E-commerce in insurance may be a disruptive intervention

E-COMMERCE has been a game-changer in more ways than one. It has been rewriting the assumptions of trade as the technology advances and more and more people get access to internet. According to an estimate by Google India, by 2020 more than 200 million Indians are likely to be make purchases and sales online. This will result in making paperless transactions as high in volume as the cash transactions in the economy.

The travel and tourism industry has made a total paradigm shift in transactions between the consumer and the service provider. The Insurance Regulatory and Development Authority of India (Irdai) has released its draft regulations for facilitating and regulating e-commerce in the Indian insurance industry. Online sale of policies was permitted already but that has been neither paperless nor without human interventions. The e-commerce guidelines and regulations, however, point to a clear step forward to usher in an absolutely new channel to market or to purchase an insurance product.

The Insurance Self-network Platform indicates a system or tool which the buyer will use to choose and buy an insurance product without any direct intervention at any stage by the entity setting up the platform. Once the prospective customer visits the website, he will have access to all available products, their features, terms and conditions regarding eligibility, endorsements and exclusions. The customer would select the policy according to his need and affordability etc. He would then complete the formalities, mostly online, except for health check-up in case of some categories of life insurance and inspection in case of property of high value. However, initially the platform may not offer policies requiringany offline activity or support to avoid spilling over of any action beyond the website.

Coming back to the age-old belief that insurance is never bought, it is always sold, it is observed that the draft regulation takes care of this truth and envisages pre-sales solicitation on the net. It expects full detail on net, perhaps meaning that the detail should be conclusive and good enough to enable the visitor to take a considered view of his needs and the matching product. In order to put the on-line buyer at par with those approached by intermediaries, the regulation permits the ISNP provider to put on website all the products approved by the regulator. The most significant development introduced through the draft regulation is provision for differentiated pricing. Insurance products available online can be cheaper than those sold through agents wherein companies have to incur expenses on commission and training of the sales force.

The online products of the nonlife insurers can be made available at substantially lower cost. This will help in popularising householders’ policy, health and accident policy among the vast number of middle-class people who are very rarely approached by intermediaries for such covers. If available online and at a lower cost, people may start buying essential insurance cover as they buy railway reservation tickets. The regulation also provides for remuneration to the promoters of the registered ISNPs.

Removing all confusion regarding e-transactions compatability with the concurrent law, the draft regulation states that no wet signature will be required on the e-proposal form at any stage and PAN or date of birth may be used to authenticate the declarations. The draft also takes care of the vexing issue of KYC which has brought back use of paper in several financial transactions. It provides for e-KYC as offered by the UIDAI and the e-PAN by NSDL.

A major feature is the opening of e-insurance account by the policyholder who transacts on ISNP. The insurance repositories approved by Irdai will take care of this provision. The draft mentions that policies purchased on ISNP will have to be maintained in the electronic form. Monetary transactions also have to be made electronically and premium receipts, too, will be in electronic form. The draft sends a message to the industry that the regulator envisages a hundred per cent electronic platform easily accessible to a common man and this would be a completely novel tool for selling insurance in a digital society. The step is consistent with the Prime Minister’s call to digitalise all services for letting the benefits trickle down to the common man.

The Insurance Self Network Platform may prove to be a powerful channel for enhancing insurance reach and penetration. But raising awareness about the role and functions of the insurance repositories in digitalising the industry in the best interest of the policyholders must be impressed upon all the stake holders. Unless the policyholders feel confident about the advantages of maintaining their record in electronic form, they may keep away from the insurance e-commerce facilities too. I think large number of the existing policyholders may also buy policies through ISNP if they are initiated in maintaining policies in electronic form with the approved repositories.