Online Term Insurance: Premium and Process Analysis

Sat, Oct 1, 2011

Biz Arena


Company Overview

Berkshire India Ltd. is a majority owned non-direct subsidiary of Berkshire Hathaway Inc. It started its operations in India in 2011 and is currently a licensed corporate agent of Bajaj Allianz General Insurance Company Ltd., selling their products directly to retail consumers through its own Internet portal Currently, its product offerings are limited to the distribution of automobile insurance, though it has a vision to expand soon to include other non-life as well as life insurance products in the future.


The objective of the project was to study and analyze the premium variation for Term Insurance Plans offered online with various factors, identify general trends and conduct Inter-company comparison. The next phase of the project was targeted to analyze Application Process Flow for purchasing Term Insurance Plans online, and conduct a comparison for Domestic and International insurers. This phase also included Term Insurance Risk Factor analysis and recommendations for prospective online Term Insurance product, in terms of Process Flow and Layout, and Risk Factors considerations.


The project incorporated study of Online Term Insurance plans offered by following companies:

Table 1: List of companies studied (Scope)

Premium analysis was conducted over the plans offered only by domestic companies listed above. No other plan(s) was (were) considered in this comparison. Process Flow recommendations are based on existing process of both Domestic and International companies listed above.

Product Overview

Term Insurance plan is a pure protection life insurance plan, where life coverage for requisite amount of Sum Assured is provided for opted term period. Some of the major factors influencing premium pricing are:

  • Age
  • Gender
  • Smoking Habits
  • Term Period
  • Sum Assured

Apart from this, various other factors contribute to the final decision on premium pricing, and are discussed in a later part of this document.


With a large number of private players foraying into providing insurance plans online, it is essential for any new entrant to be aware of features currently offered by competitors and possible new product/process features which can provide ease to end-customers. With a recent entry into insurance sector in India, and a view to expand its operations to other insurance sectors along with developing own products, Berkshire India Ltd. is targeting improvement areas in the field of online selling of insurance plans in India. Both, product and process features form a part of the target improvisation zones. Consequently, the existing falls in line with the accomplishment of these objectives.


Preliminary task was to study insurance sector, life insurance in particular. For both, premium pricing and application procedure analysis, data was established through publically disclosed Annual Reports and data available on respective websites (Premium Pricing). Trend analysis and comparison for premium price was conducted using MS Excel. Online application procedures for various companies, both domestic and international, were documented first and then analyzed. Subsequent recommendations were then given for both aspects of term insurance product: Premium Pricing and Application procedure.

Premium Analysis Results

An extensive study and analysis of premium prices offered by companies under study yielded following common results:

  • Premium increases with Age, Sum Assured and Term Period. Rate of increase of premium increases with these factors too
  • Premium increases at a higher rate for Smokers as compared to Non-Smokers, for both genders (sharp increase between age of 30 and 40 years)
  • Difference in premium for Males and Females (Smokers and Non-Smokers)  is prominent only at Age roughly greater than 32 years; this difference increases with Age

Following figures explain the above in brief:

Fig. 1: Variation of Premium with Term Period (less steep for a lower age of 20 years)

Fig. 2: Variation of Premium with Term Period (steeper for a higher age of 40 years)

Fig. 3: Variation of Premium with Age (exponential increase)

Conclusions from Premium Analysis

  • Among companies studied, online term insurance product offered only by IndiaFirst doesn’t differentiate between Smokers and Non-Smokers in terms of premium price
  • ICICI proves to be more competitive in terms of premium pricing, as Age and Sum Assured increase
  • IndiaFirst offers most competitive premium for low value of Sum Assured (observed for Rs. 20L), for both Males as well as Females
  • Premium for Smokers, as a percentage over premium for Non-Smokers, varies largely for Kotak and MetLife over Age, Term Period and Sum Assured; while it has a small variation in case of AEGON Religare and ICICI Life
  • MetLife is found to be more economical in the form of low-priced premium specifically for Non-Smokers for low age, for all sum assured values. Premium gets comparatively costly with increasing Age and Sum Assured, more acutely for Smokers.

Online Application Process

The second phase of the study was focused on procedure and layout of an online application of Term (Life) Insurance Plan. The underlying process is:

  • Generation of the premium quote on the basis of certain factors
  • Subsequent options to apply online for purchasing the policy

Following data items are captured in this application process. These are also the ones which form basis of the premium for a specific individual, as finalized by the team of underwriters:

  • Personal details
    • Insurance History
    • Policy details
    • Occupational details
    • Lifestyle details
    • Health/Medical
    • Payment details

Application Process Flow Analysis

The online application process for majority of the companies under study was as given below.


Fig. 4: Existing Online Application Process Flow

Existing application process flow, for majority of the plans offered online were studies in depth. One major source of inefficiency was the presence of decisive questions in the middle, or later part of the application process. These are the questions on the basis of which the decision of consent of offering a policy to an individual is taken. This positioning of such questions delays the decision and wastes resources in the form of time and technology for both prospective buyer and the company. Hence, a system was proposed so as to take details related to such questions in the beginning itself. Given below is the proposed process flow:


Fig. 5: Proposed Online Application Process Flow

Subsequent recommendations were provided on the basis of existing online term insurance products available in the domestic market. These recommendations were broadly divided into content-oriented, procedure-oriented, product specific, and process recommendations[1].

Further, recommendations were given aimed to enhance the efficient risk assessment of an individual and automating it by making it more objective. These contained the inclusion of certain factors taken to assess risk, and hence premium rates, viz.:

  • Occupation Class
  • Health Class
  • BMI (Body Mass Index) Class
  • Marital Status
  • Driving Record
  • Financial Class
  • Major Medical Conditions
  • State of Residence

Learning and Outcomes

The current study is a sector specific one and applicable to the current trends in Internet usage and online purchase habits specific to Indian context. Study of term insurance product and current providers added to my fundamental knowledge of insurance sector. Further, online purchase process and the intricacies involved made me appreciate the extent of implications of details involved. With a view of developing its own Term Insurance product in very near future, the procedure for which already underway, the current study would serve as a primary research for both product and process layout. It would further reflect the potential improvement areas on the basis of competitors’ presence and international standards.

Future Scope

Given the time and resource constraints, many areas were identified upon the completion of the project in which more extensive study could be done to enhance the benefits gained out of implementation of the recommendations to the real product. Study of consumer behavior in Indian context, so as to formulate a strategy for Online Term Insurance Plan process and layout is one possible way forward. A more comprehensive study of term insurance plans, offered domestically as well as internationally would help in Product/Process Feature – Sales analysis.


Rubal Mehta

MBA Batch of 2012

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