Agents of Change

'Insurance is a subject matter of solicitation' — this phrase, that appears at the end of every insurance advertisement, is probably familiar to most Indians. The disclaimer, which was made mandatory by the Insurance Regulatory and Development Authority (IRDA) puts the onus of choice on the consumer and expects him to discuss and understand the terms and clauses before buying a policy.

But buying an insurance policy hasn’t exactly been a cakewalk for consumers. Insurance contracts are filled with legal terms making it very complicated to understand. Usually it is the agent’s job to explain the nuances, but that does not always happen. Insurance is often sold as an investment product, rather than for pure protection. With life insurance, the term plans that offer the highest life cover to consumers, don’t sell as much since they are the least lucrative for agents. And that’s not all, the process itself is cumbersome where clients have to file lengthy forms.

This combined with the lack of awareness meant insurance penetration remained abysmally low, despite the need for the product. In India, insurance penetration is a mere 3.4% compared with the global average of 6.3%. However as income levels and consumer awareness increase, demand is only set to increase. A 2017 India Brand Equity Foundation (IBEF) report predicts the Indian insurance market to quadruple in size over the next 10 years from the current Rs.3.8 lakh crore. Not only does that come as good news for the 57 insurance companies in India, but also presents a huge opportunity for a new crop of online insurance aggregators. They are using technology to improve transparency levels by making product comparison easier, using data analytics to suggest the best fit product hence, simplifying the policy purchasing experience.

Insurance tech companies — part of the fintech ecosystem — have been making inroads slowly and steadily. According to a 2017 PricewaterhouseCoopers report, insurance aggregators such as PolicyBazaar, Turtlemint and Easypolicy among others have been the most funded in the segment, snapping up Rs.564 crore.

Dissing the conventional
In the past, the conventional ways of selling policies through agents or banks, have often resulted in mis-selling. Banks, one of the main channels for these products, tied up with insurers and pushed them to their captive audience without fully explaining the pros and cons. In June, the RBI widened the scope of its banking ombudsman, making banks responsible for mis-selling third-party products like insurance. In the non-life insurance segment, mis-selling is largely seen in motor insurance, which is covered by a government mandate. Dealers bundled insurance with a car or bike purchase and the buyer didn’t even know what insurance policy he was purchasing. 

The online insurance firms are doing their bit to remove the opaqueness that comes with insurance buying. “When users come to our platform to compare policies, we provide them with data points — such as the most popular insurance policy, brands with the highest insurance claim settlement ratio — to help them make better decisions,” says Premanshu Singh, CEO of insurance aggregator Coverfox.

Founded in 2013 by Varun Dua (who has moved on) and Devendra Rane, Coverfox got an IRDA direct broker licence in early 2014. Coverfox specialises in auto and health insurance. It has integrated its technology with around 39 insurance company partners and RTOs across India. “100% of our bike insurance sale happens without any call centre assistance. That was our idea — to have a simplified process so that clients don’t need assistance,” he says. In the life insurance segment, Coverfox doesn’t sell investment products and sticks to term plans. According to Singh, the number of people searching for insurance online has gone up by 20x in the past couple of years and the number of people buying them online has increased by 25-30%. “Even now the process is predominantly offline. Yet there is 4x growth per year, which is satisfactory,” says Singh. 

Coverfox follows a revenue model by earning 12-18% commission from its partners on sale of policies. It also gets renewal commission if the policies are renewed through their platform. The company sells around 30,000 policies a month and is expecting to collect premium worth Rs.340 crore by FY18. Its 250-member team currently services around 4 million people. Coverfox is looking at an annual revenue of Rs.38 crore by the end of this financial year and hopes to break-even by October 2018. It is expecting a 3-4x YoY growth till 2020 and is investing in scaling up life insurance policies and providing PoS technology for offline agents. The start-up, which has  raised Rs.175 crore till date, is in the process of raising another Rs.162 crore to scale up its operations. It is close to tying up with three large e-commerce players to meet the insurance needs of their consumers. The company has also introduced features like ‘express claim’, where a customer who bought a policy through the Coverfox website can approach the start-up for his claim to be settled in 24 hours instead of approaching the insurance provider, and ‘Macro’, where a customer’s nominee would also be informed when the insurance is being taken. 

Yashish Dahiya, co-founder and CEO of PolicyBazaar, the biggest player in the space, believes that technology has only been an enabler of growth. According to him, what really helped the company was the awareness that they managed to create amongst consumers over the years. “How many times does one person voluntarily think of getting insured? Technology adds speed and convenience, but they are hygiene factors, not engine drivers,” says Dahiya. Formed in 2008, PolicyBazaar has been running campaigns ever since to bring more on people into the insurance bracket. While the company does sell some lower cost investment options, it largely promotes pure protection products. About 75% of its revenue comes from protection insurance and Dahiya believes that protection insurance, which has grown from 1% of the entire first year premium of the industry in 2008 to 5% now, will eventually grow to one-third of the market. Hence, it will continue to focus on these products.  

PolicyBazaar today accounts for about 20% of life cover, around 7% of retail health business, 6% of motor insurance and 1.5% of two-wheeler insurance of the entire policies sold. “If you look at the policies a customer should be buying, we are at around 5% of the market. That’s huge but we have to scale that,” says Dahiya.

PolicyBazaar works with 39 insurance partners and in FY17 they generated a revenue of Rs.200 crore. It has 60 million visitors annually with 125,000 transactions per month and expects a significant shift of customers to online over the next five years. “It’s already happening in the cities. The offline medium is being challenged in metros already,” he notes. The company, which clocked a premium of less than Rs.10 crore five years back, crossed the Rs.100 crore-mark three years back. It is expecting to generate Rs.1,800 crore of premium by FY18. Etechaces Marketing, the parent company, has raised around Rs.934 crore funding till date. PolicyBazaar turned profitable in November 2016 and is exploring an IPO option in the near future.

Ronnie Screwvala, founder of Unilazer Ventures and former promoter of UTV, feels that the next disruption in the insurance segment is going to come from these set of online players since it would not be easy for the bigger guys to make an easy and effective online transition. Unilazer Ventures first invested leading a Rs.15 crore round in Easypolicy in 2016 and it increased its stake to 55% by investing Rs.21 crore in June 2017.  

According to Screwvala, these firms can take advantage of the growing opportunity in tier-II and tier-III towns. For instance, Easypolicy has created ‘hubs’ — a network of local players such as domestic money transfer units, mobile recharge outlets, cable TV distributors or other similar small enterprises, which use the internet as their business medium. These people who would have a local connect help in bringing more customers from small towns and introducing them to purchasing policies online. They are paid a marketing fee for the same by the start-up. “PolicyBazaar has done an incredible job in creating the market and have spent considerable money on that. But when entering the market, I have to see what my differentiator is and tier-II and tier-III towns are my differentiator,” says Screwvala.

Alok Bhatnagar formed Easypolicy in 2011 along with Divyanshu Tripathi, who was a founding member of PolicyBazaar and Neeraj Aggarwala. “The market was so huge that we realised there is space for more than one or two players,” Divyanshu recalls. The team feels the online model might help in making the industry more transparent. Its aim is to make anything related to insurance — be it comparison, procurement or after-procurement processes — easy, as its name ‘Easypolicy’ suggests. It follows a transaction fulfillment model and earns commission for every policy sold and renewed. “The terms associated with insurance purchase have come across as too intimidating or complicated for consumers. Our aim is to make the process easy focus on customer service,” says Tripathi. Easypolicy plans to garner a premium of close to Rs.60 crore by the end of this financial year. It sees around 3,000 monthly transactions and has around 1.5 million registered users, of which around 70,000 have been bought policies till date. 

Taking the best of both worlds, Mumbai-based Turtlemint believes combining both the online and offline models. Anand Prabhudesai, co-founder at Turtlemint, found in a survey that most people were not ready to make an insurance decision on their own, instead they wanted somebody to advise them on it. Turtlemint saw an important role for agents in providing a better customer experience. Hence, it also built a network of PoS agents apart from its insurance comparison and purchase website. 

For instance, in helping consumers choose the right health insurance policy, the platform considers a multitude of factors such as family composition, cashless hospital network near the consumer before suggesting the amount of health insurance cover and policy.

Their mobile app helps agents manage the business, give multiple quotes and make online purchases. “This helped us grow very quickly in this segment,” says Prabhudesai who mentions that a major part of his business is coming through agents. While the company draws a commission from its insurance partners, it charges the agent nothing for the technology. The agent, who now doesn’t have to scout multiple portals for different quotes, gets to show multiple policies on the app to the potential buyer and gets more commission due to larger volumes. Started in 2015, Turtlemint has tied up with around 20 insurance providers and has over 1,000 agents in its network. With a customer base of around 1 lakh it has sold over 2 lakh policies till date.

Although buying insurance largely still remains an offline activity, it is clear that there is a shift in the industry moving from a seller’s market to a more informed buyer’s market and consumers getting more comfortable purchasing policies online. A BCG-Google India report predicts that by 2020 three out of four policies bought in India will be digitally influenced either at the comparison, purchase or renewal stages. According to the report, by 2020, about 75% of non-life insurance policies are expected to come from such online channels and sales. 

These online insurance tech companies help insurance providers innovate at product level by coming up micro insurance offerings besides bringing down overall costs for both insurance providers and consumers. While they may not have garnered the attention that some of their fellow fintech players, online lending or payment start-ups have, online insurance aggregators are steadily making inroads. Given the dismal penetration levels, their growth has been insured for good.