Between 2011 and 2020, the percentage of consumers who preferred online insurance sales rose by 17%. And while the growth of this uptake is encouraging, you should be cautious when buying insurance online.
Checking for factors like coverage, price, and customer service is important when buying an insurance policy online. The main reason why it's important to check for these factors is that they can help you find an insurer that provides the coverage you need at a price you can afford.
In this article, we will cover the factors you should consider when buying insurance online, the pros and cons of buying an insurance policy online, and determine whether it's safe to buy insurance online.
Please read to the end as we dive deep into the question, “should I buy an insurance policy online?”
Factors to Consider When Buying Insurance Online
Before you opt in to buy an insurance policy online, consider checking the following 5 factors:
The Insurance Company's Financial Position
Checking the price of a product in an online store is not enough. You must also know the insurer's financial position, by checking the insurer's rating. And for this, you can check in the rating agencies.
Rating agencies are independent and non-profit organizations that evaluate insurance companies based on financial criteria, such as capitalization, solvency, profitability, or financial stability. Rating agencies work with a scale of letters that ranges from AAA (very strong) to D (defaulted). Thus, when buying an insurance policy online, be sure to check the rating agency's website.
Claim Settlement Ratio
Claim settlement ratio is a key factor to consider while buying an insurance policy online. It is the percentage of claims that are paid out by the insurer against the total number of claims reported by customers. A higher claim settlement ratio indicates better claims settlement efficiency.
Claim Settlement Ratio = Total Claims Settled / Total Claims Reported
Insurance providers with a higher claim settlement ratio are more efficient in settling claims and provide better customer service.
Understanding the Policy
Just before you buy an insurance policy online, you should be aware of the fact that it may not always be as easy to cancel as it is to buy.
If you are thinking about buying a policy online, make sure that you know what you are buying. You may have to go through a few pages before you get the information that is important to you, such as whether or not your family will be covered under the policy and what the policy will cover.
You should also be aware that if you buy an insurance policy online, you may not always be able to cancel it as easily as some of the other things that you buy online.
Fund Performance
All insurance companies present their fund performance online. Please check the performance of the fund before investing.
The fund performance shown is based on the NAV of the scheme. Past performance may or may not be sustained in the future and hence it should not be a reliable indicator for investment decision making.
The best way to compare fund performance is by looking at the Annualized Returns over various periods. And the company that offers these numbers should be a reliable one.
Due Diligence & Background Checks
Start with checking the reviews, feedback, and comments left by the customers. If you find that most of them are positive, then it is a good sign.
Check the comprehensive disclosures at the company's website, the customer service information, the insurance policy details, and the claims procedure.
You should also check whether your state allows online insurance purchases or not. If it does, then you can go ahead with buying a policy from an online agency.
What are the Pros and Cons of Buying an Insurance Policy Online?
Pros of Buying an Insurance Policy Online
1. Available Anytime: It’s possible to buy insurance online anytime, 24 hours a day, 7 days a week. Thus, you can purchase a policy when it is most convenient for you.
2. Compare Plans: You can compare plans and prices online, which means that you can find the best deal available.
3. Save Money: You can save money online by purchasing a policy when it is most convenient for you and compare plans to find the best deal available.
4. Faster processing and issuance of policy documents:
You can buy insurance policies online and get them issued faster than you would if you bought a policy offline.
5. No sales pressure: You will not face any sales pressure when buying an insurance policy online.
6. No physical presence: You do not need to visit the insurance company's office when you buy an insurance policy online.
Cons of Buying an Insurance Policy Online
1. Data theft and privacy issues: Cybercrime is on the rise, and with it data theft. Cyber security issues have risen by 60% since the covid-19 pandemic hit. Identity theft, credit card theft, and other cybercrimes have risen sharply. As such, Cyber security is a major threat when buying insurance online. When you buy insurance online, your information is often sent through a third-party service that can be hacked.
2. Talking to support staff is hard: When you buy insurance online, it is difficult to talk to support staff. As such, when something goes wrong with your policy, you may have difficulty getting in touch with someone who can help you.
When you buy insurance online, there is no real human interaction. As such, it can be difficult to get the help that you need when something goes wrong with your policy.
3. Everything is handled by systems: When you buy insurance online, everything is handled by a system. As such, there may be errors in the handling of your policy and it will be hard to get them corrected.
Final Word- Should I Buy an Insurance Policy Online?
Even with the challenges associated, it is much safer to buy an insurance policy online. This is because you can get a much better deal on your policy. You will also be able to do it in the comfort of your own home, without having to go through a lengthy application process.
On top of that, you get to save money, and you will get to do it without having to go through a lot of hassle.
However, there are some pitfalls that you need to avoid. For instance, you must make sure that your policy is not going to be canceled. You must also make sure that you are not paying for any hidden fees or charges.
I hope this article has been helpful, if you have any questions about buying insurance policies online, please comment in the comment section below!
