Coming clean

Written by Saikat Neogi | Updated: Nov 30 2011, 06:21am hrs
For weeks, Pramod Deo, a young corporate executive, was confused about which online term policy to choose from a plethora of options. His source of research was online aggregators, which displayed ratings and rankings of the product, but differed widely from each other.

From February 1, 2012, web aggregators will give only comparisons, which would include details of the products like premium according to age, health and other personal details, quantum of cover, limits and key features. The Insurance Regulatory and Development Authority (Irda) has come out with new guidelines on web aggregators that bar these companies from displaying on their websites ratings, rankings and endorsements, or indicating which are the faster-selling insurance products.

The information on aggregators' websites will be factual in nature and they cannot comment on insurers or their products in their editorials or any other location on the website. Experts say the new guidelines will bring in transparency. The new guidelines make it mandatory for web aggregators to be registered as a company under the Companies Act, 1956, and the owner of the site will need to have a net worth of more than R10 lakh and should not have a referral arrangement with an insurer. The agreement between an insurer and web aggregator will be for three years and the insurer will pay a flat fee of R1 lakh per year towards each product displayed in the comparison chart of its website. For transmitting leads, the aggregator will be paid R10 per lead by the insurer.

On their part, web aggregators cannot transmit the lead to more than three insurers in the same class of insurance business and the information on customers has to be shared with the insurer within five days. It has to also secure the customer data from any kind of misuse. Moreover, web aggregators cannot carry any advertisements or sponsored content on their websites.

Kamalji Sahay, managing director and chief executive officer, Star Union Dai-ichi Life Insurance, says the new guidelines will certainly bring in transparency as the aggregators are prevented from displaying ratings or rankings, which may influence the customers decision-making. Prakash Praharaj, a certified financial planner at Max Secure Financial Planners, agrees. Since very few customers are able to understand the complex product features on their own, the Irda initiative is aimed at bringing transparency and helping customers make better decisions, he says, adding that in addition to product features, customers are also interested in knowing past performance, such as declared bonus rates in the case of participating products and returns on linked products. This can go a long way in generating customers' interest to visit aggregators' site.

So, for people like Deo who are interested in taking a life cover at a young age, more comparative features on various risk and return parameters will help them make an informed decision. The new regulations dont prevent aggregators from comparing products of various insurers as long as the comparison is unbiased and backed by facts. It only restricts them from displaying ratings or rankings and making judgmental or suggestive comments like best seller. Says Sahay, If feature-wise comparison of comparable products of various insurers is provided by the aggregators, it will be very beneficial to the prospective customers in choosing the right product.

Harsh Roongta, chief executive officer of Apnapaisa, a web aggregator, says conceptually the price comparison industry welcomes the regulation since web aggregators play a vital role in consumers taking an informed decision, especially on risk-based products, such as term insurance or health insurance. The new regulations, however, disallow the industry from providing comparison across the market by using data sourced from public sources and presenting them in an easy to understand format for the end-consumer and providing value addition in terms of editorial input and customer feedback, he says. The commercial terms proposed in the regulation, adds Roongta, presupposes that the price comparison companies play a role akin to that of an insurance agent/broker and partially links compensation to first years commission payable on the product. This disincentivises propagation of zero/low commission products, such as term plans or health insurance plans, which are such a vital part in the spread of insurance culture in the country.

Online leads result in cost reduction for both the manufacturer and customers as 60% of India's population is below 30 years of age and is very tech-savvy. Since our insurance density is very low, manufacturers will have to design simpler products and strategise for volume growth through online sales, says Praharaj. With hundreds of policy options, the guidelines will help customers compare the products and comparative disclosures like claim settlement ratio and turnaround time for policy issuance, if included ,will help customers decide on the product that suits them.