The Insurance Regulatory and Development Authority of India (IRDAI) has recently placed an exposure draft for insurance e-commerce regulations. Nilesh Parmar, COO, Edelweiss Tokio Life Insurance, shares his thoughts with ET on the impending changes the industry may witness in the future and what's in store for the customer.
On the changing landscape in the insurance market
Allowing agents and intermediaries to set up an Insurance Self-Network Platform (ISNP) to sell insurance products is an extremely progressive measure proposed by the regulator. This will enable the benefits of significant convenience (in buying), expanded reach, real-time connect, advanced digital analytics and improved cost efficiencies to be available to the entire ecosystem of participants in the insurance distribution space.
Additionally, the proposal to set up ISNPs by other authorised entities is also a very forward-looking initiative that could potentially enable new generation intermediaries, such as e-commerce firms, to start offering insurance products on their platforms. This will ensure that as Indian customers increasingly reap the benefits of growing Internet connectivity and the e-commerce boom in retail through greater access to information, product range and better pricing (due to improved process efficiencies that are then passed on to the end-customer), they are also exposed to the same benefits in the insurance space.
On the other hand, insurers will be able to reach out to and effectively communicate with a much larger set of digitally-enabled potential customers by tying up with these e-commerce players.
Going by the past experience of the expansion of e-commerce in the traditional retail businesses, there will soon be a balance in the customers' minds in terms of the expectations they will have across various platforms - from greater, in-depth information on insurers' platforms to the ability to compare and read user reviews on the platforms of intermediaries and other authorised entities. This will then ensure that the customers makes a well-thought out, considered purchase decision that is driven by their needs and the best match of those needs to the product they eventually choose.
However, in the immediate term, we do see some disruption on account of mandatory issuance of e-Insurance policies for all online customers. Convincing customers of the need to open an electronic Insurance Account (eIA) and the actual process of opening one for the vast majority of customers who don't have it could lead to some challenges. Over a short period of time, though - as with demat accounts for equity trading - customers will become more receptive towards opening an eIA as they learn the benefits of managing e-Insurance policies.
To summarise, we believe that this measure has the potential to overcome near-term disruptions and not only unlock significant value for everyone in the insurance ecosystem - customers, insurers and intermediaries - but also significantly expand the reach and scale of online insurance at increasingly competitive unit costs driven down through economies of scale.
On products portfolio in the new scenario
The customers will be exposed to two kinds of products. First, those that are available through the traditional offline channels, and second, those that are available on ISNPs which will be suffixed with the letter "i".
In fact, as insurers enable a comprehensive range of their products for online purchase through ISNPs, the purchase experience for the customers will be completely streamlined and harmonised across the various online purchase platforms (those of the insurers, their intermediaries and other authorised entities), thereby giving them a good balance of in-depth information on the insurers' platform, with comparison and user reviews on the platforms of intermediaries and other authorised entities. This will then ensure that the customers are able to make an informed decision on products that best meet their needs and complete the transaction with that insurer or intermediary who provides the best purchase experience to them.
On target segment of insurance e-commerce business
We don't believe that there is any "right" or "wrong" customer to buy e-insurance products. Again, as the e-commerce experience in the retail space has shown, the levels of adoption and scale of business could surprise everyone as customers across the country as well as demographic bands discover the convenience and benefits of online transactions in the insurance space once the ISNP guidelines come into force.
Having said this - after the initial growth of this space led by bargain hunters (since the proposed guidelines permit differential pricing for online sales) - true sustainable growth will be driven by the overlap between the discerning customer who is most likely to be an early adopter of online insurance transactions (and so the "proponent" or "growth driver") and those insurers who will target very specific customer segments with niche, well-designed products focused at those segments. Insurers will also learn to quickly react to feedback and inputs from their target segments and will ensure that their product design (and rollout processes) best match the expectations of the typical online customer who tends to be well-educated, networked, highly impatient and relatively young.
Will the need-based advice be compromised on the e-commerce platform
Absolutely not. On the contrary, the ability to provide an online experience that most genuinely translates the offline experience of need-based selling (without any biases that may creep in since there is no human being involved between the customer and the platform) on to the e-commerce platform would stand out as the key differentiator between the best ISNPs and the rest of the pack.
Generally speaking, online customers are aware, well-educated and tend to compare across various platforms before making the final purchase decision. They're also someone who do extensive online research and tend to attach significant value to reviews provided by other customers. Hence in a very short period of time, it is quite likely that a large number of online customers will gravitate towards the best platforms.
And yet owing to the very nature of online businesses (that of seamless information flow, visibility across platforms, and real-time correction of business models at a very rapid pace), this will force other platforms to very quickly upgrade themselves and product offerings to catch up with those of the leaders. In all of this 'Schumpeterian' competition, the one person who is most likely to benefit is the end customer as every platform will attempt to better their offering to the next level keeping the customer - and only the customer - in mind.
On products on offer from insurers
We believe it will vary from insurer to insurer. Keeping in mind the best fit between the product portfolios that the insurers have (and plan to build on), the set of customers that they want to reach out to and the evolved nature of an online customer, each insurer will pick out the products that best meet the needs of their target set of customers.
What this will mean is that companies who have a product portfolio that is designed on the basis of an in-depth analysis of customers' needs will have a much larger percentage of their product portfolio that will be enabled for online sales, versus those companies who have a healthy mix of products that were designed keeping in mind the specific requirements of their offline distribution channels.
On the customer's willingness to adapt to digital/electronic signature on e-commerce insurance sites
Digital and electronic signatures are proposed to be made mandatory for issuance of policies sourced through ISNPs. However, the key point to note here is the difference between "digital signature" (issued only through one of the seven certifying authorities licensed by the Controller of Certifying Authorities, Govt. of India) and "electronic signature" (simple authentication criteria that is uniquely linked to the authenticator and is under his control) as defined in the Information Technology Act, 2000 and Information Technology (Amendment) Act, 2008.
In the case of retail customers, the regulator has again demonstrated significant sagacity and a customer-centric approach through these guidelines by proposing to permit customers to use not just digital signatures, but also electronic signatures and other means such as single factor authentication, OTP (One-time Password), PAN-Date of Birth authentication, etc., as valid means for customers to authenticate themselves on ISNPs and to express consent to the insurer to proceed with policy issuance.
We believe that retail customers will find it far easier to use electronic signatures and other means of authentication compared to digital signatures. And so owing to the relatively cumbersome process (for a retail customer) to create a digital signature, we foresee it being used largely only by insurers to authenticate the e-Insurance policies that are issued to customers.
A more appropriate way to look at this aspect of the proposed guideline is that digital signatures/ electronic signatures/ other means of authentication completely do away with the need for a wet signature on the application form, thereby leading to far greater convenience to the customer, and a much faster and seamless online experience.