Though the benefits are exactly the same, online term plans are much cheaper than the ones sold by agents or branches. This is because of several reasons listed below –
- Insurance companies save on a lot of costs by selling online. Costs such as commission, paperwork, distribution, etc. Therefore they pass on such cost benefits to the customer by pricing the product low.
- Online plans can be purchased only if the customer meets certain criteria. The profile of customers who meet these criteria is expected to be less risky. Low risk results in low premiums.
- There is an immense saving from a processing perspective also. An application form signed by a customer needed to travel to the local hubs which then would be under-written and then the decision to issue or not issue the plan would be conveyed to the customer. Now the under-writing is real-time in most cases. The rules are applied as you fill up the form and most cases are screened there itself. The savings in these costs are passed on to the customer.
Also, online term plans are a relatively new phenomenon. With such a large agent force in India, not all of whom are familiar with the online world, needed the old plans to stay. Over a period of time, one would see the difference in price disappear if the commission levels of the plans sold offline are reduced.