Insurance schemes: Online policy buyers more likely to renew cover

Internet and mobile platform, which has contributed only 1% of the total health insurance business, is rising up the priority chart for general insurance companies.

The digital thrust isn't the outcome of reducing the commission costs or business expenses, but an effort to get long-term customers.

Insurance companies have found that customers who purchase health and motor insurance online remain loyal through following policy years.

The insurers sold only 1.73 lakh health insurance policies through online during 2013-14, but experts said this figure is likely to see a steep rise going by the experience of general insurance companies. "Today, about 4% of retail health policies are sold online, vis-à-vis 2% policies about a year back," says Yashish Dahiya, CEO & co-founder, Policybazaar.com.

"People are realising that purchasing insurance online allows them to choose products that are better suited to their needs and buy them at better prices as online research is easier. Therefore, reaching a decision and making a renewal online is quicker, convenient and simpler," reasons Pankaj Oberoi, chief distribution officer, Bharti AXA General Insurance.

The digital fever is spreading to various verticals of insurance rapidly. T A Ramalingam, chief distribution officer, Bajaj Allianz General Insurance, says online purchases were predominantly dominated by motor insurance policies earlier.

"However, over the past two years we have seen that consumers are looking at purchasing health and personal accident policies online," he adds.

Though Bajaj Allianz General hasn't seen significant difference in renewals rates for health insurance among online buyers, the company says, "Customers who buy two-wheeler insurance online are more likely to renew policies in the following year since it is faster and cheaper. We have seen a difference of 10% for renewals of two-wheelers online, as compared to offline renewals."

Bharti AXA General Insurance sees about 50% of customers who purchase motor insurance online renew it in the following years. "Among health insurance seekers, approximately 60% of customers who purchase online renew after the first year of policy. For policies that are renewed subsequently (second renewal onwards) the retention percentage is as high as 80%," reveals Oberoi.

Sanjay Datta, chief, underwriting and claims, ICICI Lombard General Insurance, "Those buying our products online are more evolved and long-term oriented. Even in terms of retention, 35% more customers buying health insurance online renew their policy in the second year compared to offline customers. In the offline channel, many don't renew if the agent doesn't follow up and collect renewal cheque, even though they lose out on the no-claims bonus."

New health insurance companies are seeing a swift rise in renewals online.

"There has been considerable rise amongst customers for renewing their policies online. Nearly 60% of our existing customer base renewed their policies online in this year," says Sandeep Patel, MD and CEO of Cigna TTK health insurance, which has seen online traffic multiply 3.5 times over the past year.

Another health insurer Max Bupa says the renewal revenue of the company has jumped to 32% in fiscal 2014 -15, from 20% in fiscal 2013-14.

"In the last one year, we recorded an 80% growth in online purchase of new policies while online renewals have grown by 70% during the same period," says Anika Agarwal, head–marketing, Max Bupa.

Data sourced by Policybazaar.com indicates, policies sold online are continued by more than 60% of consumers in the 61st month, as against policies sold offline which are continued by less than 30% of consumers. "Offline channels have a renewal persistency of about 64% in the 13th month. Industry-wide renewal persistency of online customers is 20% higher than that of offline customers, says Dahiya.

The renewal rates are an indication of not just the pre-purchase convenience, but even post-purchase tracking. "It is comparatively easier to track insurance policy/process online via customer portals. Meaning, you don't have to chase anyone to source information or update about your policy anymore," says Dahiya.

Online buying spells good news for insurers as a rampant problem of "errors while inputting data can be eliminated," Patel of Cigna TTK Health Insurance indicates.

But why are renewals so important? Renewal of health and motor insurance with the same company is beneficial for the customers too as the initial waiting period of 90 days isn't applicable for subsequent policies under renewal.

For the insurers too acquiring a new customer costs more. "Renewals are good for us as the cost for selling afresh is higher and the process is tough," says Datta of ICICI Lombard General Insurance.

But retaining a renewal customer requires as much effort as acquiring a new one since the customer is online and is aware of his options, points Oberoi of Bharti AXA General Insurance.

But why do customers choose one insurer above other? A survey of 3,007 people across 18 cities by Google India and ICICI Lombard General Insurance indicates that Brand (not pricing) is the top-most factor influencing online insurance purchase for 88% of the respondents.

The industry is alluring renewals through various measures. Discounts are being offered for direct purchase through company's website, by CignaTTK.

Companies such as Bharti AXA General Insurance are even encouraging renewals "We rewarding customers who choose to continue with us through better renewal rates," says Oberoi.

CignaTTK has prominently placed a "Renew Now" tab on its website, which leads the customers through a quick renewal process. Max Bupa is getting a mobile app ready for launch this year to strengthen the reach of its three-step renewal process offered through the website presently.

Bajaj Allianz General Insurance has launched a "Renewal on SMS" service for its two-wheeler customers.

But experts suggest these measures alone won't be enough. "People tend to discontinue or terminate their policy if it fails to meet their requirement and expectations. Renewal rates are bound to improve and increase if consumers take time out to read through the policy document and make full disclosures at the time of policy issuance. Insurers will have to identify ways to educate their intermediaries and agents and encourage them to sell the right product to right consumer," says Dahiya.