Introduction to Web Aggregation:
In India, Insurance has usually been “sold” (depending upon the commission, the agent/broker gets) and not “bought”(depending upon the felt need of the customer). Insurance companies historically have relied on standard channels of distribution mainly agents who normally push the highest commission products. This often leads to post purchase dissonance and hence lapsed policies. The insurance policy contracts somehow are verbose, often have fine prints, and no proactive communication on negatives. No entity besides the regulator has an incentive in making the customer understand the contract he is actually entering into, as the focus is clearly on making the transaction happen. As a result, not only,there often is a mismatch between what a person needs and gets but also she/he doesn't get to exercise an informed choice option of price and insurance product by comparing neutrally various insurance policies of different companies. In a sense, she/he gets exploited for this lack of comparative information data.
Insurance aggregation is a process of finding multiple quotes of various Insurance Companies at one time so that the buyer can make an accurate comparison of insurance products based on his needs and budget. Insurance web aggregation in turn is finding this information on the web. It is an easy and consumer friendly display of prices, costs, features, service levels, consumer reviews, and sometimes the opinions of expertson different insurance options to a consumer, who voluntarily comes (he is actually buying)looking for such information. The information required by an aggregator from a customer is usually a superset of the information required by
all the insurers who provide a quote. Aggregators get traffic because customers
find value in the research they can do on their own on Insurance products, saving time, and in simple to understand language. This traffic is the key differentiator for a successful aggregator, and its advertising revenue potential. This implies there is a direct relationship between the accuracy and helpfulness of an aggregators comparison charts, and their success.
Aggregators are different from other channels, as they are designed to be a self-help tool for the customer. The focus is on education and information quality and richness. These results in deepening penetration of protection focused products which specifically cater to his needs some of which might be low cost products, products not typically sold through traditional intermediaries. For example pure term insurance products have been largely displayed and promoted by aggregators.
International Experience:
Web aggregators are standard tools for buying Insurance in most developed markets. The UK and US have 4 web aggregators who are publically listed. Other countries including Netherlands, Germany, France, Spain, Italy, Australia, Hong Kong, Ireland, South Korea, and Canada, among others have Web aggregators.
The UK has the most developed insurance aggregation business, supported by the FSA. For example, in UK, 63% of all motor insurance buyers compare before they buy.
Insurance Aggregation in India
Insurance Aggregation started in India in 2005 with two companies (i) Apnainsurance.com and (ii) Bimadeals.com. From 2005 to 2011 twenty other players joined this industry. Their importance can be gauged from the number of Unique Visitors to various leading insurance sites for instance the number of hits which was 344,000 in April 2010 became 1,900,000 in April 2011 for Policybazaar.com. Within a short span of time, these websites already account for over 50% of the 1st year premium collected via the Internet in India. For some companies, Aggregators can account for as much as 15% of their new business.
Regulations in India regarding Web Aggregation
IRDA vide circular No.IRDA/Admin/GDL/Misc./253/11/2011 have issued guidelines under section 14(1) of IRDA Act, 1999 which defines web aggregator, process of approval and eligibility criteria to be web aggregator, agreement between an insurer/ broker with web aggregator and conditions, contents to be displayed on website and remuneration caps on transmission leads and actual issuance of policies. The guideline prescribes a flat fee not exceeding Rs. 1 lac per year towards each product displayed by the web aggregator and an amount not exceeding Rs.10/- towards each lead transmitted by the web aggregator. An insurer shall pay a fee or remuneration to web aggregator not exceeding 25% of the commission payable or actually paid, if such leads get converted into actual sales, within the overall limits on commissions and expenses as provided u/s 40 (B) and 40(C) of the Insurance Act. The guidelines came in operations w.e.f.1st February, 2012.
The average charges till the lead stage which the WA has to pay to search engine sites such as Google is about Rs 100 or more (as voiced by some of the WAs and needs to be verified) and putting a cap of Rs 10 per lead has made it totally un-remunerative. As a result, out of 15 WAs, only 5 companies decided to apply for aggregator license, that too under protest on commercials and only 2 of these have received licenses.
It may be pointed out that in no other country, is there a remuneration cap between the WA and an Insurer.
Likely implication
The implication of Rs 10 per lead as stipulated by IRDA, given the fact that since its initial phase and not more than 25% of leads are actually getting converted into sales, implies that WA end up paying more to the service providers than what they receive from prospective customers and that is making the entire process a non-starter. A question arises therefore whether should it not be left for them (WA & Insurers) to decide mutually depending upon their volumes and economies, within the overall expense limit as defined under the Act?
The likely reach of internet in Indian scenario in the coming years is going to be phenomenal. Almost 50% of the total population will have access to internet in the next five years and we will thus be missing out in a major way if we ignore the power of internet and continue to stifle it with some short sighted guidelines. We need to look into the future and create an enabling environment which provides prospective customers a neutral unbiased web based platform to compare insurance policies and make a judicious choice.
IRDA has rightly put conditions to monitor the content of what’s displayed by a WA to ensure against misinformation and to maintain neutrality. Regarding the remuneration between an Insurer and the WA, IRDA‘s stipulation of it being within the overall limit u/s 40(B) & (C) of the Insurance Act for those leads actually getting converted into sales (ie lead charges +sales commission) is also within the justifiable as there is no separate definition of a WA under the Act and the expenses are to be covered within the meaning of Section 40 (B) & (C) of the Insurance Act.
There’s another related issue which is hampering the growth of insurance e-policies. IRDA has mandated that Insurance co. has to reapply for product approval if it proposes to put a product, already approved, as a e-policy based product too. There are large no. of products already approved and in order to increase the efficacy of web-based comparison of insurance products, it is desirable that all such products should be available as e-products. Otherwise, the basket of Insurance products available online gets severely restricted, depriving customers to make a meaningful comparison and choice. The logic of IRDA is that the regulator wants to examine the cost implication of a product being introduced as e-product and that no additional cost should be passed on to the customer. This, however, can be achieved by adding a certification from the insurance co that such an introduction doesn’t increase the premium nor changes any aspect of the policy in any manner. E-policies, by cutting down the other expenses, may actually lead to some cost savings for the insurance cos and that will act as an incentive for them to concentrate on issuance of e-policies in a major way duly harnessing the web based potential and reach.
In view of the growing importance of internet, the web based insurance business, whether issuance of e-policies or comparison sites on the web, need to be encouraged. Putting a cap of Rs 10 per lead, without any basis, is proving to be stifling and is restraining the propagation of Insurance policies through comparative sites in a major way and needs to be done away with. Similarly, asking the co to reapply for approval for a product already approved leads to delays and puts extra burden on the regulator which can be obviated by having a certification by the insurance co. regarding the price impact and status quo of product features.
Suggestions for making Web Aggregation more effective in India
(i) the actual charges levied by the WA and payable by the insurers on a per click or per lead basis should be left to be decided by them which will vary depending upon the volume of business, the web-design of the WA and other such factors, subject to it being within the overall limits under Section 40(B) & (C) of the Insurance Act;
(ii) An insurance product, once approved by IRDA need not require re-approval if it is proposed to be introduced as an e-policy provided it doesn’t lead to increase in premium and there remains status-quo so far as product design is concerned. A certificate needs to be filed by the co. in this respect with the Authority who can take appropriate action in case of any violations.
(iii) There shouldn't be an entry fee prescribed (at present Rs 1 lakh) payable by an Insurance company to the WA for display of an insurance product on the web aggregator portal. It puts a cost for the insurance co. and may deter them from displaying low premium insurance products and thereby depriving customers from availing such products. In fact, I would suggest that enlisting of any insurance product should be free so that one can have as many products on such portals as possible which will give the intended customers a real time choice option.
Conclusion
Indian insurance market which used to be predominantly agent (including brokers and corporate agents) driven is changing with newer mode of distribution channels such as Bancassurance and web based individual insurance cos portals coming to play increasing role. The importance of web aggregation for insurance cannot be ignored. World over, especially in mature markets, majority of insurance policies in Motor, health and property insurance as well as life insurance are bought online through web aggregation. This is yet another effective and neutral platform providing comparative information on various insurance products of different companies to the intended customers and enabling them making an informed choice based on their specific need and budget. Web aggregation thus needs to be encouraged and shouldn't be curbed down with some short sighted ill-informed regulations. People have suffered tremendously since 2006-07 on account of large scale mis-selling and a time has come when they should "buy" insurance products rather than being "sold".
In India, Insurance has usually been “sold” (depending upon the commission, the agent/broker gets) and not “bought”(depending upon the felt need of the customer). Insurance companies historically have relied on standard channels of distribution mainly agents who normally push the highest commission products. This often leads to post purchase dissonance and hence lapsed policies. The insurance policy contracts somehow are verbose, often have fine prints, and no proactive communication on negatives. No entity besides the regulator has an incentive in making the customer understand the contract he is actually entering into, as the focus is clearly on making the transaction happen. As a result, not only,there often is a mismatch between what a person needs and gets but also she/he doesn't get to exercise an informed choice option of price and insurance product by comparing neutrally various insurance policies of different companies. In a sense, she/he gets exploited for this lack of comparative information data.
Insurance aggregation is a process of finding multiple quotes of various Insurance Companies at one time so that the buyer can make an accurate comparison of insurance products based on his needs and budget. Insurance web aggregation in turn is finding this information on the web. It is an easy and consumer friendly display of prices, costs, features, service levels, consumer reviews, and sometimes the opinions of expertson different insurance options to a consumer, who voluntarily comes (he is actually buying)looking for such information. The information required by an aggregator from a customer is usually a superset of the information required by
all the insurers who provide a quote. Aggregators get traffic because customers
find value in the research they can do on their own on Insurance products, saving time, and in simple to understand language. This traffic is the key differentiator for a successful aggregator, and its advertising revenue potential. This implies there is a direct relationship between the accuracy and helpfulness of an aggregators comparison charts, and their success.
Aggregators are different from other channels, as they are designed to be a self-help tool for the customer. The focus is on education and information quality and richness. These results in deepening penetration of protection focused products which specifically cater to his needs some of which might be low cost products, products not typically sold through traditional intermediaries. For example pure term insurance products have been largely displayed and promoted by aggregators.
International Experience:
Web aggregators are standard tools for buying Insurance in most developed markets. The UK and US have 4 web aggregators who are publically listed. Other countries including Netherlands, Germany, France, Spain, Italy, Australia, Hong Kong, Ireland, South Korea, and Canada, among others have Web aggregators.
The UK has the most developed insurance aggregation business, supported by the FSA. For example, in UK, 63% of all motor insurance buyers compare before they buy.
Insurance Aggregation in India
Insurance Aggregation started in India in 2005 with two companies (i) Apnainsurance.com and (ii) Bimadeals.com. From 2005 to 2011 twenty other players joined this industry. Their importance can be gauged from the number of Unique Visitors to various leading insurance sites for instance the number of hits which was 344,000 in April 2010 became 1,900,000 in April 2011 for Policybazaar.com. Within a short span of time, these websites already account for over 50% of the 1st year premium collected via the Internet in India. For some companies, Aggregators can account for as much as 15% of their new business.
Regulations in India regarding Web Aggregation
IRDA vide circular No.IRDA/Admin/GDL/Misc./253/11/2011 have issued guidelines under section 14(1) of IRDA Act, 1999 which defines web aggregator, process of approval and eligibility criteria to be web aggregator, agreement between an insurer/ broker with web aggregator and conditions, contents to be displayed on website and remuneration caps on transmission leads and actual issuance of policies. The guideline prescribes a flat fee not exceeding Rs. 1 lac per year towards each product displayed by the web aggregator and an amount not exceeding Rs.10/- towards each lead transmitted by the web aggregator. An insurer shall pay a fee or remuneration to web aggregator not exceeding 25% of the commission payable or actually paid, if such leads get converted into actual sales, within the overall limits on commissions and expenses as provided u/s 40 (B) and 40(C) of the Insurance Act. The guidelines came in operations w.e.f.1st February, 2012.
The average charges till the lead stage which the WA has to pay to search engine sites such as Google is about Rs 100 or more (as voiced by some of the WAs and needs to be verified) and putting a cap of Rs 10 per lead has made it totally un-remunerative. As a result, out of 15 WAs, only 5 companies decided to apply for aggregator license, that too under protest on commercials and only 2 of these have received licenses.
It may be pointed out that in no other country, is there a remuneration cap between the WA and an Insurer.
Likely implication
The implication of Rs 10 per lead as stipulated by IRDA, given the fact that since its initial phase and not more than 25% of leads are actually getting converted into sales, implies that WA end up paying more to the service providers than what they receive from prospective customers and that is making the entire process a non-starter. A question arises therefore whether should it not be left for them (WA & Insurers) to decide mutually depending upon their volumes and economies, within the overall expense limit as defined under the Act?
The likely reach of internet in Indian scenario in the coming years is going to be phenomenal. Almost 50% of the total population will have access to internet in the next five years and we will thus be missing out in a major way if we ignore the power of internet and continue to stifle it with some short sighted guidelines. We need to look into the future and create an enabling environment which provides prospective customers a neutral unbiased web based platform to compare insurance policies and make a judicious choice.
IRDA has rightly put conditions to monitor the content of what’s displayed by a WA to ensure against misinformation and to maintain neutrality. Regarding the remuneration between an Insurer and the WA, IRDA‘s stipulation of it being within the overall limit u/s 40(B) & (C) of the Insurance Act for those leads actually getting converted into sales (ie lead charges +sales commission) is also within the justifiable as there is no separate definition of a WA under the Act and the expenses are to be covered within the meaning of Section 40 (B) & (C) of the Insurance Act.
There’s another related issue which is hampering the growth of insurance e-policies. IRDA has mandated that Insurance co. has to reapply for product approval if it proposes to put a product, already approved, as a e-policy based product too. There are large no. of products already approved and in order to increase the efficacy of web-based comparison of insurance products, it is desirable that all such products should be available as e-products. Otherwise, the basket of Insurance products available online gets severely restricted, depriving customers to make a meaningful comparison and choice. The logic of IRDA is that the regulator wants to examine the cost implication of a product being introduced as e-product and that no additional cost should be passed on to the customer. This, however, can be achieved by adding a certification from the insurance co that such an introduction doesn’t increase the premium nor changes any aspect of the policy in any manner. E-policies, by cutting down the other expenses, may actually lead to some cost savings for the insurance cos and that will act as an incentive for them to concentrate on issuance of e-policies in a major way duly harnessing the web based potential and reach.
In view of the growing importance of internet, the web based insurance business, whether issuance of e-policies or comparison sites on the web, need to be encouraged. Putting a cap of Rs 10 per lead, without any basis, is proving to be stifling and is restraining the propagation of Insurance policies through comparative sites in a major way and needs to be done away with. Similarly, asking the co to reapply for approval for a product already approved leads to delays and puts extra burden on the regulator which can be obviated by having a certification by the insurance co. regarding the price impact and status quo of product features.
Suggestions for making Web Aggregation more effective in India
(i) the actual charges levied by the WA and payable by the insurers on a per click or per lead basis should be left to be decided by them which will vary depending upon the volume of business, the web-design of the WA and other such factors, subject to it being within the overall limits under Section 40(B) & (C) of the Insurance Act;
(ii) An insurance product, once approved by IRDA need not require re-approval if it is proposed to be introduced as an e-policy provided it doesn’t lead to increase in premium and there remains status-quo so far as product design is concerned. A certificate needs to be filed by the co. in this respect with the Authority who can take appropriate action in case of any violations.
(iii) There shouldn't be an entry fee prescribed (at present Rs 1 lakh) payable by an Insurance company to the WA for display of an insurance product on the web aggregator portal. It puts a cost for the insurance co. and may deter them from displaying low premium insurance products and thereby depriving customers from availing such products. In fact, I would suggest that enlisting of any insurance product should be free so that one can have as many products on such portals as possible which will give the intended customers a real time choice option.
Indian insurance market which used to be predominantly agent (including brokers and corporate agents) driven is changing with newer mode of distribution channels such as Bancassurance and web based individual insurance cos portals coming to play increasing role. The importance of web aggregation for insurance cannot be ignored. World over, especially in mature markets, majority of insurance policies in Motor, health and property insurance as well as life insurance are bought online through web aggregation. This is yet another effective and neutral platform providing comparative information on various insurance products of different companies to the intended customers and enabling them making an informed choice based on their specific need and budget. Web aggregation thus needs to be encouraged and shouldn't be curbed down with some short sighted ill-informed regulations. People have suffered tremendously since 2006-07 on account of large scale mis-selling and a time has come when they should "buy" insurance products rather than being "sold".
Hi Aravind, excellent observation and good suggestions. I am Girish Gopinath an Insurance IT professional. I liked the note.
ReplyDeletehi, Aravind
ReplyDeleteShare me your email ID
prashanth.groffr@gmail.com
Hello Sir,
ReplyDeleteHow to apply web aggregator Licence?
Plz. tell me
Hello Arvind,
ReplyDeleteAn excellent analysis,I need some info about web aggregator startup (thinking to develp Mediclaim.info)
pls share your contact details so I can talk with you,
Thanks,