. One of the cons of buying a term policy online is that customers may often unintentionally or to lower the premium, withhold any medical condition or other critical information that will result in complications or rejection of claims in future.

It is best to disclose things like any pre-existing medical conditions, habits, like consumption of tobacco and alcohol, etc, to ensure smooth and quick processing. Also, since the product has been developed keeping the internet platform in mind, it may not be available for customers in all places, but only in select urban cities with considerable internet penetration and usage.

To sum up, online is a great platform for you to get better deals even when buying a simple life cover. So start surfing, not just to plan your next holiday, but also to insure your life - the premium for your life cover may be cheaper than your next air ticket.

(The author is CEO & MD, Aviva India)