As the world today facilitates online transactions which are seamless and uninterrupted, giving us access to variety of products at our fingertips, it becomes imperative that our financial transactions like banking, investments and insurance also take the same route. This is for the simple reason that online transactions are more convenient and avoid hassles of paperwork and numerous visits to offices and hubs. From the point of service delivery, the service providers also promote it as it helps in minimising costs and better monitoring.
Today, online transactions are becoming prominent in India as they are convenient, faster and cost effective. Customers shopping online can avail various facilities such as comparing the price of different products, view product features and ratings by other customers, etc. Online transactions are becoming popular in online shopping, e-commerce and insurance. The growth is mainly driven by the young generation who prefer to go online for almost all services and products. More over, today's tech-savvy generation and multifunctional devices are also major contributors to this growing trend.
Looking at the transition of banking transactions and investments from traditional to the online space, it brings us to the next most important financial tool i.e., insurance.
The traditional channels of product distribution in the insurance business comprise of the tele-callers, branch walk-ins, or sales through channel partners such as banks, agents, etc. While the agency channel involves costs of training the agents, paying the commission, tracking their business and negating fraudulent selling and legal issues, tele-calling too involves recruiting and training executives/agents and eventually maintaining them. This is where the importance of offering insurance services online comes into picture.
Online insurance transactions will not only help the insurance companies reduce their operational cost by 20-25%, but they will also provide a platform for customers to compare the price and features of similar products. A latest study shows that by the year 2020, online transactions in insurance are expected to grow 20 times more of what the current level is.
Customers are attracted to this facility as it offers pre-purchase, purchase and renewal services. Another feature offered on the online space is an aggregator website which helps customers to decide on a product by comparing the price and features of various similar products.
In an online transaction, there is no paper work involved and the entire conversation on the transaction is recorded as per insurance regulator Irda guidelines and the same is treated as a valid proposal form. These transactions are monitored and audited by Irda regularly, keeping a constant check on the business transactions.
Inspite of all the technological advancements, there are customers who still prefer agent services, even though they are aware of the benefits of online transactions. This can mainly be attributed to lack of infrastructure and lack of pre and post purchase service. Some customers are intentionally dependent on services of corporate agents as they want to keep their entire financial planning and management with one intermediary who is also involved in their overall financial planning and management. Also it is advised to keep records of online transactions and make the family members aware about the same.
Thus, even though the initial move towards online selling of financial products is building up, it surely does have a lot to catch up on as compared to the intermediary mode of selling. Looking at the pace in which our country is progressing in the technological field, this difference will soon dissolve and vanish.
The writer is head of general insurance distribution, Geojit BNP Paribas