With over 250 million internet users, close to 100 million Facebook users and about a billion mobile phones in circulation, it is safe to say that India in going digital. In fact, digitization in the country is by far one of the most significant technological innovations for customer facing businesses.
And even though digital sales represent less than 10% of overall sales in most industries, they strongly influence consumers in pre- and post-purchase decisions, especially when it comes to product information, discounts, reviews, and trouble shooting.
One industry where the influence of digitization can be seen clearly is in life insurance. The online life insurance market in India is growing at a CAGR of 25.36% thanks to some significant advances in technology, rapid urbanization and changing consumer demographics in the country.
Part of the reason that life insurance is seeing such big success in the online sphere is because of the amount of information that potential buyers are seeing pre-purchase, which includes information on the types of policies available and their benefits, policy comparisons, branch details, and the credibility of the insurer and the policy.
Issues surrounding IRDA compliance
While growth in the industry has been significant, compliance with guidelines set out by the Insurance Regulatory and Development Authority (IRDA) is actually stunting the healthy development of the online life insurance market in India.
Over the past few years, IRDA has come out with policies and regulations that are expected to negatively impact the market. In 2011, the organization proposed regulatory and licensing policies through which web aggregators cannot display endorsements, comparisons, ratings, rankings, and bestsellers of insurance products on their websites. Apart from that, the IRDA also has restrictions on advertisements and sponsored content.
Additionally, in 2013, the IRDA banned aggregators from operating more than one website and the use of social media, as well as capped the FDI by venture capitalists in aggregators at 49%. It also passed stringent regulations regarding the eligibility and renewal of licenses.
These relatively strict regulations are making it difficult for consumers to compare products, which is changing how they invest in insurance.
Rising internet penetration a boon to market growth
But despite the challenges that exist in the market, a lot of the growth in online life insurance is coming thanks to expansion of internet services in India. A number of projects are underway to bring internet connectivity to non-urban areas. While internet penetration is still low in comparison to developed nations, the penetration rate is increasing rapidly, thanks to various government initiatives such as NeGP, SWAN, and CSC. The private sector is also exploiting the untapped market by rolling out plans such as Google Internet Bus project.
Insurance providers are clamoring to capitalize on the boom in connectivity in India. Almost all the leading national and private life insurers have introduced mobile apps that are easy to access, provide detailed policy information, allow customers to buy and renew policies, and assist in tracking policy status. All of these activities are expected to have a significant, positive impact on the online life insurance market in India through the projected period.
