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Nothing can beat ease of buying policies at the click of a button. We take a closer look at the channel of the future
From offering online payment channels to selling their wares in the virtual space, insurance companies are increasingly getting hooked to the net. Till some time ago, only a few insurers like Aegon Religare Life Insurance, HDFC Life and Bajaj Allianz Life were selling online policies. Now several companies are trying to play catch-up as they rush to board the online platform. The latest entrants include ICICI Prudential, MetLife, Kotak Life and Future Generali which have launched term plans that can be purchased only online.
From an insurer's perspective, the virtual channel eliminates the commission that the company would have to pay to the distributor. This assumes significance in the backdrop of Insurance Regulatory and Development Authority (Irda) placing caps on Ulip charges, thereby limiting the commission payout. The change in rules coupled with the immense potential of the online platform is increasingly driving insurers to focus on exclusive online products.
"Independent buying of financial as well as other products and services on-line is expected to increase exponentially over the next few years," says G Murlidhar, chief operating officer, Kotak Life. "Today, there exists a niche of financially aware individuals who are comfortable with the online mode and are willing to make definitive choices regarding their investments and be rewarded for their efforts. The online model proffers such individuals the twin reward of cost-savings and convenience." Health insurers are also actively promoting the online platform for buying as well as renewing health policies. "We believe this is the channel of the future. It offers a lot of convenience and is simple to understand, which means that an individual can buy a policy online without someone else's guidance. Even those who have bought a policy through the physical channel should look at renewing it online," says Sanjay Datta, head, health insurance, ICICI Lombard General Insurance.
What's There For You?:
Convenience apart, for the customer, buying a policy online will mean shelling out a smaller sum as premium, in case of a life insurance plan. Buying health insurance online, however, will not yield any discounts. The regulator allows insurance companies to charge differential premium for online and offline life products. "Buying a term policy online can have significant advantages for the customer, both in terms of value as well as convenience. Buying a term policy online can lead to substantial savings as well convenience in terms of getting instantly insured (in case you do not require going for a medical examination)," explains Yateesh Srivatsava, chief marketing officer, Aegon Religare Life Insurance.
Depending on the life insurance company and the term policy you have opted for, the premium could be lower by up to 50% compared to its offline counterpart. In case of online Ulips, the benefit could be in the form of lower premium allocation charges compared to buying them from a distributor. For instance, HDFC Life offers insurance-seekers the option of buying three of its policies online. If you opt for the online platform, the first-year premium allocation charge will amount to 10% of the premium against 15% in case of other distribution channels. Similarly, the second-year premium allocation charges stand at 5% and 10% for online and offline platforms, respectively.
Is It Completely Online?
Yes. If you do not have to go through a medical test, that is. This is determined on the basis of the sum assured desired by you as well as the self-declaration you need to furnish. "In case the customers' declaration and sum assured combination makes them eligible for a non-medical processing they can proceed to make the payment and get instantly assured. If declaration and sum assured combination makes then ineligible for non-medical processing they are required to go for a medical test. Once the test is completed and evaluated by underwriting, the policy is issued," explains Srivastava. Insurers also offer tele-assistance for those who encounter doubts during the process.
Similar is the case with health insurance. Whether the proposer needs to undergo a medical test or not, is determined primarily by his/her age and cover sought. They also have to give a declaration of pre-existing illnesses. If you are not suffering from any ailments, you can proceed to make the payment and complete the process. In the event of the proposers requiring a medical test, the insurance company's representative will contact them to take the process forward.
The Glitches:
While insurers insist that the procedure is extremely simple even if the level of familiarity with the internet is not high, you need to get clarity on certain points before clicking away. "Before buying a life cover online, you need to make thorough enquiry about the claim settlement. If you purchase it through a branch or agent, they will take up the task of helping your dependents, as they are familiar with you and your family. However, in case of an online policy, they may have to approach the centralised claims cell directly. This may be a cause of inconvenience for some as the lack of personal connect may create hurdles," points out certified financial planner Pankaj Mathpal who tried making enquiries about the claim process with a leading life insurer and received a lacklustre response. This apart, most online term policies are not comprehensive as either they do not offer any rider options or the ones offered fall short when compared to those attached to offline term policies.
Also, as the distributor will not be there to guide you all along, you may find it difficult to determine the ideal sum assured. However, sceptics may argue that given the distributor's track record in mis-selling the lack of 'guidance' could even prove beneficial for the insurance-seeker.
Should You Go For It?:
Given that health insurance policies are renewed annually, you can certainly consider buying them online. But what about a life policy, which is a long-term contract and has the potential to determine your dependents' financial security in your absence? It may be convenient, but how prudent is it to take such a critical decision in a few clicks? Well, you do not have to do so at one go. You can approach a financial planner to ascertain the ideal life cover, depending on your needs, monthly expenses, dependents' profile and so on. An individual's life cover should be equal to at least 100 times his/her monthly income. In case you are disatisfied with the policy,you can surrender it within the 15-day free-look period. Armed with this basic information, you can compare online policies available and click away to ensure peace of mind for yourself and secure future for your family.
Source: The Economic Times
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