IRDA’s guidelines on comparison websites will make it impossible for likes of PolicyBazaar.com and MyinsuranceClub.com to survive in their current form

Raj Pradhan

The Insurance Regulatory and Development Authority’s (IRDA) stringent guidelines for comparison websites are seen as a deathblow for likes of PolicyBazaar.com, Myinsuranceclub.com and ApnaPaisa.com. Clamping down on advertising, ratings, endorsements or bestselling insurance products will surely help customers to get unbiased information for making a good buying decision. The main points, which will help customers, are as follows –

• Comparison websites shall not display ratings, rankings, endorsements or bestselling insurance products on their website. The content of the comparison websites shall be unbiased and factual in nature; they shall desist from commenting on insurers or their products in their editorials or at any other location in their websites.
   
• Comparison websites shall disclose prominently on the home page that the client/visitor’s particulars could be shared with insurers/insurance brokers.
   
• Comparison websites shall not carry any advertisements or sponsored content on their websites.
   
• Product comparisons that are displayed shall be up-to-date and reflect a true picture of the products.
   
•  Comparison websites shall display product information purely on the basis of the information furnished to them by insurers.
   
• Web aggregator shall not transmit the data of a client to insurer(s) other than the one(s) preferred by the client. Provided that, if the client evinces interest in buying insurance but does not prefer any insurer, the web aggregator shall not transmit the lead to more than three insurers in the same class of insurance business or one insurance broker.

The main points which do not help web aggregator business are as follows –

• Remuneration shall be payable to comparison websites by insurers in compliance with the following provisions: a) A flat fee not exceeding Rs1 lakh per year towards each product displayed by the web aggregator in the comparison charts of its website. b) An amount not exceeding Rs10 towards each lead transmitted by the web aggregator.
   
• If the lead gets converted into sales, the web aggregator payment shall not exceed 25% of the commission payable or actually paid, whichever is lower, on the first-year premium of the first policy sold on the basis of the lead obtained from the web aggregator.

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. The commissions for many online products were negligible, but revenues were generated from advertising. They earned Rs80-Rs100 per lead with quality leads sold to one insurer even fetching Rs200 to Rs250. IRDA regulating the financial remuneration will cut-off all sources of money being passed for wrong reasons and bringing the lead generation to Rs10 will wipe out the business.

Deepak Yohannan, chief executive officer, MyInsuranceClub.com has a balanced view of the guidelines. According to him, “Approved channel from the regulator will give confidence to the customers. The insurance industry will take the channel seriously. Banning advertising, ratings, endorsements or bestsellers is also positive step. IRDA was very receptive of our views and gave us a patient hearing.”

“Lead payment of Rs10 is impractical and impossible. 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 for Rs10 to maximum three insurers? If IRDA had allowed Rs50 per lead, it may have been viable considering three insurers may buy the lead. Moreover, getting 25% of the commission when brokers/agents get 100% of commission is also unfair. We want to display information of all the insurers’ products. Why will all insurers pay Rs1 lakh per year when they can get it for free?” he said.

PolicyBazaar.com, the leader in the web aggregation business, is also an unhappy camper. Akshay Mehrotra, chief marketing officer, PolicyBazaar.com, said, “The guidelines will result in companies like us almost not to function. We used to specify which product is bestselling, but we cannot do it anymore. How can IRDA stop public opinion on product feedback? It is vested interest of some insurers who don’t want comparison websites.”

“We make for 70% of online insurance sales today which helps in reducing distribution costs of insurance companies. We had suggested to IRDA for allowing Rs100 per lead. Why should I get only Rs10 per lead and 25% of the commission? Is it legitimate regulation? It is like telling us to shut down our business. We may have to change the business model to not sell leads or go out of business,” he added.