MUMBAI: Change in the regulatory environment, which has compelled insurers to cut distribution costs, is leading life companies to look at new low-cost channels for distribution.

A spate of companies, including market leader Life Insurance Corporation, are looking at online distribution to increase reach.

"Online may not be very profitable right now, but it will be definitely be unprofitable not to be online," Thomas Mathew, MD, Life Insurance Corporation of India, said while speaking at Economic Times Insurance Conclave on Sustainability and Profitability. According to Mathew, insurers will need to look at using technology to build a low-cost model that is scalable as volume picks up. "One option that insurers could look at is selling pre-approved through business correspondents of banks with whom they have a tie-up. This is of course subject to regulatory approval," he said.

In 2010, the insurance regulator tightened norms which forced insurers to cut down commission to agents. The regulator also made it mandatory for agents to achieve a minimum level of productivity and persistency of business. As a result of these tough measures the number of life insurance agents dropped from 28.03 lakh in September 2010 to 24.53 lakh in September 2011. Until a couple of years back most life insurers were swearing by face-to-face sales and maintained that online would be largely used for servicing.

Paul Robinson, insurance industry leader, IBM Financial Services Sector, said that a study in 2010 has shown that in future insurers will have to deal with multi-modal customers who will transact through multiple channels. To build up online sales they would have to leverage social media and whatever information companies already have. Although there would be a section of customers who would never buy online insurers could look at 10% of their premium coming from online.

Life Insurance Corporation has recently started direct selling of its policies and is looking at the online option.

In recent months, a host of companies have started selling plans online. SBI Life, the largest private insurer in terms of new policies, which was already selling online, has increased its online bets by launching policies in five language. Last month HDFC Life launched click2protect, an online term insurance plan. This fiscal a host of private companies have started offering products online. Bharti Axa Life launched its online term product iprotect. The pioneer among online sales is Aegon Religare Life Insurance - a three-way joint venture between Aegon, Religare and Bennett Coleman & Company (owners of Times of India). Aegon Religare started offering term insurance as far back as October 2009. Since then the company has added to its suite of products.

Source : timesofindia.indiatimes.com