Bima Sugam may make policy buying easier, cut commissions

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Buying an insurance policy is set to become simpler and more convenient.

The Insurance Regulatory and Development Authority of India (IRDAI) has proposed to set up an online platform or marketplace for selling all kinds of insurance products.

Tentatively called 'Bima Sugam', the digital platform, backed by the regulator, the Life Insurance Council and General Insurance Council, will allow individuals to buy policies directly from insurance companies of their choice.

However, it is likely to face stiff competition from established insurance brokers and web aggregators, who offer such services at present. The platform would give buyers a wide choice to pick and choose policies.

Along with the digital platform, IRDAI plans to mandate demat policies and e-insurance accounts (eIA) to create a framework and give a further push to end-to-end digitisation of the insurance ecosystem. This could be effective as early as December 2022 for fresh policies.

“It will provide a single window to view all your policies (life as well as general), details and renewal dates. You can also raise service requests. Physical policy documents could get lost, a risk that eIA eliminates,” says Vighnesh Shahane, MD and CEO, Ageas Federal Life Insurance.

Also read: MC explains: Soon, you may have to hold your insurance policies in electronic form

Advantages for policyholders

A big benefit for policyholders would be reduced commissions as companies would be directly selling policies on the platform, though insurance intermediaries, too, would be on board.

Instead of visiting multiple insurers’ websites or aggregator portals, individuals can log on to this regulator-approved platform to buy policies online, especially those concerned about sharing their mobile numbers with aggregator portals to obtain policy premium quotes.

The IRDAI has not released details of the shape that such a platform will take but according to industry officials and reports, the commissions paid to intermediaries will be cut drastically, leading to lower premiums for policyholders and higher amounts to be invested in insurance-cum-investment plans.

The IRDAI has proposed that an insurer can offer a discount on premium rates for policies purchased directly through the platform.

The road ahead

The contours of the platform are yet to be worked out. For instance, it remains to be seen if the platform would offer additional policy-related information to make it easier for policyholders to compare policies, which the web-aggregator portals presently do.

Shahane of Ageas Federal Life Insurance points out that “policyholders would require access to claim repudiation ratios, the turnaround time for settling claims and resolving grievances, and so on before making a decision.”

Electronic proposal forms

Insurers and intermediaries will have to upgrade their systems to offer the choice of physical as well as digital proposal forms – where prospective insurance buyers enter all their details – to the policyholders.

As a policyholder, you can either obtain digital signatures or authenticate the information in the forms using Aadhaar-based OTP if your mobile number is linked to it.

Also read: What not to do with your Aadhaar

While some aggregators and brokers could feel the heat from competition, others see it as an opportunity to grow their business, as it can provide greater access to customers and lower costs compared to the physical mode of doing business.

“This can be a game-changer moment for the insurance industry... As an intermediary, we need to have in place an e-proposal form consistent with the physical proposal form, with respect to the product being solicited. Also, we have to authenticate the submissions through respective digital or electronic signatures,” says Rakesh Goyal, Director, Probus Insurance Brokers.

E-insurance accounts and policy documents

The insurance regulator is also mulling making e-insurance accounts and dematerialised policies mandatory.

Though the e-insurance account system did not take off when it was first introduced in 2013, it holds several benefits for policyholders. “It ensures easy access to their policy details. Life insurance policyholders need not worry about their physical policy bonds being misplaced in case their nominees have to file a claim in future,” says Sunil Sharma, President, Chief Actuary and Chief Risk Officer, Kotak Mahindra Life Insurance.

Insurers will not only have to provide the eIA facility to new policyholders but also the existing ones. You only need to open such accounts once. Insurers will have to convert existing policies into demat form within a year of the regulations becoming effective. The entire cost -  for fresh as well as existing policyholders - will be borne by the insurers.

“The framework will also facilitate common Know Your Customer (KYC) for an eIA holder. The KYC done while opening an eIA will eliminate the need to repeat the process every time an insurance policy is purchased by the policyholder,” adds Goyal.

However, an eIA carries a lower utility value compared to a demat account for shares, as there is no scope for regular trading unlike in the case of the latter. More services such as viewing ULIP NAVs and fund switch facilities will need to be introduced to increase its usage, experts say.