IRDA has not approved any web aggregator license till now; web aggregators have stopped giving product comparison for the last 21 days. Business outlook remains grim due to drastic cutback of the price a customer lead can be sold. Will aggregators adapt or perish? 

The Insurance Regulatory and Development Authority’s (IRDA) stringent guidelines for comparison websites is followed by the lack of license approval till now. The outcome is a stony webpage with message of pending approval of license when you try to compare insurance rates online on numerous aggregator websites. The product comparison is not displayed, but some websites like MyInsuranceClub.com, ApnaPaisa.com and i-save.com offer to help you in case you call them.

Lead generation, which refers to website visitor information (with approval) being sold to insurance companies for pursuing sales was the main business of comparison websites. According to one web aggregator, “There have been eight applications for web aggregator license, some of whom have applied more than a month ago. Many web aggregators have slashed their Google advertising budgets. One Google click costs more than Rs10 and it takes 10 clicks to generate a lead. If my cost is Rs100, how can I sell the lead for Rs10 to a maximum of three insurers? We want to get through this tough phase and hope that the regulator shows some flexibility.” 

Some web aggregators are not inclined to sell customer leads even after they get the IRDA license approval. This is because the commission from product sale may be near zero as in the case of online term plans. Moreover, the web aggregator will only get 25% of the wafer-thin commission. According to one web aggregator, “We will sell the lead for traditional endowment or money-back products, but how can we ensure that the customer lead was converted to sale by the insurance company unless they tell us honestly?” It means there are concerns over the ground reality of how the web aggregator model will really function.

The downer is not just the price for which a customer lead can be sold; web aggregators face a stark future in case insurance companies refuse to share the product pricing. IRDA guidelines clearly states that web aggregators shall display product information purely on the basis of the information furnished to them by the insurers. 

Moreover, aggregator will get flat fee of Rs1 lakh per year towards each product displayed and hence insurers will pick and choose which product information they want to share. It will be a bummer if the web aggregator ends up displaying only a few insurance products as it will make their purpose of transparent product comparison futile. As such, there were few insurers who did not work with web aggregators before the IRDA guidelines and there is less chance of them changing their strategy in future.

Web aggregator Policybazaar.com still gives you product comparison. The website redirects you to comparebima.com which is powered by Achyut Insurance Brokers. The broking license does not allow them to sell leads, but they can close the sale to derive commission from the insurance company. Policybazaar.com is looking at the online sales model to generate revenues. It boasts of having sold 10,000 policies last month which includes 4,500 term life insurance, 2,500 health insurance, 2,000 ULIPs and 1,000 car insurance covers. 

Online distribution has a tremendous growth potential in reducing the insurance sales cost, which can be humongous. Web aggregators claim to have reduced the distribution cost of insurance companies to Rs2,000 per policy and hope to bring it further down to Rs500 per policy over a couple of years, obviously with the help of compliant regulator. The reality is that the rigorous IRDA guidelines are seen as a deathblow for budding web aggregators. 

There is grouse among web aggregators for the IRDA stance, but who would want to be the first one to take a stab at the regulator? As one web aggregator puts it, “If you want to go out of business, you can afford to go down fighting the regulator with civil court lawsuits or public interest litigations. No one dares. We just want to stay afloat for now.”

IRDA may not have been successful if the web aggregators were displaying the product comparison without any business angle. IRDA just cannot regulate anyone outside their purview. But, the web aggregator business is laced with remuneration from the insurance companies which will not violate the diktats from the mighty regulator.

There was no response from IRDA to our query on number of web aggregator license applications. 

Also read: Are insurance comparison sites going out of business?