Comparison Between Offline and Online Distribution Practices for the Insurance Industry in India

Introduction

The insurance industry is very important for any country’s economic development. A well-developed insurance sector promotes risk-taking in the economy, as it provides a certain amount of security in case of an unforeseen, loss-causing incident. It also provides much-needed financial security to family members in case of loss of life or health. Since the insurance companies having assets under management represent long-term capital, they also act as a funds pool to invest in long-term projects such as infrastructure development. The Indian economy’s globalization and liberalisation in 1991 and formation of Insurance Regulatory Development Authority (IRDA) in year 2001 led to the sudden spike in growth of Insurance Industry. The spirited amplification of Indian Insurance industry is due to the evolving and unbelievable performance of various channels of distribution. These channels are interdependent mediums, interlinked in moving the products, services and information from business houses to consumers. They are considered as the most important links of Insurance Industry which bring an association between consumers; who are looking out to procure insurance policies or products and insurance companies; who are exploring ways to sell those policies or products. They are playing a strong intermediary role between buyer and seller and whose role is to study the overall market, matching the requirements of both parties and thereby helping their clients to choose from best competing offers. There are numerous channels involved in undertaking the business in the industry in the form of issuance of policies and collection of the premium amount. Firstly, independent agents are certified individuals who sell insurance policies or products on behalf of any insurance company. They receive commission from the company on all policies sold and serviced. As far as the marketing of insurance in Indian market is concerned, the agent has been instrumental and major factor in spreading the awareness with respect to market growth and insurance penetration. The only and major difference between individual and corporate agents is that, the latter are considered as employees of insurance companies who sell insurance policies on behalf of the company itself. Thereafter, another channel prevailing strongly in the insurance sector is Bancassurance, which is a joining hands and pact of banks and insurance companies, where insurance policies are sold by existing and upcoming banking networks. It is one of the low cost distribution channels which have emerged as a viable, most preferred and reliable insurance distribution channel in the market. The new and prevailing market condition for private participation has resulted in strong competition in the industry and thus a need for a new and specialized distribution channel was strongly felt that can bolster the clientele in the evaluation of their total risk exposure and present suitable insurance policies to cover such risks. Thus insurance brokers emerged as professional entities with the required technical expertise to offer customized insurance solutions. While an agent represents only one insurance company, a broker may deal with more than one insurer or both or multiple companies both in life and general insurance domain. With the growing awareness of insurance, many customers now prefer to transact either online or through phone or email. For such customers, there is a rise of direct selling channel. It is a process of selling insurance either online or through phone where the insurer sells directly to the insured via its employees.