New Delhi: Buying insurance could be a harrowing experience, especially through insurance aggregators. The unending calls from sales executives, not-so-transparent listings, and non-disclosure of commissions could make the whole process cumbersome for anyone looking to buy an insurance product.
The same goes for many other insurance-related services like renewals, portability, claim settlement, etc. Safety of data feed on third-party websites to avail these services is also a big challenge. Mindful of these issues faced by insurance buyers and policyholders, the Insurance Regulatory Authority of India (IRDAI) has launched an e-commerce platform ‘Bima Sugam’ which will house all the companies that sell life and non-life insurance products on a single platform.
The insurance regulator is trying to create a Unified Payments Interface (UPI)-like open infrastructure for insurance products that increases convenience for both buyers and sellers as well as reduces cost of buying and selling insurance products.
The aim of ‘Bima Sugam’ also seems to be increasing the penetration of insurance products like UPI did with digital payments.
How does it work?
‘Bima Sugam’ will be a one-stop destination for all insurance-related services, including buying, portability, claim settlement, change of agents etc – provided to policyholders through an e-insurance account (E-IA or E-BIMA account).
There will be a variety of products, businesses, and payment options on this platform to choose from. All the insurance intermediaries including individual agents, web aggregators will have access to ‘Bima Sugam’. IRDAI chairman Debasish Panda in an interview with PTI recently said ‘Bima Sugam’ should be a UPI moment for the insurance industry.
The widespread adoption of the UPI for even minor payments has revolutionised digital payment in the nation and several countries are attempting to duplicate UPI’s rapid success, which has attracted attention across the world, he added.
Payment through UPI, introduced in 2016, reached the `11 lakh crore milestone in September this year.
Panda said policyholders will be able to buy insurance products directly or through assisted mode. People who prefer assisted mode can take help from intermediaries. The platform will be launched by IRDAI on January 1, 2023. Insurers will be required to convert their existing policies into demat form within a year after the regulations come into effect.
Boon for policyholders
Personal finance experts say the platform will help simplify the processes of buying, claim settlement and speedy resolution of grievances via digitisation. Commission rates in general and health insurance are also likely to come down on buying insurance products through the portal, says Sandeep Jethwani, co-founder of dezerv, a portfolio management service provider.
Currently, commission rates of these products range from 7.5% to 15% of the premium, depending on the product, according to dezerv. Experts say the platform will ensure better data privacy, as there is no need to share information with any third party to get premium quotes.
Apart from this, the platform will also reduce mis-selling via transparent communication and awareness building. There will also be better quality of data aggregation and improvement of product offerings using data analytics, experts opine.
IRDAI data shows that banks and insurance brokers received 12,300 and 10,800 complaints, respectively, related to mis-selling in the financial year 2020-21 and that 68% of complaints were rejected in the same financial year.
Jethwani says, “Bima Sugam is a huge step towards improving the insurance infrastructure in India.”
“It can have three main benefits for users and the industry improved access to users for their own information give them greater confidence to purchase insurance; reduced intermediary costs translating into better pricing and three and greater insurance penetration in the long term which will benefit players in the space,” he added.
On the safety of data feed on the platform, IRDAI chairman said that know-your-customer (KYC) will be done through Aadhaar number and the data will auto populate. However, the Aadhaar number will be masked for security reasons, Panda added.
Jitendra Solanki, a SEBI-registered investment expert, says that the advantage of the platform will be that consumers can make a claim and appeal for grievance redressal through this platform.
Prashant Tripathy, MD and CEO, Max Life Insurance, said the good thing about it is that the entire design is customer-backwards – customers will have access to products, sellers, insurance companies and they can make their own decision.
Even if the platform fails to replicate the big success of UPI — something that the insurance regulator is aiming for — the existence of a regulator-backed online platform would be a good alternative to the one’s owned by private entities.
The success of the platform, though, depends on how good the user interface will be and how hassle-free the experience of all stakeholders, more so of policyholders, will be.