Online sales in Asia: ready to take off

Ask any insurers or insurance aggregators in India about online sales and a barrage of very impressive figures follows.

Sales are doubling each year, market share is a high double digit, and the customer base is expanding exponentially. There are claims and counter-claims and the figures sound suspiciously similar for all.

As one insurer says: "Figures for online insurance in India are as good as folklore. Telling reality from myth is impossible."

One generic statement that everyone does agree on, however, is that online insurance in India is on a roll.

Nascent industry
Taking a step back, the situation appears to be typical of a nascent industry in the throes of growth, exaggerated by a very small base.

The online insurance industry in India is estimated to have doubled to $163m in 2012 and is all set to grow another 70% in 2013.

Driving this is the phenomenal increase in the number of internet users at over 30% annually from 2000 to 2011.

The number is expected to be close to 300 million by 2014, according to Towers Watson. Online insurance is clearly piggy-backing this trend.

"Figures for online insurance in India are as good as folklore."

Low penetration
Now for some sobering statistics: only about 2% of life and 4% of general insurance is sold online, according to Akshay Mehrotra, chief marketing officer of policybazaar.com, an aggregator.

Overall, premium garnered online is less than 2% of the $11bn figure for the total insurance industry.

The internet penetration itself, although advancing at a steady clip, was at only about 10% in December 2011, according to Towers Watson.

The experience for several other Asian economies seems similar. Tony Compton, director and head of insurance consulting for mainland China at KPMG, says: "Although we are not aware of any market data specific to online sales, the figures are still very low."

Converting the visitor
For property and casualty insurance, Wenli Yuan, a senior analyst with the Hong Kong office of Celent, a global advisory and research firm, says that, while there are seven major dedicated online P&C insurers in Japan, e-business contributed a mere 6% to the total premium in 2011.

In China, the figure was just 1.8% of the total, despite more than 30 insurers selling life and P&C insurance online.

Converting a visitor into a customer remains the biggest challenge. Yateesh Srivastava, chief marketing officer at Indian insurer Aegon Religare, says that customers who "research online and purchase offline" are a staggeringly high percentage.

Of every 100 visitors to the Aegon Religare website who research and take a quote, only seven to eight actually make a purchase.

"Although we are not aware of any market data specific to online sales, the figures are still very low." Compton

Travel trend
Policybazaar.com has a similar experience. Of the 600 000 customers the site receives in a month, only about 15,000 make a purchase.

Compton reports a similar experience in China: "In a recent KPMG survey we found that only short-term travel policies were gaining any real traction through pure online sales. 12% of them were bought online."

The comfort of an agent interface remains a big barrier, especially in life insurance, agrees Yuan.

In Singapore, 75% of life insurers do not sell life insurance products online, and less than 7% provide online applications for term insurance and critical illness, he says.

For China, Compton says: "We are aware of some initiatives to establish online platforms to distribute life policies, but these are at very early stages."

Chat backup
In India, most aggregators and insurers, therefore, have tele-assist and online chat built into the model.

Some others, like Aviva, provide both, an instant call and an agent visits facility. Interestingly, in China, some aggregator sites are appearing now.

Lack of insurance awareness and low internet penetration pose their own challenges.

"There is no online-only brand in India due to these reasons," says Gaurav Rajput, director of marketing at Aviva India.

"There is no online-only brand in India due to these reasons." Rajput

Buying online
Another challenge faced by all e-tailing businesses is the apprehension regarding making online purchases.

Customers are still not very comfortable carrying out online transactions, says Rajput. The same hesitation stymies online insurance purchase, agrees Robin Roy, director of financial services at PWC India.

Aid may come in from the country's central Reserve Bank of India, which is pushing banks to ensure that 85-90% of transactions move online.

Banks, which own the payment networks including gateways, may give an impetus to online sales.

Catching concept
"The concept of business correspondents is catching on. For instance, grocery stores are being enabled to help customers make deposits or withdrawals at their point of sales," he says.

"A year or so back RBI had allowed ‘for profit' firms to become BCs. A number of them are now getting trained to distribute micro insurance."

Everyone agrees that there is tremendous potential for growth. A benefit no one can argue with is cost.

A customer can save as much as 55% through online purchase. Mainly on this benefit, simple products like travel or motor insurance are already selling well online, especially for renewals.

"There are big savings on the operational side that can be passed on to the customer." Sharma

Operational savings
For complex products like health and life insurance, the online model is geared more towards servicing or tracking than sales, says Shashwat Sharma, partner at KPMG India.

However, he concedes: "The sales volumes will definitely grow. There are big savings on the operational side that can be passed on to the customer."

After all, companies are saved from having feet-on-street and spending millions in opening new branches.

New mobile offerings like smartphones and tablets are also changing consumer behavior, says Yuan.

"In developing countries, such as India and Indonesia, mobile devices are the major tool for internet access," he adds.

"We believe that the culture change brought by mobile technology could increase the number of consumers getting information and purchasing insurance online."

He appears to be right. For Policybazaar, which introduced a mobile-friendly feature on its website only 12 weeks ago, traffic coming from mobiles and tablets is already at 11% of the total.

Immense possibilties
In fact, technology may aid in higher penetration too. Indian insurer Royal Sundaram, for instance, is partnering with the BASIX Social Enterprise Group in the health insurance area to enable rural customers to receive their policy document instantly.

"E-insurance is definitely good marketing as well as distribution tool that will be key in increasing penetration," says Ajay Bimbhet, managing director.

The possibilities are immense. As Compton says: "One of the largest online markets for Asia is in Australia.

"Approximately 70% of personal insurance products are sold through direct channels, with online sales generating a significant proportion of the total."

Clearly, the example is driving the rest of Asia.