Term Insurance Comparison and the Internet

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Term Insurance Comparison and the Internet
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• Online
  Insurance Comparison The internet today is the
  most vast source of information. Information is
  almost commoditized, the only important thing
  being that one should know what to search for.
  The greatest role of the internet has been in
  removing information asymmetry, leading to a more
  efficient marketplace. And insurance is one area
  where the power of information through the
  internet can be harnessed to the maximum,
  allowing prospective buyers to compare insurance
  online.

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• One
  of the biggest gripes about the insurance
  industry has been that users have been purchasing
  insurance almost blindfolded, completely at the
  mercy of the agent who unabashedly pushes
  products where he earns the maximum commission.
  The costs of distribution in insurance are
  massive, and there are significant inefficiencies
  within the system. As with any other channel
  where commissions are unrealistically high, there
  are many layers and sub layers of distribution,
  the ultimate cost of which is borne by the
  consumer. This is where the internet can step in,
  getting the buyer and the insurance company much
  closer, and thus ultimately leading to lower
  purchase price.

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• In India, the recent trend has been that people
  have started using the internet extensively to
  compare insurance online before buying. Insurance
  purchase through the internet is still in its
  infancy, but it is a matter of time before things
  catch up. With broadband penetration set to surge
  beyond the current levels of 10 mn connections,
  the use of the internet can only increase. The
  efficiency that the internet has brought in is
  primarily in terms of allowing the user to
  compare all features of the insurance company
  including price through the individual websites
  of the companies or through aggregator sites. In
  that sense, there is a tremendous responsibility
  on aggregator sites to provide unbiased
  information. Whether that is happening or not is
  a different matter altogether. The level of
  mis-selling that is there in insurance is of epic
  proportions. Regular premium policies have been
  sold as recurring bank deposits, non-guaranteed
  products have been sold as guaranteed products,
  direct debit mandates have been taken from
  unsuspecting consumers...even if the internet can
  reduce the level of mis-selling a bit, it would
  have more than served its purpose. The important
  factor to note in any price Term Insurance
  Comparison is that the savings through lower
  premium is not only for a year, but this benefit
  is passed on every year on renewal. A health
  insurance policy bought at a 40 lower price than
  a policy of another company is likely to cost 40
  less on each subsequent renewal. The power of
  accumulated savings is thus huge, as we can see.

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• At the same time, there is one disturbing trend
  that is being seen in aggregator sites. We are
  seeing that products which frankly do not merit
  comparisons are being compared. A case in point
  is pensions product, where the variable with
  perhaps more than 90 weightage is fund
  performance of the company. Yet we still find
  aggregator sites providing comparisons using the
  assumed rate of return of 6 and 10 . A.25
  lower fund management fee of one company is
  irrelevant if it underperforms the fund
  performance of another company cumulatively by
  even 1 Insurance products that lend itself the
  best to a comparison are health insurance, car
  insurance and term life insurance.

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• This is primarily because there is a direct price
  comparison, and there are direct feature
  comparisons. Additional features can be
  attributed a monetary value, and the user can
  then do an analysis whether the overall price
  equation makes sense. Products like child
  policies, pensions, or for those matter
  investment products are very difficult to compare
  on the price front, and more often than not the
  comparisons are meaningless.

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