Why we go for online term plans? One of the major reason is they are economical compared to offline prices. Because there will be no middlemen, so charges are less. But are they actually out of middlemen? Premiums are really fair to the risk they take? I doubt it. Let us see the reasons for my doubt.
This doubt started in my mind when I came across one online portal which compares insurance plans. In order to recommend an online term plan to my client I visited the site and as usual it asked me to input the personal data. I entered the wrong data (to avoid unnecessary mails) except the phone number. Because they send the code to my number then only they display the comparison window. After providing the information and getting back the detailed view of online term plan comparison I forgot the issue. But after that I started to receive the continues calls from that online portal company forcing me to buy the online term plans.
Initially I told them that I did that research for client purpose. But when they started to force me to buy any one of two companies online term plans then I started doubting their motive. I asked them whether there is any price difference between buying online term plan by directly visiting the individual insurance company site or by clicking the tab “BUY NOW” on that particular insurance comparison site. The answer I got is no price difference. In fact I did the comparison also and found no price change.
So if there is no price difference and no middlemen in buying online term plan then why that online comparison company insisting me to buy only any one of the two insurance company term plans which they claiming best in the market? When I asked the executive of that company then he doesn’t have any answer to that.
But what we can assume from this? Yes..your understanding is right. In few online term plans still you find middlemen charges included to arrive at a premium. Otherwise who will do charity by calling me daily and insisting me to buy online term plans on behalf of insurance companies?
How we can judge that the online term plan we are buying is actually fair price? We are Indians and our market runs on price sensitive issue. So can we judge the term plan only by comparing the premium they offer us? A dangerous issue lies here. Suppose Company XYZ is offering a term plan of Rs.1 Crore at Rs.10,000 yearly and Company ABC is offering the same SA term plan for Rs.8,000 then which one you choose? Obviously the first choice will be Company ABC as the price is less than Company XYZ. Then we do research on the claim settlement ratio and how they offer service.
But we still lagging behind in getting the right data on the claim settlement ratio. Because IRDA’s data on claim settlement depict the overall claim settlement ratio but not the particular product called TERM PLAN. If a company is settling all claims (where usually SA will be less than around Rs.10 Lakhs) but rejecting the majority of claims related to term plans then we are unable to track them. Coming to service insurance company offer you, it may be a great company in offering you the best service but who will guarantee you that they offer the same when you will not be there to claim the SA?
Coming back to premium of term plans, no insurance company will be disclosing the exact mortality charges they are charging and what other expenses they are including to arrive at the actual term plan premiums. Also price difference exists may be due to adopting the different mortality rates, business competition or expenses. If we consider these things then they are equally dangerous to endowment plans wherein you are unable to know the exact expenses.
So online term plans are bubbling like ULIPs? Do regulators know all these things and still silent to act once the bubble burst? Let us see how it unfolds.
Let me know some experts’ comments if my understanding is wrong 🙂