Is integrated insurance the new breakthrough in the e-commerce sector?

India’s e-commerce industry is poised to become the second largest in the world by 2024, thanks to a liberalized FDI policy for the sector, greater digital literacy and access and a pandemic that has forced more online shopping. Naturally then, competition in the sector intensifies. The entry of big companies, Indian and foreign, into the e-commerce space has flooded the market for about 5,000+ active e-commerce start-ups in India. Obviously, all e-commerce players need to bring more than their goods, and this is where integrated insurance could make a difference. Simply put, embedded insurance is the sale of insurance coverage, as an add-on, with a product, at the point of sale of the product.

Insurers in India have rapidly embraced integrated insurance through e-commerce channels as more and more purchases are made online. The integrated insurance is no longer limited to the purchase of insurance when booking airline tickets online, but also extends to the purchase of cover when booking taxi rides or train tickets, the purchase of mobile phones, furniture, household items or even shoes and glasses on the Internet.

On the one hand, integrated insurance allows insurers to reach more customers without relying on expensive distribution channels such as banks, and on the other hand, it helps e-commerce companies to sell products bundled with insurance coverage, at nominal cost or at no additional cost to customers, making e-commerce offers more attractive. Since most e-commerce companies offer similarly priced products, providing built-in insurance could add “value” to customers’ shopping experience. By doing so, e-commerce portals could highlight to the customer certain future risks associated with purchased goods and simultaneously provide a solution to those risks at nominal costs, ultimately offering more personalization to the customer. E-commerce entities looking to differentiate themselves could also provide a seamless complaints experience for customers, giving customers more reason to come back to them rather than another e-commerce player. E-commerce entities can easily leverage data pre-populated by subscribers when purchasing goods or services, for insurance purchase purposes, making insurance purchase more convenient for the customer.

E-commerce businesses already have valuable customer data needed to build a targeted sales pitch for a particular insurance coverage, which, combined with the ease of shopping online, makes integrated insurance a winning proposition. -winner for insurers, e-commerce companies and customers.

The sale of insurance coverage can provide an additional source of revenue for e-commerce entities in a competitive market. Depending on the volumes, this could mean significant revenues without substantial expenses. India’s population is vastly underinsured and therefore the potential for income through the sale of insurance covers can be significant. However, e-commerce entities should keep certain insurance regulatory considerations in mind when analyzing the value proposition for themselves.

Since the underwriting and sale of insurance products in India can only be undertaken by entities licensed by the Insurance Regulatory and Development Authority of India (IRDAI), such as insurers and insurance intermediaries, unlicensed actors such as e-commerce entities mainly offer integrated insurance through group insurance arrangements where the e-commerce entity acts as the “master policyholder” and the customer is the ” insured beneficiary”. The regulations allow insurance companies to pay primary policyholders to leverage existing infrastructure for data management, premium collection, certificate of insurance issuance and claims settlement, all by prescribing maximum limits on what can be paid to primary policyholders for these services.

E-commerce entities considering integrated insurance should also keep in mind that mandatory bundling of insurance products, i.e. requiring customers to purchase insurance as a condition of benefiting from their product/service , is not authorised. Nor would they be able to offer discounts of any kind to customers to entice them to purchase insurance coverage. IRDAI also strictly regulates the advertising of insurance products and how insurers can use third parties to disseminate information about a policy.

Although it does not have dedicated standards for the regulation of integrated insurance, the IRDAI already closely regulates the administration of group insurance products. These standards impose all the obligations on the insurers, but also oblige the insurers to carry out surprise inspections of the group policyholders to ensure compliance with the standards or to obtain a certificate of compliance from the auditors of the main policyholders. As integrated insurance becomes an important distribution channel for insurers, e-commerce businesses can expect insurers to take a closer look at agreements with them, to ensure compliance requirements with the IRDAI are specifically spelled out in these agreements for e-commerce entities to join to ensure that the insurers themselves always remain compliant with the standards.

IRDAI showed great intention to leverage technology in the insurance industry and highlighted the need to use data to design integrated insurance products. Its recent authorization for life insurers to extend the use and deposit procedure to most life insurance products allows insurers to launch certain products without prior authorization from IRDAI. Such opportunities can be seized by insurers, in conjunction with the real-time data that e-commerce players have access to, to respond more quickly to emerging market needs and to design and price policies in a way that will benefit consumers. insured and to all. delivery chain actors.



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The opinions expressed above are those of the author.



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