'Bima Sugam' platform to make insurance cheaper in India :

Insurance Regulatory and Development Authority of India (Irdai), recently announced the launch of Bima Sugam—an online marketplace that will house all companies selling life and non-life insurance on a single platform. The portal is scheduled to go live from 1st January 2023.

The online platform will provide you with a one-stop destination for all insurance needs, providing services like buying insurance policies, portability facilities, change of insurance agents and settling of claims.

It allows buyers to purchase life, motor or health insurance policies directly. Besides, web aggregators (such as PolicyX, PolicyBazaar, etc.), brokers (such as Bajaj Capital, Probus Insurance Broker, etc.), banks and insurance agents will act as facilitators in selling insurance policies.

The Bima Sugam platform will provide all these facilities to policyholders with an e-insurance account (E-IA).

Owners of 'Bima Sugam':

Several insurance companies (both general and life insurers) would become major shareholders of the Bima Sugam platform.

BIMA Sugam exchange will be monitored by the IRDA and shall have the following key stakeholders-  Life Insurance Council and General Insurance Council will hold 30% stake for Rs 25 crore fund infusion each, while Online PSBs will get 35% for Rs 30 crore. Brokers Association will have 5% stake for Rs 3 crore infusion.

Benefits of 'Bima Sugam' :

The Bima Sugam will leverage the prospect of having a centralised database. It will assist the insured/buyers facing challenges with existing insurers/agents to port their respective policies based on coverage and pricing. Further, it will pave the way for speedy acceptance of new/sandbox products.

• The platform will also give buyers a wide choice to pick and choose policies. It will offer a window to view all your policies (be it life or general), details and renewal dates.
• The platform will help reduce commissions paid to intermediaries . Hence, you can select the best suitable product at an appropriate premium price.
• Irdai has proposed that an insurer can give a discount on premiums for the policies purchased directly through this platform. The contours of the discounting pattern are yet to be worked out.

How will it work?

The platform will push for end-to-end digitisation of the insurance-selling ecosystem. The selected repositories can help maintain the insurance policies of the policyholder and his family. Policyholders will have their E-Bima or E-insurance accounts wherein they can view their policies and file a claim.

The information links stored in one place will make claim settlement easier for nominees/beneficiaries. Moreover, the portal will help individuals apprehensive about sharing their contact details with aggregator portals to obtain policy premium quotes.

Will policyholders need to create a demat account?

Unlike mutual funds, share trading and payment platforms, insurance has more complex products and lacks standardisation in the underlying technology.

• Bima Sugam will be a platform where a centralized technology infrastructure will help manage your entire policy.
• Policyholders don’t need demat accounts. They will have to give consent (through the Aadhaar verification process) to access insurance policies but will not have to create demat accounts like they do for trading and investing.

Immediate threat to Private aggregators:

The immediate threat to private web aggregators business is seen from the fact that a section of customers may start buying insurance directly whereas others may prefer and trust a regulator-backed platform over private players due to issues such as data privacy.

• Private platforms tend to be biased due to their profitability goals. However, a regulator-supervised platform will provide unbiased comparisons to customers and leads to service providers.
• Most industry players expect atleast a short-term hit on the business of private aggregators, especially in straightline products at the lower end of the spectrum such as term products, motor and health covers, which could in turn see more direct sales.
• Others though believe that private aggregators have the ‘first mover advantage’ and have built customer-friendly and seamless on-boarding models--something which regular users might not want to give up.

More flexibility:

Further, with IRDAI proposing more flexibility and insurtech solutions, aggregators may be nudged to look at more unique offerings and services to create a distinct value proposition for their customers, according to industry participants.

Direct sales

• Conceived as an insurance marketplace for comparing, selling and servicing for insurance policies across life, general and health insurance without any tedious paperwork, the platform will also enable saving of insurance policies in a demat format enabling easier renewals and claims management.
• It will make policies cheaper because there will be no distributor commission and the regulator is very clear that this benefit should be passed on to customers, industry players said, adding that policyholders will also be able to port their agent or policy.

Standardisation:

The lack of standardisation is what Bima Sugam addresses the most. This will be very helpful in making insurance buying online easier and simpler, thus bringing in more transparency and help reduce instances of mis-selling and fraud risk.

• Enhanced customer convenience is seen boosting direct policy sales, thereby reducing distribution costs for all stakeholders. Policies bought without the help of an intermediary of agent, currently constitute a very small percentage of overall insurance policy sales.
• Over a period of time the visibility, ease of availing insurance and adoption is expected to push direct policies especially the standard OTC products.
• Even today, aggregators go beyond pure online intermediation and are involved in physical intervention with prospective customers, which may not be true under Bima Sugam at this stage.

Customers from rural India may still like to go for the traditional approach and thus the insurance aggregators may aggressively start exploring these markets. An increased competition may lead to improved services from aggregators, agents and brokers resulting in increased customer satisfaction.

The overarching Insurance Platform shall enable the following services for the customers- Buy insurance policy, Claim Settlement, Agent Portability, Policy Portability.

Individuals who are apprehensive about sharing their contact details with aggregator portals to receive policy premium quotations can log on to this regulator-approved platform to purchase policies in one place instead of visiting different insurers’ websites separately.

The regulator also plans to mandate demat policies by providing E-BIMA or E-insurance accounts (E-IA) to create a framework and give a further push to end-to-end digitisation of the ecosystem.