Such incidents are not uncommon. Many people prefer to buy insurance online when insurance is available at low rates. Data from insurance regulator Insurance Regulatory and Development Authority of India (IRDAI) shows that the contribution of individual insurance agents to individual new business premium is declining. It declined to 58.14% in 2020-21 as compared to 60.09% in 2019-20 in the life insurance business. In case of health insurance, it fell to 73.90% in 2020-21 from 75.21% in 2019-20.
Instead, online direct selling and web aggregators saw an increase in sales- from 1.72% in 2019-20 to 1.92% in life insurance new business premiums in 2020-21 and from 4.56% in 2019-20 to 5.95% in 2020-21. health insurance. Interestingly, the share of banks in new business premium in life insurance increased from 26.7 per cent in 2019-20 to 29 per cent in 2020-21. However, it declined from 8.06% to 7.84% in the case of health insurance. Data trends aside, the thing you should keep in mind is the distribution channel through which you are buying the policy.
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Focus on sources more than premium: There is a casual approach to buying insurance. People insist on the premium amount or a specific insurance company. However, the first step should be to find a favorable distribution channel, be it individual, corporate agent or web-aggregator. Take into account factors such as expertise in the industry, the agent’s commission structure, and pre- and after-sales services.
Skin in game: Not all distribution channels earn the same amount on selling policies. You must understand the extent to which you matter to a specific distribution channel. Ask the agent how much upfront or renewable commission they earn from the premiums you pay.
“The remuneration of agents includes the first year as well as the renewal commission whereas the alternative channels get only the first year commission which is more than the commission paid to the agents. So an agent will be service-oriented as their future commissions are linked,” said Shailesh Kumar, co-founder and head of insurance, Insurance Solutions, a grievance redressal platform.
Mahavir Chopra, founder of Beshak.org, agrees. “Customer executives on toll-free numbers have targets that may not be in line with the long-term interest of the customer. For example, if a claim is rejected due to something wrong in the proposal form or because of misinterpreted information, there is hardly any impact on the reputation or earnings of the advisor,” says Chopra.
As far as Banks is concerned, he has the least skin in the game. Online web-aggregator platforms have a separate team that looks after claims resolution, but banks do not have such a mechanism.
Advice needed: Insurance is not a one-size-fits-all product. Experts can guide you about the product that best suits your needs. The distributor involved must be sharp enough to ask the right questions. “Just like there are family doctors who stay with your family for generations, you need a similar connection while buying insurance too,” Kumar said.
Most importantly, when it comes time to file a claim or make changes to the policy, dealing with customer care executives or bank officials is the last thing you want.
“In the imperfect world of insurance where after-sales services are still uninterrupted, you need a human being by your side. Admit it or not, insurers have a definite conflict of interest in settling claims. Have seen cases where they would err on the side of non-payment on settling the claim. If you have a reputed agent, they will fight for you to settle your true claims,” Chopra said.
Choose Consultants Wisely: Not that all individual agents are equally good. “95% of agents leave the business in two-three years. You should buy the policy online instead of going to such agents. “At least you’ll have some support in the past,” said Awadhesh Mishra, Caterpillar Insurance’s founder and CEO.
Do your research well. Some websites like Beshak.org are building alternative business models. “We have compiled a list of professional financial advisors on our platform. Customers can explore the list and get video consultations from anyone they like, without any fees or charges,” Chopra said.
Price Parity: Meanwhile, individual agents have begun to question the price disparity.
“The industry has been working aggressively for the past few years to bridge the gap between agent fees and direct sales. In our case, the gap is narrowing year-on-year and is now around 5-7%,” said Prashant Tripathi, MD and CEO, Max Life Insurance Company.
Mishra of Caterpillar Insurance has confirmed that he can now match prices online against the physical services he offers for some life insurance policies. A welcome trend, indeed.
Take the mint: Insurance misselling happens across the board, whether the agent is a bank, an aggregator or an individual. However, individual agents with whom you have a direct relationship can provide you with better after-sales service, even if they quote higher premiums. Keep this in mind while buying an insurance policy.
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