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.
One of the reasons that stock market has been up for the past two months is massive liquidity injection by the European Central Bank—exactly the way the market was charged by quantitative easing in the US in 2009 and mid-2011. Are there signs that liquidity injection by ECB is about to halt? In that case, will the market continue to move higher?
The Sensex has been up a sharp 15.4% since 7 January 2012, mainly due to massive inflow of money from foreign institutional investors (FIIs). FIIs have put it as much as Rs22,989.95 crore in January and February this year so far; over the first quarter of 2011, when they had pulled out Rs7,931.11 crore. Why the sudden inflow of investment? Where is the money coming from? While we would like to believe suddenly the foreigners have rediscovered the hidden charms of India, the fact is that a lot of this money has is coming from short-term traders who are taking advantage of massive liquidity injection by the European Central Bank (ECB) to trade in risky assets like emerging market equities.
The total amount the ECB has spent since starting the programme, back in May 2010 remained at 219.5 billion euros, with just 59 million euros last week. The ECB and the 17 Eurozone national central banks buy the bonds under what the ECB calls its Securities Markets program (SMP). European laws forbid it buying the bonds direct from governments, but it gets round the restriction by buying them from banks and other investors on the open market.
This parallels that of the liquidity injection programme of the US Federal Reserve of 2009-11. Whenever there have been injections by central banks equities have started to shoot up. The graph below highlights how central bankers’ liquidity injection programme has pushed up the markets at different times in the last three years.
You can see how markets have expanded significantly, since 2009, shortly after the sub-prime bust, after the US Fed introduced the first of its Quantitative Easing (also known as QE1). QE1 is part of the broad monetary policy of printing money and dumping it on the economy vis-a-vis banks. This leads to a ‘loose money’ policy, as banks now have more money to lend. The hope is that with higher bank lending, economic activity would pick up. But if there are no takers for more bank loans, the money goes into speculative purposes like funding hedge funds or the bank’s own trading departments, which in turn leads to widespread purchase of financial instruments, such as stocks or gold or commodities. This is what has propped the markets up with each quantitative easing. Some of this money eventually finds its way to emerging markets, like India. Notice that after the first QE1 ended, the markets fell. Immediately, the Fed panicked and introduced QE2. The markets reacted positively and moved upwards, until it sagged again, at the end of QE2. Incidentally, after this, the ECB then stepped in and announced it would buy Euro Bonds. Not surprisingly, the markets took the good news and climbed back up. As the bond buyback eased towards its end, the US Fed ‘hinted’ at QE3. It remains to be seen whether it will announce it.
What do we notice from this chart? What we see as bull or bear market is only partly linked to fundamental factors. A bigger factor is whether large speculators will access cheap money or not as and when the two big central banks decide to loosen their purse strings. If they are easing, the market stabilises and rises. If the easing ends, the market sags. Interestingly, according to some savvy traders like Eric Schwarts, who runs a great blog called marketanthropology.com, the ECB has halted its bond buying programme for the first time since early August. Is that signal that the Indian markets are about to give up some of the huge gains of the Jan-Feb period?
The freezing temperature brought cheers to wine grape farmers and wine makers while the table grapes growers are reeling under huge losses
With the severe cold wave, witnessed across Maharashtra, taking toll on the grapes production in Nashik, you may not be lucky to get those sweet-sour-tangy fruits, or pay extra to relish them. Instead, a glass of wine, would make up for your sacrifice.
The freezing temperature has cheered the wine makers, while the table grapes growers are reeling under huge losses. Reason? The vintage 2012 of wine grape is all set to raise the quality of Indian wines. At the same time, table grapes that are consumed by everyone, have lost their leaves and subsequently its sugar content due to cold conditions.
Nashik district of Maharashtra, popularly known as country's wine capital, accounts for about 75% of the total national production of grapes. While the table grape crop destroyed is as high as 70%, there is very little impact on wine grapes. Instead, experts see this production as one of the best in recent times.
"Since last two years harvest has been bad due to unseasonal rains. During the souring and berry stage (ripening) the harvest was attacked by lot of diseases. This year, winter has helped for healthy produce. Though the production has not seen any increase and the harvest was delayed, the quality will definitely be one of the best we had seen. Wine grape, this year, will have perfect balance of acidity and sugar, essential for making high quality wine," said Sachin Darawade, operational manager, York Wine.
Concurs Avik Narula, assistant operational manger, Fratelli Wines, the only vineyard in Nashik located on a hilly terrain. "The crushing for this season has already begun. This year's quality is very fine."
Past two years has been bad for the sector. With unseasonal rains playing havoc, there was 30-40% loss in the production. Subhash Arora, a wine expert and director of Indian Wine Academy writes, "After three miserable years for the Nashik growers suffering vagaries of nature and unexpected, out-of-season rains in November resulting in extra labour costs and extensive damage to the crops, the region has seen a perfect weather that is expected to yield both higher quality and quantity than the last three years."
Mr Arora says that according to Neeraj Agarwal, chief viticulturist at Sula Vineyard, Nashik, Sula had a crop of 5,000 tons from its own vineyards and the contracted farms last year but expects a bumper crop of 6,000 tons and that too with excellent quality.
Meanwhile table grape growers are in bad state. According to a media report, preliminary estimates indicates that farmers in the Nashik are have suffered losses of about Rs1,300 crore. The table grape has been affected mainly due to the shedding leaves of the plant and the decreasing sugar sap in the fruits.
Kailash Bhosale, official from Draksha Bagaitdar Sangh, Nashik, says that, "Due to falling temperature, the water remained on the leaves and fruits, resulting in formation of ice. Leaves were damaged and eventually led them to shed. Some places have seen losses up to 90%. At the grape orchids, where harvesting is still pending, loss of leaves will result in lower sugar content."
When asked on why wine grapes are not affected, Mr Bhosale explains that, "Wine grapes, unlike table ones, are grown without using any hormones. For table grapes dipping and spraying of GA is essential, hence they get affected in extreme weather condition."
So if you are a grape lover, then this time instead of eating grapes, enjoy your wine- red or white, whichever you like!