On-line selling of term plans & availing other effective forms of life insurance distribution in this new age

Introduction:

Long-term disability insurance helps to replace the income if one is unable to work due to illness or injury. Illness and injury can happen at any age. If a person has created a financial cushion with disability insurance, a person is assured that the financial safety will help him to deal even the most difficult situations.

Life insurance policies pay a specified amount of money on the death of the policy holder. All life insurance policies are not the same. The policy may be term life, or whole life or a combination of the both. Term life policies are best suited to be taken online. Term life insurance is the purest form of life insurance, as they do not offer any survival benefits, just death benefit. It is also the cheapest form of life insurance. In case of an untimely death, dependents will receive the benefit amount specified in the insurance agreement.

One can customize the term life insurance with the addition of riders, such as Waiver of Premium, or accidental death. Another popular feature of term insurance is return of premium. Premium under these schemes are slightly bit higher than the regular term plans. But it has the benefit of refund of premium at the end of the term.

Some term policies are also convertible. This means that before the end of specified conversion period, one may choose to convert the term policy to whole policy or endowment policy, even if the health changes. But premium for such new policy will be higher than the term policy rates. These plans would be most useful for those who are initially unable to pay the high rates of premium required for Whole Life or Endowment Insurance plans, but hope to pay for such policy in near future. In case of endowment type plans, the term policy is defined for a specified period say 15, 20, 25 or 30 years.

The insurance company pays the claim to the family of assured in an event of his death within the policy’s term or in an event of assured surviving the policy’s term. Money back policies are part of endowment policies and are opted by people who want periodical payments. In case of death of the insured within the term of the policy, full sum insured along with bonus accruing on it is payable by the insurer to the nominee of the deceased. This plan helps to accumulate a specific sum of money over a period of time. Whereas the Whole life insurance provides death benefits for as long as one lives.

Availing the online term plans from your house:

Now keep life insurance agents at bay. Directly buy pure term plans on the internet for a lower cost. Are you postponing getting a life insurance cover thinking about long hours you’ll have to spend with a slew of agents exploring various companies and their array of plans? Worry no more. You can now directly buy insurance policies from the insurers online. The Internet has made the task far simpler.

Buy a pure term insurance plan online from the comfort of your home or office and pay lower premiums. The premium of pure term plans, which solely cover the risk to life, is the lowest among all life cover plans, but when bought on the internet, the premium gets reduced further as the intermediary commission is passed on to the customers. Online term plans are around 25 % cheaper than their offline version. Two strong reasons on why one should buy cover online are lower cost and the case of exploring various insurers’ websites in practically no time. Easy access to plans online allows every customer to take informed decisions based on features, price and availability.

The process on online buying by yourself:           

Before you start filling your cart with online plans, it is better to make a call to the insurers’ call centres and get clarity on the buying procedure. Get information on medical tests to be carried out and the list of documents to be sent to the insurer. A few websites also offer live help through a chat facility. The application form can be filled and the payments made online.  However, documents such as date of birth proof and income proof, among others, have to be sent either by email or by post to insurers’ office.

Most insurers’ sites have tools that help you determine the amount of coverage needed. However, the thumb rule on the coverage amount is at least 10 times one’s annual income. Factor in your age, kids’ expenses over the years and the standard of living your family presently enjoys. You may then top it up.  If you have liability, such as home loan -declare it to arrive at the final premium figure. Review your insurance needs according to your requirements and preferably once in every four year.

Watch out the important aspect of online buying of insurance:

Before you preceded buy a plan online, check if the insurer is offering the online purchase feature in your city because, at present, all cities are not covered. Also, for online buying, one needs to have Net banking facility with one of the major banks or, alternatively, use credit or debit card.

Procedure for online buying of term plans:

Online term plans come at a lower cost. However, check if the insurer offers online buying of term plans in your city before proceeding. If the facility exits then we need to undergo the following steps: 

Step 1 –  Go to the insurer’s website

Step-2-  Input personal details-age, gender, DOB, etc.

Step-3-  Indicate if you are tobacco user or not

Step-4- Choose term, sum assured

Step-5- Premium figure gets shown

Step-6- Modify term and/or sum assured, if need be

Step-7- Click on “terms and conditions” and read them carefully

Step-8- Input personal details in the online-application form including nominee details

Step-9- Enter health declaration

Step-10- Submit and preview the details you have entered. Edit if need be

Step-11- Choose to pay through credit/debit card or net banking

Step-12- Finally submit documents at insurer’s office and receive policy document if physically, as & when policy is issued by the insurer.

Buying plans online keeps intermediaries or agents out of the picture. That means the policyholder, including the nominee of the policy, deal directly with the insurer. However, this should not be a deterrent to online buying if one is comfortable with the features, premiums and insurers’ stability over the long term.

Selection of appropriate distribution channel by the life insurers:

India has millions of outlets but very poor roads. Distributing life insurance in Rural India is very, very hard – still it is being done mainly by the individual agents. Distribution is a key external resourcing. Logistics, distribution and channel management are the less visible side of marketing – so it varies depending upon the mission, vision & objectives and priority of the life insurers. Now it is dire need for the insurers to highlight the functions of channel members too, which may include:

1. To know the various facets of marketing;
2. Making products available in the target market,
3. To indulge in sales promotion and advertising,
4. Provide feedback about the various products.
5. Perform several functions to provide value-added services to the clientele – something more than merely serving as a ‘dealer’.
6. For on-line supply of products, the net-work providers / partners in the value chain also cooperate to bring products from insurers to ultimate customers even in group policy.

It is always expected the channel partners need to follow the code conducts & business ethics as stipulated by the regulators, never solicit or procure business without the valid license, never induce the prospect to omit any material information for the true interest of the insurer.

They should even never induce the prospect to submit wrong information in the proposal form or documents submitted to the insurer for acceptance of business for the sake of any convenience and to offer different rates, advantages, terms and conditions other than those offered by the insurer. But that way the online selling of life insurance is very safe. It is not only preaching direct insurance – it is hassle free too.

Now the insurance companies, considering their nature of the insurance sales directions and variations in target segments using IT driven platforms,  have to determine the structure and the quality of distributive channels.

This selection procedure of product / policy distribution is absolutely dependent on the business strategy of the companies for penetration into specific segments of the market with different lines of business. If an insurer plans to enter the personal line of business in a big way, the intermediaries like full time agents will be more appropriate.

Because personal insurance development needs building-up qualitative long term bondage & relationship on one to one basis. The customers require repeat calls by the agents to carry the conviction with the buyers.

Here the after sales service is also critical. The agents must know claims procedure thoroughly and guide the customers. If the claims are serviced in time will lead to customer satisfaction and a satisfied customer, could spread the good word around, for his insurer, and the same could prove to be the best advertisement medium.

This in turn eventually results in lots of new customers, by reference, from the satisfied & delighted customer. Again if an insurance company plans to enter the marine market (both import/export), the right selection of intermediaries from within the export/import trade could serve the clientele better than by using agent who are specializing in personal/domestic insurance.

The type of requirement or the character of the market may determine the exact type of intermediary and accordingly preparations are to be made either to recruit appropriate agents from the correct place and to devise the necessary training strategy in building in-house human capital development for Life Insurance Marketing or placing the corporate agents / brokers in the identified business segment to tap the corporate clients.

Conclusion:

For Personal Insurance product selling, as there are a good number of products available in the market of life insurance / pension schemes individual agents as well Bancassurance through banks (Private/ Public/Nodal/Cooperative)/ NBFCs may also be effective. Some financial consultants/ brokers have emerged out as advisor even for the retail life insurance markets.

They are privy to the individual customer’s needs and requirements as well as they know the intricate tax laws and definitely are better equipped to advise their clients continually on various aspects of savings, security and investment products and plans. Sometimes the insurers are resorting to so-called the piggy riding approach in promoting sales, in a limited way. Linkage of insurance product with a credit card may be an example of this kind of marketing strategy of the insurers. 

1. Kiosks at shopping malls;
2. Tie-up with mutual funds & NBFCs & so many other ways to mobilize insurance business and also to create insurance awareness in India.

By: Anabil Bhattacharya, Chief Manager & CPIO, R.T.I. Department , Head Office, National Insurance Co.ltd, Kolkata, Published in “Life Insurance Today” January, 2013