INTERVIEW OF YASHISH DAHIYA, CEO, POLICYBAZAAR E-com is very, very positive

Yashish Dahiya, Chief Executive Officer and co-founder, PolicyBazaar.com, in a conversation with Teena Jain Kaushal, explains how online platforms, including e-commerce players, are contributing to the growth of the insurance industry.

Which insurance products are doing well online or are expected to gain popularity?

All insurance products are gaining traction online. For instance, 10-12 per cent of motor insurance is happening online. In health insurance, about 12 per cent of first year policies are online. In term insurance, about 18 per cent is online. In Ulip, 10-15 per cent is happening online. Endowment, however, is zero.

Why is that the case with endowment policies?

At present, 70 per cent of the life insurance market is endowment and there are enough policies available online. But, not a single customer, after understanding the product, wants to buy them. The only way to sell these policies is when they are not explained to the customer, which is something that cannot be done online.

Could you please elaborate?

Okay, tell me something. If a bank offers you 8 per cent guaranteed return on your investment and I, as an agent, come to you to sell an endowment policy that gives you an assured return of 4 per cent, will you buy it?

On the online platform, I can’t bluff and promise you 10 per cent return because the moment I lie, I am doing something illegal. But if I meet you personally, I can risk giving you a wrong picture, without being caught. Online, everything is documented, which is not the case in the offline mode for selling insurance.

Once you buy the policy, there is a 15-day free-look period, when you can return the policy without incurring charges. But usually, one realises his or her mistake only after 15 days are over. Then, you can surrender the policy – that is what 80 per cent of customers do on the endowment side. Sadly, the surrender charge in an endowment policy is obnoxiously high at 70-80 per cent. The rate of lapse in other insurance products is not so high. Look at health insurance. Why is there not such high lapsation in health? Why not in term policies? Why is it that only in endowment policy 80 per cent of the customers leave?

What about Ulips?

Ulips are so few right that they do not add up to the overall numbers. Now, at least, consumers have an understanding of what they are buying. It’s closer to reality. In fact, Ulips have gone up in numbers, if you compare to what they were back in the last decade.

Before September 2010, Ulips were bad. After September 2010, Ulips are good because the charges in Ulips have come down very significantly. Ulips have gradually become a very good consumer-centric product. And that is why they stopped selling. The reason for not selling was because the distributor was not getting enough from it. Today, on every Ulip, an agent gets paid less than 10 per cent commission but on traditional products you can get 70-80 per cent. Earlier you were getting 70-80 per cent commission on Ulips also. So, there was enough margin. So as a distributor, why will I sell you Ulips when I hardly earn anything?

There were guidelines about ecommerce companies selling financial products such as insurance and mutual funds. What is your take? How is this model going to affect you?

Positive, very positive! They should be allowed. I think e-commerce is one of the best ways to sell products. It’s quite transparent. It lays out all the actual features of the product where their selling is very low. I think it’s very, very positive!

But will the products be priced differently?

Not necessary. If you have the same products, why do you want to price the products differently?

Then what is the purpose?

Convenience. See, if at 9 O’clock in the night, I want to buy something, why would I want to meet someone? Why do we buy on Amazon? We don’t buy just because it is cheap, we buy because of convenience. I don’t think we get discounts on Amazon any longer. Must be very, very little, and in UK, they don’t have any discounts. It’s the same price. But it is very convenient, right? Why would you go to different stores and then buy when the same product is available online? At that point, discount won’t matter. Consumers are realising that different pricing is just causing confusion. Why have a different price for an agent? Anybody can distribute it. Right?

When health insurance is bought online, how is it different from offline?

There is nothing offline or online in health insurance. It’s all the same. There’s no difference. The premium rates, too, are the same. The main reason why you buy online is because of only two reasons – convenience and trust.

If that is the case, then why do online term insurance plans have discounts?

Term insurance does not have any discount online. You can get the same policy offline as well. And there is nothing like offline term plan or online term plan. There are only old term plans and new term plans.

But then, why this brouhaha about offline and online insurance products?

After all it is an insurance policy. You can buy whichever way you want. The fundamental thing is that there are good policies, which have low commissions, which is why agents have no interest in selling. See, agents will sell products that they can earn hefty commissions on. So, if you want to increase your agency sales, you have to increase the commission. If you want to increase your online sales, then you have to improve your product. It’s a simple philosophy – in agency sales, your product does not matter. In online sales, your commission does not matter.

Now let’s assume that you have a term insurance product, which is three times more expensive than Insurer A and let’s say that you are a smaller brand. You come to me and you want us to push your product to the consumer. As a web aggregator, the best I can do is to put your product at the top. But the customer will (scroll down) to find a term insurance with a life cover of Rs 1 crore for Rs 20,000, whereas your Rs 1 crore policy costs Rs 60,000. Will the customer buy the expensive plan? So you see, for online, it is the product strength.

But offline, I as an agent will not talk about the cheaper product and will sell you the expensive one because I am earning a higher commission on it. If you look at the sales trend, I can promise you that less and less educated people are buying offline.

If insurers want to increase agency sales, they have to increase commission. If they want to increase online sales, they have to improve the product