We had asked founders of three web insurance aggregators for their remarks on (what we believe are) draconian web aggregator guidelines from India’s Insurance regulator IRDA. We asked them how these guidelines impact their business, what changes will need to be made, in terms of structuring (remember, policybazaar had to restructure the last time), which provisions they want changed, and whether there are any positives in these guidelines. For more context, read our critique of the web aggregator guidelines: Why You Shouldn’t Launch An Insurance Web Aggregator In India. The reaction from the insurance aggregators, which are, understandably, more measured (and politically-correct) than ours:
Yashish Dahiya, Founder, Policybazaar.com: I believe these regulations have been detailed and thought through. There are various interest groups in Insurance and some more influential than others, and everyone believes digital is a long term answer for the problems that plague the industry. Digital is a means used for “Pull” or educated insurance which is a miniscule part of the industry. Here the problem starts. If you do a “Pull” purchase, you are less likely to buy a “Poor” product, while in the push channel you can still push “Poor” products. Everyone in the industry now understands this problem, but everyone has their interests.
There are strong lobbies led by some insurance companies that do not wish aggregation, remember comparison stops sales of bad products, and allows sales on merit. So its not an easy one. IRDA has done a great job interacting with all stakeholders and drafting very detailed guidelines. I honestly believe they could not have done a better job given all the constraints. However I do believe they would gain through regular interactions with some digital folk like Sanjeev (Bikhchandani), Deep (Kalra) etc, as they honestly do not understand digital, and unfortunately need to make rules on that. They rightly would not believe everything Web aggregators say as we are an interested party, and perhaps biased towards our interests.
There are two killers though. One 26% FDI, who will invest if FVCI’s cannot, we are already at 38%. Insurers are already barred. The 2nd and one you have missed is, every three years, even if you apply for renewal in time, if the IRDA cannot approve your licence in time, you will need to stop business. If these two can change, we will survive and grow, but yes, its not what IXIGO had to go through for sure, but they may have had other challenges.
Alok Bhatnagar, Founder, EasyPolicy.com: The new guidelines will impact the business positively as the core of the business – sales commissions (that web aggregators stand to make out of sale of Insurance policies) have been made at par with other forms of intermediaries. This was not the case in previous guidelines. The renewal/trail commissions that other intermediaries get have also been provisioned in the form of outsourced services charges. Not only this, lead sales have been allowed on CPA mode and it will definitely be healthier than the Rs 10 limit that was earlier defined as the lead sales price. This makes for an awesome combination and encourages the single-company structure that is more investment friendly.
Under the earlier regulations, it was permissible for any website to fetch rates from other licenced intermediaries and to thereafter deal with them in a manner that was outside the purview of the regulator. This route has now been effectively plugged as the new regulations make it mandatory for any website dealing with insurance products to be licenced in its own right – either as an insurance broker or as a web aggregator. This change might induce a better regulated and structured insurance environment which will lead to better practices and will benefit for the public at large in the longer term.
IRDA did consult existing web aggregators and insurers before coming with an exhaustive set of guidelines. The methodology has been correct but we do think that some interaction with core internet professionals on a regular basis would help the regulator understand Internet dynamics better.
The 4 things that we want IRDA to re-consider are as following:
1. 26% cap in FDI as that restricts a lot of international investors from investing in Indian insurance intermediaries
2. Tie-up with other websites for display of product comparison for example we should be able to provide car insurance rates to sites like Gaadi, Zigwheels etc
3. 3 year renewal period should be increased for all insurance intermediaries
4. Advertising for non-insurance products and services should be allowed
Easypolicy would be applying for a web aggregator license very soon. It will also have to invest time and resources in making an exhaustive lead management system and other technical changes. But we are fine with that effort.
Deepak Yohannan, Founder, MyInsuranceClub: These guidelines are a lot more forward looking than the existing rules which were crippling. So in a sense, it is a huge positive. Now we are more less allowed to do the activities which are actually required to compare policies and sell them online. That is something we wanted clarity on, and we have that now. Online Sales, Direct Marketing and Outsourcing activities are allowed and it covers most of the areas where an aggregator could add value to the customer and to the insurer.
Negative impact – the clause on FDI is a serious threat. The ability to raise money will be seriously curtailed. It can be called show-stopper. But then IRDA has formed a committee to re-look the FDI cap for intermediaries and hopefully the cap would be done away with. Secondly, the freedom to rate a policy would have been a very handy tool for the customer. Very often people do not understand the policy completely and purchase a plan based on trust or recommendation of others.
Equity, MFs etc have this freedom and hence people can make some intelligent calls based on the recommendation of various ratings on sites. Thirdly, there is a mention of not doing any lead generation activities with other websites. This needs to be clarified, else huge spends on branding would be required. And you need to generate leads through other websites. Fourthly, nothing can be charged for leads – this is also an unfair clause. There are business lines (like some life insurance plans) which cannot be sold online. Aggregators cannot charge for the lead which they pass and will have to depend on the insurer to close the sale and inform the aggregator so that payouts can be shared. This will never happen as channels conflicts will creep in.
I view these guidelines as a very positive move overall. It’s a nascent industry and even the participants are not unanimous on the path ahead. Some want to view this as a marketing channel while some see it as a lot more close to sales and servicing. Perhaps it lies somewhere in between.
Our entire operations would need to be overhauled as you can now do a lot more activities. Direct Marketing, Outsourcing, Sales etc would now be supported by this channel. I think it will take some time before participants can start focusing on all areas. Even requirements like Principal Officer etc are not something which was outlined in the old rules. Lots to do.