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Insurance e-commerce norms will push insurers to innovate

Posted by - Sanjeev Mantri, Executive Director
August 19 2016

E-commerce as an industry took birth way back in 1979 but became mainstream with the launch of Amazon.com in 1995. Starting with simple sale of standardised products, the segment has evolved to empower consumers to design and customise products online to suit their individual preferences. In a span of two decades, the sector has grown to a $1.67-trillion industry. India, which is touted as the world’s fastest growing major economy, is also among the fastest growing e-commerce markets. For a country that registered $3.8 billion in sales in this sector in 2009, the industry is expected to grow 10 times to $38 billion by the end of 2016.

The Indian insurance industry is expected to actively participate in the online revolution. It is estimated to clock online sales of ` 20,000 crore by 2020, a rise of 20 times in just 5 years. We have already experienced success stories in online insurance. Life insurance products such as term insurance got a new lease of life with the surge in online policies that were priced lower than traditional term plans. General insurers, too, haven’t stayed behind. They now offer non-life insurance products on both online and mobile platforms. In fact, today, products such as travel insurance dominate the online platform, with two in every three travel insurance policies being purchased online. Motor insurance renewal is already witnessing a shift to the online platform, and more recently to mobile apps.

In a major milestone, the insurance regulator recently released an exposure draft on guidelines pertaining to distribution, sale and servicing of insurance products through the online platform. This came with a short period of the government announcing e-commerce regulations.

The new guidelines are a much needed step for the industry to ensure a clear roadmap for multiple entities that want to establish or enhance their online platforms.

Even as the guidelines provide clarity in terms of the responsibilities of insurance companies and intermediaries, they will ensure a better experience for consumers as well. For one, consumers should benefit from a seamless experience while buying insurance. At their end, insurers need to quickly align their online platforms with those of their channel partners or work with the intermediaries to develop integrated systems that cut across the manufacturer-distributor relationship. The guidelines also provide a clear roadmap for the distribution chain encompassing the insurer and the intermediaries. They map the responsibilities for the intermediary, including the role of the insurer in case a policy is sold online by the intermediary. This is important as consumers buying online will not have the traditional support of their family agent or preferred dealer but will have to seek support of neutral platforms.

Further, insurers will be allowed to sell products through the online platform which are currently available through offline channels with differentiated pricing. This will enable insurers to offer their entire suite of products and combine their product development expertise with the service capabilities that the online platform offers. For consumers, this means access to quality and tested products at differentiated prices while wanting to avail the convenience and speed of the online platform.

Some may argue that products like insurance need an offline intervention given the nature of the product wherein the benefits are not immediately evident or are derived after a long gap post-product purchase.

Also, one needs to understand multiple aspects of the product, including policy exclusions. These fears seem to be farfetched as life insurers have already successfully sold term plans through the Web medium for many years, including the high-value single-premium option. Similarly, general insurance companies are gaining traction online in products such as travel and motor insurance.

Many industries have been able to improve product penetration by moving online and the insurance sector too can witness the same impact.

We expect the guidelines to provide clarity on the distribution front in terms of their implication for the diverse set of distribution partners. As specified, Insurance Self Network Platforms would need to be set up by interested companies to sell insurance online without any offline intervention. It would help if the regulations provide complete clarity on key processes such as filling of forms and their acceptance, pricing of insurance covers, compliance to know-your-customer (KYC) requirements, issuance of policies, settlement of claims and other policy related aspects. Having said this, the measures announced on e-signatures and eKYC as well the mandatory requirement to set up e-insurance accounts to store policy documents are a big move forward in that regard.

So what lies ahead? It is now in the hands of industry participants and other stakeholders to work together and introduce comprehensive Web enabled and mobility solutions for the benefit of consumers, especially the millennial generation, which is oriented to the online experience. One can learn from the online retail industry which, driven by entrepreneurship and innovation, has dismantled many traditional approaches to product sale and customer service. Simple yet innovative product offerings and customised solutions are possible in the online era. The stage has been set; it is now for the industry to make the leap into the online age.

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