Insights

Online Vs Offline Term Insurance – A Comparison

May 28, 2014 . Sridharan S

In the market, insurance companies are increasingly introducing online term plans for lesser premiums to customers. This, in one way, is exciting news as it means more savings. However, price shouldn’t be the main criteria for choosing something as important as term insurance. Here are a few pointers that will help you make the right decision between online and offline term insurance.

Is low premium the main criterion for choosing term plans?

In our view, low premium must never be the only criterion for choosing a term plan. Before you fall for the charms of such plans, you’ll need to look closely at the fine print. For starters, the ‘cheap’ premium paid for online term insurance often jumps up by 25% after the prospective customer undergoes a medical test. Also, after the medical test, if the proposer would like to decline the policy, the amount paid will be refunded to him only after the cost of the medical test that was borne by the insurance company has been deducted.

In some cases, a few leading insurance companies have started offering online term plans without conducting any medical test of the prospective customer. This is for term insurance policies that have a sum assured of up to Rs. 50 Lakh. One important point to note here is that such a customer has to disclose his entire medical history, and that can be used as evidence in the case of a claim.

Claim Settlement Ratio

The claim settlement ratio for online insurance is not required to be mandatorily disclosed by insurance companies to the Insurance and Regulatory Development Authority (IRDA). As per IRDA guidelines, such a ratio declared by insurance companies is the combination of both online and offline insurance plans. Further, the lack of data available on the claim ratio of online plans hinders its clarity. As insurance companies have started offering online insurance plans only from the last 4-5 years, early claims will go through high scrutiny before the claim is settled.

Customer Support

The objective of a term plan is to acquire the sum assured amount when the policy holder dies. In the case of an online term plan, the proposer’s nominee has to coordinate with the designated call centre for the claim settlement. In the case of an offline plan, the advisor/broker is the one point contact. He will work on your behalf to help you get the claim from the insurance company. As per the insurance law, the agent/broker is the first underwriter to the customer as he is meeting the insurance buyer. Insurance is thus, the contract between the insurance company and the proposer which works on “UBERRIMA FIDE” (i.e. utmost good faith). Even small details that were missed out at the time of filing the online application form by the proposer leads to cancellation of claim proceeds.

Premium Comparison

The premium of online term plans varies from company to company and this leads to a lot of confusion among customers. The premium is factored based on various parameters like mortality rates, cost of medical tests and marketing costs. While a few companies are reducing their cost by offering term insurance without any medical test of the prospective customer (for up to Rs. 50 Lakh of the sum assured), such online term plans, in most instances, do not offer additional riders like accidental death, Permanent Disability Benefit (PDB) and critical illness coverage to customers.

To conclude, you must remember that cheaper premium alone should never be the criterion for choosing a term plan. Apart from the premium, all the above factors should also be considered before signing up for a term plan. We strongly advocate that offline term plans are best suited for individuals as it offers an array of beneficial services coupled with guided advice.

Comments

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27 thoughts on “Online Vs Offline Term Insurance – A Comparison

  1. a review of the Reliance Term Insurance plan would be helpful. It is the cheapest one right now.

    1. Hello Mr. Abhishek,

      The reliance term insurance has a claim settlement ratio of less than 90% in the last four years. As the article says, one should not look at the cheaper premium alone as a criteria for choosing the term insurance. It is always advisable to look at the other parameter like CSR, insolvency ratio, customer support etc., to choose the best term insurance.

      Hope this clarifies.

      Thanks & Regards
      Sridharan

  2. Good article – for the first time I have read such an objective and balanced comparison.

  3. Excellent and very objective article… Another factor to consider is that it is very difficult to compare these plans with each other (online 1 vs online 2 or offline 1 vs offline 2) in terms of inclusions and exclusions because all these companies advertise is low premium & all websites which offer comparison don’t provide info on inclusions and exclusions in a comparable format.
    While online is a little cumbersome in terms of you alone being responsible for change of address or understanding your policy but I would like it to be that way rather than trust someone who may or may not be around when I have to make my claim & may not be serious enough with my claim because it’s just one in many claims lying with him..

    1. Hello Harsh,

      Thanks for your views. We can certainly compare two different products be it online term or offline term plans. The various parameter for comparisons are the claim settlement ratio, company’s financial strength, insolvency ratio and the customer support etc., As far as the life insurance is concerned, it is something that we are planning where the claim process to be definitely handled by someone else in our absense and hence it is always advisable to choose the right plan with the right advisor.

      Thanks & Regards

      Sridharan

  4. Hi Sridharan,

    If i go for an offline term plan through an agent. And if that agent retires or is not working with that insurance company then will I be assigned with some other agent to help the policy beneficiary in case of claims?

    1. Hello Romit,

      Thanks for writing to us. The insurance bought through the agent or broker will remain the same till the end of the policy period. However, if one wanted to change the agent/broker, the policy holder has to get the no objection certificate from the existing agent/broker and move to the new broker/agent. It is always better to deal with the professionally managed organisation instead of an independent agent.

      Hope this helps.

      Regards
      Sridharan

  5. I just want to tell everyone something i experienced with sbi life insurance. I bought SBI e shield life insurance for 50 lak at 5500rs. It was online and purchase was absolutely hassle free. It took just 5 days for application process and everything was online. I got the policy documents in 15 days. Same time my brother bought the sbi term insurance for 50lak at 10500rs through a broker, every day he used to come home with a new form and used to ask for some document proof. The process took almost 1 month to get the policy document. Documents came through SBI directly and not through broker. Then i just called up the customer care people to know about claim process. They told if i have any claims. i ( benificiary) can put a request on phone and the person from sbi will visit the place and he will assist in further process.
    Moral i learnt was buying online and directly claiming through insurance company is much better rather than buying it offline with extra cost. Claim process as told by the customer care is quite simple contrary to what is written in the article
    with regards
    Dr Chethan K

    1. Hello Mr. Chethan,

      Thanks for your feedback. In fact, you have got the better experience with your insurer. This article is about the educating the clients on the different types of things that are to be looked after before buying a term insurance and ofcourse, the individual has to seriously think whether the beneficiary is well educated about the claim process. The objective of taking a term insurance is something that we are planning for the individuals absence and hence it is to triple check on all the issues before taking up the same.

      Thanks & Regards

  6. Hi shreedharan

    Nice article. I have an question to you.

    I purchased an Offline term plan from Aviva for 50L which was during 2010 and also planning to add another 50L from Aviva Online term plan. In my opinion if you want to increase the SA later we can go to same insurer instead of others, the reason is insurer will be already knowing you when you purchased the first plan and in case any claims arise it can be settled with the same insurer without any hassle. Does this sounds good or do you have different opinion.

    What about the trustworthy Aviva PLC in terms of claim settlement. In your article you have not commented more on Aviva PLC, when I checked the IRDA claim settlement ratio for 2013 it shows approx 87% for Aviva. As per my understanding claims settlement ratios whether it is less than 90 % or more than 90% for any insurer you want to go does not impact your claims related, provided you have disclosed all material facts about you in the application form while doing contract for insurance.

    Is this sounds good or do you have different opinion

    1. Hello Satish,

      Thanks for your appreciation. This is with regards to your query, since you had already taken a term insurance of 50L with Aviva, it is advisable to do with another company having a consistency in their claim settlement. The claim settlement ratio of Aviva is less than 90% again one has to look at the no. of claims applied and the no. of claims settled instead of the ratio alone. For example, if the claim applied is 1 in the whole year and the settled is also 1, then the claim ratio of this company may be 100%. But, this doesn’t impact on the overall claim settlement experience.

      Again, the term plan that you had taken about 4 years back and the medical status keep changing from year to year and hence the insurer will ask you to go for a medical checkup compulsorily. So, in a way it is like a fresh application and hence it is advisable go with the better company compared to Aviva.

      Hope this clarifies/

  7. I dont agree with most of the issues that is raised here.Let me address them one by one.
    1.No advisor support for insurance need.
    First of all, almost no travel agent offers/recommends any term plan, those who buy it ,buy by their own will and have to force the agent to get one.Because the agent try to sell only endowment policy.Even they try to portray that term plan is a waste of money. and a person who is tech savvy enough to buy a online plan can easily evaluate his insurance need by a little googling.There are thousands of article regarding how much insurance one needs.
    2. offline plans are not “a little costly”. The cost is almost double. I have lic offline term plan which costs me 13k pa. I checked the eterm policy that they introduced recently.It will cost a little more than 7k for same insurance cover and lic e -term is on the costlier side than other companies. Sadly I cant buy it as I dont have 3 years tax returns.
    3.I am investing through fundsindia and not through any physical bank.is it a hassle just because it is online?what is the hassle in working through call centre.
    4. How do you come to the conclusion that insurance companies are not prompt to remind the renewal date.You are alerted by emails/sms. what more alert one wants. of course they will not chase for your cheque as the agent will do.I kind of agree with this issue.
    5.You fill all the forms yourself when buying online. but in case of agents they will just make you sign the documents and they will fill the rest(of course you can tell them that you want to fill the form yourself, but really who takes the pain!). and god knows what they fill.in online you are responsible for what you are filling. from personal expereinece I can tell the agent will want to hide facts in the form which can increase the premium, because they think that if he offers a certain cover (say 50lac) in less premium then the customer will be happy. He would not let me write that for my work I have to handle explosives, he would not let me write that I had a surgery in the past.all because of the fear of increasing premium and losing customer.Most agents thinks about their profit only.They are least interested about you.

    My conclusion about this article is that, it is a heavily biased article towards offline insurance policy and does not at all try to educate readers about all the facets of both the products. As it is influencing the reader for going to the offline route.
    A person who is educated enough to buy a policy on line will surely benefit from a online one.offline can not be better for him in any condition.

    1. Hello Mr. Rick,

      Thanks for your feedback. My replies to your points are inline below.

      We consider only a honest broker who sells the insurance based on the client needs and not on his needs. Secondly, the LIC terms plans are costly both in online and offline as they are portraying their claim settlement ratio is higher. Let me tell you onething, the claim settlement ratio alone is not the criteria as this involves the no. of insured persons that are being rejected. Suppose, if we assume, the claim settlement ratio of LIC is said to be 97%. The total policy issuance is 100,000, then the no of cases that was rejected in this case is 3000.

      Investments and Term Insurance is two different products. Investments are something where we are planning to accumulate wealth for long term and term insurance is something that we are thinking of supporting one’s family in case of something happens to the insured. We need to be more careful when taking a term insurance having in mind that you need to trust someone who can help in terms of your absence.

      The E-term is relatively new and there is no information on the claim settlement ratio individually on these plans which is a major setback and hence we are recommending the offline plans and it is not biased towards offline as there are more reasons why not to buy an online plans.

      Finally, we advocate this towards a novice clients who doesn’t have any knowledge on term plans and get caught with the agents talking about investments plans which may not be a requirement of the clients.

      Thanks & Regards
      Sridharan

      1. Hi Sridharan,
        I agree with all your points in favour of offline term plan over online term plan and I think they are 100% valid, but only in theory. Whereas what Rick has shared is the more practical experience.
        Ideally yes I would love to have someone “whom I trust”, take care of the claim process in my absence. But today it is very difficult to trust someone. And second if I do find one of my known person working for an insurance company then there is no guarantee that he will be actively working when i need him, as insurance is a very long term product, we are talking about what may happen after 25-30 years.
        And if you say that if my old “trusted person” retires then company will assign someone else then what is the harm in trusting the company and its process itself rather than any one person and relying on him.

        And i think the best way to move forward should be buying an online plan after exhaustive research, understanding the claim process and “making sure that everyone in your family understands that process ” also. And insurance company will always be there to help.

        But if one doesn’t have time for research and wants to rely on someone else’s judgement or doesn’t understand insurance and its terms or doesn’t want to put in the effort then it is always better to buy an offline term plan rather than not buying insurance at all.

        1. Hello Romit,

          Appreciate your views. Addressing your query, have replied in my earlier mail as well. In any case, the policy is being tied with the respective insurance company where there is a set of people involved in terms of claim settlement. In the case of offline plans, the human touch is involved and in the online plans, there is no human touch. The question of choosing a broker depends on the individual and in case if he doesn’t get the services properly, they one can change the broker.

          Regards,
          Sridharan

  8. Your logic is not really making sense to me. Fundsindia is also new. Should not I trust fundsindia then !!! Of course I have done my homework before investing .
    online plans may be new but the companies that have introduced them are not new. When a claim will be made it would be processed by the same company/same people be it online/offline.
    According to your logic nobody should invest through fundsindia too. Because all the cons you have mentioned for online plans applies for fundsindia too.Heck fundsindia don’t even have a dedicated call center number even all the support comes either from chat or email.
    N.B: that’s a real requirement. Fundsindia should have a dedicated call centre. is the number 917667166166 a call centre? because for reasons not known I cant seem to reach this number ever. It says the number does not exist and a few times it was picked up by somebody who speaks tamil(probably,I dont know ) and does not understand english.

    1. Hello Rick,

      Hope you are misinterpreting between insurance and other financial product. As far as the insurance is concerned, it is a protection product. The other financial products are investment product and the method of choosing an online buying is better to the investors as this provides a hassle free process and there is little due diligence required. When it comes to insurance, definitely one has to think a lot before choosing.

      There are 2 types of online

      1. Buy online
      2. Sell online (In insurance they call it as offline products as it routed through a distributor)

      Here the technology is just mode of display or facility to avoid mistakes / human error in terms of completing the documentation / process. Now the question how many of them aware of concept and purpose of Life insurance let us say TERM PLAN?

      My View is we hold technology that applies logical measure to an extent will support certain practical difficulty but won’t resolve completely. We need a mix. Technology helps / facilitate to reduce logistics but that not a solution.

      With regards to your other query on the call center. Our Customer support team is looking into the same. Very soon you hear from them.

      Regards
      Sridharan

      1. Again I am failing to understand your logic. So according to you dilligence is not required while investing!!! Insurance is for protection purpose, agreed and what are investments for then? I am sure nobody will want to lose their hard earned money after years of investment. Mr. Sridharan it is very very important to judge the trust factor before investing in instrument through anybody. What you are claiming fundsindia is doing( and I agree too) applies for online term plan also, eliminating middle man. It is cheaper because insurance companies dont have to give commissions to agents. In online term plan if anybody is at a loss then he is an agent. For everyone else (customer,insurance company) its a win win situation.

        1. Hello Rick,

          We are hereby addressing a majority of the investor population who doesn’t understand the difference between an insurance and investment product and hence it is advisable to use the advisor to take an informed investment decision be it insurance or investment product. This is not for the population of investor who understand the product before taking an investment decision.

          Hope this clarifies.

          Regards
          Sridharan

  9. This article comes as a shocker for me. While most others are recommending online term plans if one is comfortable with online buying fundsindia is recommending offline ones with silly logic. I dont see fundsindia’s any direct gain by recommending offline ones or I would have thought it a paid article.
    Most of the reasons shown here are outright silly and surely will prove to be wrong. let me ask you on thing :
    Say I am a officer of LIC and I have two claims of term plan one is by offline and another online. So will I treat them differently?? I dont think so.
    For people who are tech savvy and nominate their spouses who are also tech savvy there is no denying of the fact that online term plan is far far better for them.

    1. Hello Mr. Raja Das,

      Thanks for your reply.

      In India, how many insurance agents/brokers are selling insurance? If most of the insurance agents/brokers are selling the term insurance, by the definition of insurance “law of average numbers”, the premium for a term insurance would have been much lower.

      Addressing your query on purchase of online / offline policy will be treated differently if they are not applied simultaneously with one company. Norms differs on risk perspective.

      Do not mix technology and subject, instead link technology. Else with the above statement Insurance companies might have cut down their employment cost and choose preferred mode as online. Then why there is delay? There are many more insides hence all Insurance company are trying to steam line online policy process which will definitely help next generation which may not useful for this generation.

      Even though husband / wife are tech savvy many of the insurance companies has a separate renewal department to collect the renewal premium and there is a huge % of renewal that is not happening. It really indicates how people realized about the subject hence replicate very low penetration in India.

      A HNI client signs an online term plan with the reputed insurance company was rejected simply based on the clients financial ground. In offline, there is a logic to decline a policy which is not clear in the online process.

      Hope this clarifies.

      Regards
      Sridharan

  10. When I thought of investing in mf through fundsindia most of my friends cautioned me against this. Their argument were in line with your argument against online plans. They were saying sip is for long term , dont take risk, invest through bank etc etc.. But I researched and satisfied myself about the pros and cons and concluded that fundsindia is good for me. Same for online term plan too. The product may be new but LIC, HDFC these insurance companies are there for ages. If I can trust them for offline ones then I can trust them for online one’s also.

  11. When I thought of investing in mf through fundsindia most of my friends cautioned me against this. Their argument were in line with your argument against online plans. They were saying sip is for long term , dont take risk, invest through bank etc etc.. But I researched and satisfied myself about the pros and cons and concluded that fundsindia is good for me. Same for online term plan too. The product may be new but LIC, HDFC these insurance companies are there for ages. If I can trust them for offline ones then I can trust them for online one’s also.

  12. Extremely informative. I had absolutely no idea that there are so many little details, but after going through the article i feel that i too know something.Investing in anything requires a lot of thought and research too so that your money is safe and provides great returns also. I have recently bought TATA AIA Life’s money back Insurance plan, this plan gives you the flexibility to choose from various term options to meet your financial commitments with the advantage of paying for only half the term. http://www.youtube.com/watch?v=pt9zffdjBkw

  13. Thank you for sharing such great information. It is informative, can you help me in finding out more detail on Term Insurance Comparison,i am interested and would like to know more about this field and wanted to understand the basics of Retirement Insurance Company

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