Premia hit rock bottom as competition intensifies in online term insurance space

You have a product that costs you Rs 540 a month. It is then reduced to Rs 500 a month. Now, a competitor enters the scene and the price is further reduced to Rs 450 a month. We are not talking about a fast-moving consumer goods product, but an online term insurance plan with a cover of Rs 1 crore.

Competition has intensified in the online term insurance space with the premium for a Rs 1 crore pure-term cover coming down as low as Rs 5,400 a year. With several life insurance players entering this space, industry experts say the price war is likely to continue, benefiting the end customer Nifty Trading Tips

Deepak Yohannan, CEO of MyInsuranceClub.com, a web aggregator approved by the Insurance Regulatory and Development Authority (Irda), explains that competition has resulted in lower pricing of products, because pricing is a key factor that customers look for before buying an insurance product.

"Compared with earlier times when term plans were quite expensive, now, when one insurer entered the online market with an aggressive pricing, others followed suit. This is one of the biggest developments in the past few years and with intense competition, prices might not go up," says Yohannan. He adds that even if one insurer increases the price, there are many others willing to offer the product at a cheaper price Intraday Trading Tips

A pure-term plan is one of the simplest, and oldest, life insurance policies. The plan involves payment of premium for a particular tenure. If the policyholder survives the tenure of the policy, there is no benefit payable. However, if s/he dies during this period owing to natural or accidental causes, the sum assured is payable. If there is accidental death, an additional benefit is payable for this, which is decided by the insurer.

For online term plans, the premium payable is low because there are no agents and, hence, no commissions to be paid. In this, an individual directly purchases the policy from the online portal.

Amit Kumar Roy, Chief Distribution Officer at AEGON Religare Life Insurance, says the company was the first player to enter the online term space. "It is a different market and very informed people come online to buy products on their own. We entered this space in 2008 and it has been gradually growing since then Commodity Trading Tips

According to Roy, with longevity increasing, pricing has become cheap. He adds that the bare minimum with respect to pricing has been reached.

For young and healthy buyers, there is a bigger incentive. Earlier this year, Reliance Life Insurance launched an online term plan with Rs 1 crore life cover for as low as Rs 15 a day (for a 25-year-old healthy male). Reliance Online Term offers higher life protection up to the age of 75 years and provides the convenience of medical tests/check-ups, if any, at the customer's residence.

Anup Rau, CEO of Reliance Life Insurance, says the pricing could move either upwards or downwards based on their experience with customers. Rau explains the sum assured taken has also been as high as Rs 85 lakh and the online term space has seen a good persistency rate. Going forward, industry players expect more transactions to move online. Roy says newer features such as double sum assured coverage for accidental death are also being provided in the market in the online term space as an incentive to customers Free Stock Market Tips