Buying insurance online needs homework

Insurance companies see a higher portion of motor insurance renewals and travel insurance coming through online channels.

Chennai:

Buying insurance online is an easy, convenient and cheaper as well. Online insurance is catching up fast among the net-savvy younger population. Insurance companies see a higher portion of motor insurance renewals and travel insurance coming through online channels. For someone who prefers to make purchases as per his convenience, there are health plans, life cover. Home insurance too is available online.

Convenience is the greatest advantage customers have while buying a product online. Mostly insurance companies have simple products for the online channel and these are easy to understand even without the help of a third party. But while doing away with agents one will have to examine all aspects of the product and the company, like insurance cover, term, exclusions, riders, credibility of the insurer and claim settlement record – all on his own.

The customer can go to aggregator sites and compare the products of different companies before taking a decision. The sites also provide reviews by customers who have already bought the product and made claims. Reviews are crucial to understand which company has hassle-free claim processing systems. However, one has to ensure that the information provided by the aggregator sites or the broker sites are genuine. Once the customer has decided on the product, he can also check the insurer’s website for better pricing. The product should be bought only from an authentic site.

Pricing is another advantage the online channel provides. “Technically, online product should be cheaper than the one bought through a broker or an agent. The customer acquisition costs are low in the online channel. Further, the commission for the broker or the agent, which can even go up to 15 per cent, can be eliminated. There is also the benefit of monetisation of operational efficiencies by cutting cost of delivery of the policy in its physical form. This can go up to 10 per cent. So, there is total cost advantage of 20-25 per cent for online product,” said Sanjay Pande, executive director, Finsall Networks. The insurance company may choose to pass on the advantage of lower cost either in the form of lower premium or higher sum insured.

Utilising online payment gateway and transacting through credit, debit or net banking also eliminates the uncertainty and delay around sending cheques or cash through the agent. The payment is done fast and the policy document also arrives in your mailbox faster.

However, buying an insurance product without a human interface can also lead to a wrong purchase. In the absence of a professional to judge the requirement and paying capacity, the customer may end up taking a bigger or a smaller cover. He may also opt for a longer term or a shorter term. An agent or a broker can help the customer make a better choice.

However, there is a flipside to it as well. If the agent withholds some information about the product, it may result in misselling. Agents may also try to push products, which provide them higher commission. Doing an online research on your own and making an informed choice can lower the chances of misselling. All individuals are not acquainted with the technical terms used by the insurance companies and much depends upon the comprehending capability of the buyer.

While theoretically, the online facility looks good, there are a few drawbacks of the e-distribution channel. The insurance plans available on the net are mostly pre-set. So, it won't be possible to customise a plan to suit your special requirements or negotiate your premium with the insurer.

Health insurance is comparatively more complex and buying it online would be a difficult thing to attempt for many. Many companies have come out with simpler health products for the online channel. These are vanilla products with not many riders. “These are pre-underwritten products and mostly all-encompassing. There are less chances of customisation,” said Pande. One also has to find out details such as hospital network and exclusion clauses.

A person, who does not need a medical check and is in the low to normal risk category, may not find much problem with the online products. But for others, it may not work. “In such cases usually messages pop up saying that a customer executive will get in touch with the customer,” said Pande.

In case of life cover, term plans are in great demand among online buyers. Arriving at the right sum insured and tenure is a difficulty most buyers face while buying a term plan online.

Finally, the taste of the pudding is in its eating. Claim processing is the most crucial aspect of any insurance policy. Many insurance companies allow online customers to make their insurance claims also online. Technically, this should help customers get their claim amount easily.

“But when it comes to processing of online claims, much needs to be done. Several gaps still exist in the way the claims are being handled,” said Pande. A human interface is very important at the time of claims processing. If the claims do not get settled within the stipulated time, the customer can push his case through the agents.

As the online channel gets larger for insurance companies with time, they will have to put the best systems in place for their customers to provide the same convenience in claims settlement as well.