Low-Ticket Insurance Covers

Online platforms offering low-ticket insurance covers: Implications for policyholders

Insurers refer to these as group-retail, ecosystem, platform or affinity products.

Can they substitute for regular insurance covers?

Low-Ticket Insurance Covers

Payment apps

Have become ubiquitous and insurance is increasingly being offer on such platforms.

When you recharge your mobile balance or pay an electricity bill.

A compelling insurance policy is offer to you – dental insurance of Rs 10,000 for Rs 1000 a year, for example.

The types of insurance covers range from personal health to burglary protection policies.

This is an unusual way for consumers to consider and purchase insurance.

Insurance buying is drive by tax savings.

Contractual or legal requirements, and was did after detailed comparisons.

The question that emerges in this new form of buying is whether this in the interest of the policyholders.

How are these platforms able to offer a substantially lower price?

Why are these policies not available on the insurer’s own website?

Platform products

Businesses with a large customer base can form a group to offer insurance to its members.

Insurers refer to these as group-retail, ecosystem, platform or affinity products.

A group policy offers economies of scale.

The cost savings thus derive are pass onto the members.

The product construct of a group-retail policy allows customize benefit design for each policy.

Insurers can do this at their end, without a regulatory approval for each policy.

This gives insurers higher flexibility to iterate.

Rates are set base on loss experience of the specific group.

Without impacting the commercials of other platforms.

Insurers cannot offer these products on their website directly.

As membership of an existing group is a prerequisite.

Instead, insurers offer retail products on their website.

Retail products go through a tight regulatory scrutiny as these are sell to general public.

Any change, rightly so, gets review by the regulator before it is launch.

For individual policies, such as health insurance, prices are fix for a particular age-group, no claim-base loading is allow.

The policy is life-long renewable.

Low-Ticket Insurance Covers

Group-retail policy is not a novel concept.

Historically, banks use to offer health insurance products to their savings accounts holders.

Price of this group-base product used to be a fraction of the retail product.

This trend then caught up with credit cards.

Which would bundle large personal accident covers with their offerings.

Then, travel aggregators would offer travel insurance bundle with airline tickets and holiday packages.

Now, with every app-based taxi ride you can choose to get an accidental insurance cover for a nominal charge of Re 1.

Riding on technology, e-commerce firms, new-age NBFCs, and payment apps can amplify the reach.

Affordable policies

Currently, the big proposition of an ecosystem product is its low ticket size.

The entry-point for the policy is design to be affordable and within reach of masses.

Policyholders are able to buy a health insurance product for as low as Rs 800 per year.

For someone with no prior coverage, this is a great start.

The other advantage is that these products are focus on areas untouched by traditional policies.

Daily hospital cash, or OPD coverage for specific vector borne diseases.

Further, these products tend to be mostly fixed-benefit orient.

Documentation requirements for claim in fixed-benefit products are minimal.

As soon as the underlying event gets triggered, the claim becomes payable.

The biggest criticism of affinity products is that in many cases

It may be an accidental purchase.

Users may not even realize if the check-box is selected and the insurance policy gets embedded into the transaction.

This may lead to customer disputes later.

The other issue is about discovering a sustainable price.

In order to design a compelling proposition, companies may offer a very low price initially.

This provides a huge cost savings upfront.

However, if the insurer decides to increase the price on renewal, platforms would have little choice.

The other issue is about customer perception.

Buying a small ticket-size insurance may give a false assurance to the policyholder.

In reality, key risks may remain uninsured.

Instant digital purchase takes away the needs analysis that an advisor used to provide.

Low-Ticket Insurance Covers

Some of these issues can be mitigate

Platforms need to ensure that along with ease.

The buyer is involve in the purchase decision.

This could be done by having a requirement of filling a small proposal form.

Platforms should ideally deal with multiple insurers to offer a comparison to buyers.

Reduce over-dependence on a single insurer.

Finally, the product design should offer tangible benefits to the user.

This can be assess by the loss ratio of the product.

Utilization helps in creating a positive feedback and encourages repeat purchase.

Platform sales can solve the distribution problem.

Which is the biggest impediment for higher general insurance penetration in the country.

It also provides the necessary context for the buyer to see insurance cost in the light of sum assured at risk.

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One thought on “Low-Ticket Insurance Covers

  1. I do accept as true with all of the ideas you have introduced in your post. They’re very convincing and can definitely work. Still, the posts are too quick for newbies. Could you please extend them a bit from subsequent time? Thank you for the post.

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