LIC launches online term insurance plan, finally

By Deepak Yohannan
May 29, 2014

(Any opinions expressed here are those of the author and not of Thomson Reuters)

There are 24 life insurance companies operating in India, and Life Insurance Corporation of India (LIC), the industry’s biggest player, was one of only five which did not have an online term plan, until now.

LIC had earlier tested the online waters with an immediate annuity plan, but stayed away from the most-purchased plan – online term insurance.

Now, with the launch of the company’s e-Term plan, a lot of apprehensions about online products will be dismissed. While most private players have online term plans, the absence of LIC provided ammunition for offline distribution channels to punch holes in this amazingly cheap and convenient insurance product.

A huge price difference between online and offline insurance products having identical benefits led to questions on whether claims for online plans would be honoured; and how is was possible to even sell at such low rates? The fact that LIC, the biggest and most well-known insurance player, hitherto did not have an online plan meant questions kept lingering.

So what does the online term plan mean for LIC and the life insurance industry?

The implications of this move can be quite far-reaching in the long run. In my opinion, it is a huge step forward for the industry, signaling a paradigm shift in the way it will move in the coming years.

If the move clicks for LIC (no reason why it should not), more and more online products will be made available to customers in the coming years.

LIC corners almost 70 percent of the industry, and any significant online movement for the government-owned company means movement for the entire online insurance space. All other insurance companies will also benefit as the whole term insurance market has now moved online.

This will also force positive changes in LIC’s large agency force – the individuals who meet customers and sell LIC products. While many of them are already tech-savvy, the latest move will push them towards the online medium even more.

If paid adequately, you could one day see a couple of million insurance agents trying to sell online plans on their laptops and tablets.

The threat to LIC is that the online world is open to all and is easily accessible. Even the smallest or newest insurance company will now stand a chance to get its products compared with those of LIC.

When an LIC agent goes out to sell a plan, he pitches only LIC products and does not compare them with similar products from other companies. But in the online space, products can easily be compared and the large network of LIC agents does not hold an unassailable upper hand.

Setting up a well-oiled agency force in remote parts of India was tough for private insurers and LIC had a huge advantage. But for an online plan, customers in smaller towns or rural area can easily compare LIC’s plan to a similar product from private players like Reliance Life or Aviva Life.

LIC has priced its online product above the average of other online term plans, but that is not a cause for concern as most customers would be willing to pay the premium for such a trusted brand. However, price conscious customers will start looking at other options.

It is one big move for the life insurance industry which should also accelerate the sale of other non-term life insurance products in the medium to long term. These are exciting days.

(For more articles by Deepak Yohannan, visit MyInsuranceClub.com or tweet him @dyohannan)

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