The growing dissonance between online insurance aggregators and insurers – Economic Times

Mumbai: One of India’s leading private sector general insurers HDFC Ergo recently delisted its products from web aggregators and online third-party brokers, including the largest player in the segment, Policybazaar.

In withdrawing its health and motor insurance policies, the insurer joined a small yet growing band of incumbents in India’s legacy insurance industry, which include largest private sector general insurer ICICI Lombard and public sector behemoth Life Insurance Corporation of India, which have either partially or completely stayed away from listing their products on third-party online brokers.

These “strategic” calls by insurers may seem counterintuitive as the Covid-19 pandemic-led digitisation of the consumer economy is driving significant traffic to online sales of insurance plans. But insurance industry insiders say this could be an indication of a larger pushback from insurance companies to gain more autonomy in the increasingly digitising world of retail insurance in India.

Insurance industry sources say several companies are scouting for new self-sufficient distribution models to boost their digital ambitions, while also reducing dependency on third-party platforms, which are increasingly commanding online sales of insurance policies.

According to US-based investment bank Jefferies, nearly one-fifth of premium revenue for India’s health and life insurers could be through online channels by FY25. The share has already grown from 0.1% in FY15 to nearly 4% (or $1.3 billion in premium) in FY20.

ET spoke with executives from leading insurers across health, life, and motor insurance segments as well as those working closely with online aggregators such as Policybazaar and Coverfox to unpack some of the concerns being harboured by insurers.

Detailed questionnaires to Policybazaar and HDFC Ergo didn’t elicit a response.

Grfx-Online InsuranceETtech

(Graphic: Rahul Awasthi/ETtech)

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Is price-based comparison hurting insurance brands?

There is a growing view in the industry that price-based comparison deployed by insurance marketplaces, pitting products from competing insurers based on premiums, is hurting the brand reputation of larger firms. This is even as players like Policybazaar have introduced criteria such as claims settlement ratio and sum assured as a comparison metric on their platforms.

“It is a question that has emerged as the industry has evolved,” said an executive heading distribution at a leading private insurer.

“When a customer comes online to buy an insurance cover, there is a lot more they should be aware about than just the premium it will cost. The quality of the purchase would also be dependent on factors such as the claim settlement ratio (of the insurer), the sum assured for protection covers, number of tie-ups with hospital networks, room rent limits to name a few,” the insurer said, adding that online marketplace, especially on motor and term side, prompts consumers to go for “cheaper” policies.

With Insurance Regulatory and Development Authority of India (IRDAI) increasingly pushing insurers towards standardisation of terms and services, executives from larger insurance firms are sensing that this model listing covers based on cheapest to most expensive could dilute its competitive advantage.

“There is no denying the work done by aggregators like Policybazaar in expanding the size of India’s insurance market. But we feel there is scope for a more inclusive approach where disclosures on product types, age groups and quality of claims service can be given more prominence on the platform,” a second insurance industry executive added.

To be sure, the insurance industry of India has 57 insurance companies, of which 24 are life insurers, while 33 are non-life insurers including standalone health firms. These companies can manufacture policies. Third-party platforms such as IPO-bound Policybazaar, Turtlemint, and Coverfox among others typically function as online-first brokers that aggregate policies on platforms for customers to compare and purchase like a marketplace.

According to an industry expert, who has worked closely with insurance aggregators, insurance companies are also increasingly investing on their own digital and distribution capabilities to command more autonomy on the channels of sales. This could be through new bancassurance networks, strengthening digital distribution, as well as incubating startups.

“For large insurance companies, the branding can often go for a toss when pitted against smaller rivals. There is a growing sentiment among insurance companies to decrease the dependency on third-party services and instead invest in their own agency relationships and distribution capabilities,” the expert said, requesting anonymity.

Other concerns also include the inability of insurers to control onboarding experience, according to a chief operating officer of a life insurer.

“A customer buying an online cover from Paytm, PhonePe or Policybazaar is still the customer of the insurance company whose policy they are buying. In the online world, these lines often get blurred and the insurer has to depend on the platform for providing its customers the best service,” the person added.

Insurance firms want to build own digital muscle

The relationship between web aggregators and insurance companies have also been dictated by the quality of customers it helped acquire. Now with the online market rapidly expanding, these differentiators are also changing.

“The claims ratio of customers acquired through online channels are lower as these are younger and more affluent segments. However with the market gaining scale, this advantage is also diminishing. This also points towards how much the market has expanded and platforms have played a huge role in this,” the executive added.

According to a source close to Policybazaar, the reasons for HDFC Ergo’s withdrawal from all leading web aggregator platforms “was strategic”, and a call taken in view to build its own digital capabilities.

“The decision was amicable and the relationship with HDFC brand is very good,” the source said, adding that the life subsidiary of HDFC—HDFC Life—continues to list on Policybazaar along with 50 other brands. The person also added that LIC could also soon get listed again on the platform, nearly five years after it delisted its term cover from web aggregators.

The online insurance segment in India in recent months has been among one of the most heavily funded segments with startups such as Digit, Acko, Plum and RenewBuy having closed big rounds in recent months. In fact, Policybazaar has filed its IPO documents with Sebi to raise over Rs 6,000 crore, as per sources.