Due to lower premiums and ease of buying, life insurance policies are being bought through the internet. Buying life insurance online is fast emerging as a preferred medium for buying and selling pure protection term insurance products.
Most online insurance buyers are relatively young, urban and tech-savvy insurance-seekers, say market observers. "We typically see men aged between 30 years and 44 years opting for online term covers," says TR Ramachandran, managing director and CEO, Aviva India, adding that the median age of the company's customers is 34. "Online term insurance seekers are financially sophisticated customers whose insurance awareness level is very high.
They are usually executives who have liabilities in the form of loans or wish to protect their families against the life uncertainties," says Sunil Sharma, chief actuary of Kotak Life. Industry estimates for average cover bought by policyholders range from 50 lakh to 75 lakh. Sensing a growing demand for online term plans, almost all private life insurers are focussing on this segment. Its contribution to their overall business remains low at around 3-5%, but corners a huge chunk of the protection portfolio.
For instance, in case of Aegon Religare Life Insurance, it accounts for 95% of the protection portfolio. Similarly, around 85% of Kotak Life's term business comes from online products. According to Aegon Religare's marketing director Harshal Shah, the claim experience, too, is better from the company's perspective. "Due to high awareness levels, the disclosures are better. In case of offline plans, there is a possibility that the insured has merely signed the form, with the agent entering the responses. Therefore, the information could be sketchy or inaccurate. In case of online, the policyholder is likely to have completed the form herself, resulting in better quality of information," he says.
Pricing is the key differentiator as other features of online and offline term plans are largely similar. That is, both promise to hand out the chosen sum assured, or life cover, to the nominee in case of the policyholder's demise.
"Online term life insurance policies are 30-40% cheaper when compared with their off line counterparts," says Sanjay Tiwari, vice-president - products, HDFC Life. Absence of distribution costs and low transaction costs are passed on to the customers by charging lower premium, he adds.
To buy a product online, you need to complete the proposal form which requires you to disclose your health, income, liabilities and family details. Next, you will get a premium estimate that needs to be paid. Remember, the premium that you have to actually pay may vary from what the insurer's premium calculator tool indicated during your research.
"The preliminary premium is determined after taking into account the insurance-seeker's responses to our questions, age and the sum assured chosen," says Shah. If you are not happy with the amount charged to you, you need not proceed. If you decide to accept the offering, you can go ahead and make the payment using your cards or Internet banking.
If the company, based on the amount of cover, age and disclosed health history, feels that you need not undergo medical tests, the underwriting process will come to an end. In case medical tests seem necessary, you will have to go through the same. The insurer will foot the bill for such tests. After making adjustments in the premium amount, if required, the policy will be issued to you. You will also have to submit the documents asked for - they can either be sent to the insurer's branch offices or uploaded online, if the option is provided on the portal.
The positives clearly outweigh the negatives for the life assured, but for nominees, the technology-driven edge might prove to be counter-productive, if they are unaware of the cover or the claim-filing procedure. With no friendly neighbourhood acquaintance-cum-agent to assist with the paperwork, the nominees might have to hunt for documents and make trips to the company's office.
"The help of an agent who is conversant with the procedures and formalities would definitely help the claimant," says consumer activist Jehangir Gai. Insurers, though, say that their call centres are equipped to handle claim queries.
Besides, if your agent happens to be unscrupulous, mis-selling is a distinct possibility. Many insurance agents, particularly those working with private insurers, quit their profession very soon. So, there is no certainty on the agent being available to render his service after death of the life assured.
nstead, you should focus on the quality of services offered by the insurer," says certified financial planner Pankaj Mathpal, CEO of Optima Money Managers. Since 2010, the number of individual agents exiting the profession has shot up. On their part, online term policyholders can keep their nominees informed about the cover and the location of the policy contract.