Reinventing Insurance
Much enthusiasm greeted PB Fintech’s initial public offering (IPO) on 1 November. PB Fintech, which operates online insurance platform PolicyBazaar and credit comparison portal PaisaBazaar, had received capital markets regulator Sebi’s approval to raise Rs 6,017.50 crore through an initial share sale in October.
The company made an initial public offering of Rs 5,700 crore, comprising a fresh issue of Rs 3,750 crore worth of equity shares and an offer for sale of Rs 1,959 crore by existing shareholders. Early in October, general insurance startup Acko raised $255 million in a new funding round, which valued the four-year-old company at $1.1 billion.
It is a known fact that the robust demand for insurance products has been driven by an increase in catastrophic incidents over the last few years. Climate change and the raging Covid pandemic, have led to a higher awareness of and a soaring demand for insurance products world over. However, in India, not more than 100 million people are insured and that too only in the top 50-60 cities. So effecctively around 700 million Indians, especially in the countryside, are currently underserved. This demand-supply gap led to the germination of the ‘Insurtech’ industry in the country. Moreover, technological advancements such as artificial intelligence (AI), the internet of things (IoT), big data analytics, etc. are enabling innovation across the insurance value chain.
The increasing number of Insurtechs also indicates growing investor confidence in them. From 2016 to 2020, global funding in the Insurtech industry has more than tripled to $6 billion, with Asia emerging as the fastest-growing geography. Since then, funding in India has increased 26 times to $287 million in 2020.
The funding trend has continued with Riskcovry raising $5 million in March 2021, Onsurity raising $16 million in August 2021, and Pazcare raising around $3.5 million early in October.
Globally nine Insurtech unicorns have emerged with PolicyBazaar, Acko and Digit insurance from India entering this exclusive club.
The Big Opportunity
Yogesh Agarwal, CEO and Founder of employee healthcare platform Onsurity Technologies, claims that what started alongside the Fintech revolution eventually led to a vast number of tech companies entering the insurance domain. In his view, “These tech-led companies gave an opportunity and the infrastructure for the insurance firms to align themselves with the changing needs of the modern-day users by adopting digitalisation. Today, Insurtech is not limiting itself to technology, but is relooking at the processes that have kept insurance penetration and density rates low and are ensuring that the products are made to be future-forward.”
Insurtechs are found in a wide range of industries business-to-business (B2B) and business-to-consumer (B2C), with a focus on life and non-life spanning the entire value chain. It is interesting to note that India has over 100 Insurtech players spread across different sub-segments, such as aggregators, claims management, digital-first insurers, software white label and infrastructure APIs, and IoT.
While there are marquee players such as PolicyBazaar and CoverFox who have created ‘Do it Yourself’ (DIY) models for urban consumers, creating more choices for them at a click of a button, there are also true blue pureplay technology players who are creating technology stacks and are partnering with insurance companies and intermediaries.
While the sector has specialised players who are leveraging technology and point of sale partner networks to create insurance access at scale such as GramCover, Turtelmint, some some are working primarily for the small and medium businesses. A few are just focussing on employee benefits and wellness initiatives (Plum, Nova Benefits). Many Insurtech players are in allied services like vehicle inspection, claims management, parametric insurance products and pureplay digital insurance companies, etc.
“Segments such as life, health, property and crop are underpenetrated. Regulators and government bodies are also actively supporting innovation through enablers such as the regulatory sandbox. Covid-19 has further accelerated the evolution with higher digital adoption by customers, channel partners and insurers,” avers Prerak Sethi, Founder, RIA Insurance and Co-founder of the India Insurtech Association.
Growing Market Size
Industry estimates peg the number of Insurtechs that have sprung up around the world at approximately 2,000, with roughly half having been established over the last five years. Global Insurtech market revenue was valued at $5.48 billion in 2019 and is expected to reach $10.14 billion by 2025, growing at a compound annual growth rate (CAGR) of 10.80 per cent during the 2019-2025 period, according to Mordor Intelligence report.
According to S&P Global Market Intelligence data, the Indian Insurtech sector is the second largest insurance technology market in the Asia Pacific, accounting for nearly 35 per cent of the $3.66 billion of the venture capital coming into the sector in the region.
Insurance premiums in India totalled $107 billion during the financial year ended March 31, 2020, after growing at a CAGR of 10 per cent from FY2015 to FY2020. The Economic Survey for the 2020-2021 financial year says the country’s insurance penetration increased from 3.30 per cent in FY2015 to 3.76 per cent in FY2020, but remained considerably behind the global average of 7.23 per cent. “The growth potential for Insurtech is massive in the years to come. The insurance market is poised to be $150 billion by FY 2026. Within that, the digital share will be ten times the current size and grow to more than $15-20 billion,” claims Devesh Rai, Chief Product Officer, RenewBuy.
Filling Up The White Spaces
Globally, and in India, Insurtech startups have gained significance after Covid-19. To top it all, new-age players are increasingly filling in the white spaces that traditional players had failed to address.
For instance, RenewBuy was started with the vision to make insurance simple and accessible to every Indian. In the last five years, the company managed to provide health, life and motor insurance across 35 insurance companies. It has also expanded its footprint to 750 plus cities and towns, with 60,000 plus insurance POSP (point of sale person) advisors, leading to an outreach to over three million consumers.
“We are taking insurance to the remotest part of the country to those who have been traditionally under-served. More than 60 per cent of our business is from semi-urban and rural areas in India, with a focus on addressing an under-insured population,” reveals Devesh Rai from RenewBuy, adding, “In the next five years, we will be in a phase of exponential growth for the company, aiming to reach 25 million customers through over 200,000 POSP advisors in India and beyond.”
Similarly, Gramcover is a player in the rural insurance space, working with a diverse set of products such as crop insurance, parametric insurance, livestock insurance, motor insurance, health insurance etc. The company claimed that in FY2021, ~1.7 million policies were distributed, corresponding to Rs 110 crores of premium.
“We expect to keep on doubling our crop insurance business over the next few years, however, we believe, that we will experience exponential growth in the non-crop business, to emerge as the largest rural focussed Insurtech play in the coming years,” remarks Dhyanesh Bhatt, CEO of Gramcove.
PolicyBazaar, an insurance aggregator and multinational financial technology company based in Gurgaon, had earlier told BW Businessworld that its new initiatives included specially customised services. “A good case study for us is on the retail-health side, where we have co-launched a one-crore product. We realised the health insurance sector is under-covered and under secured, and we realised customers want a large cover. Similarly, we are working on a shopkeeper product, where they can make sure that the inventory or content of their shops is ensured. More such products are coming into being. We are also working with our insurance partners and trying to create more customer-centric products,” reveals Tarun Mathur, Co-Founder and Chief Business Officer at PolicyBazaar.com.
Coverfox is a new-age insurance portal that allows a user to easily compare and buy policies from a range of products from all top insurance brands in one go. “Technology is at our core. We use data analytics, machine learning and AI where we provide customers with accurate information on insurance policies. We are committed to provide assistance to them in choosing the right policy and offer a superior ‘Do it yourself’ experience while they evaluate plans from various insurance providers,” asserts Sanjib Jha, CEO, Coverfox.
Insurer-Insurtech Alliance
Insurers have begun to recognise that the traditional approach to selling insurance products to customers will no longer suffice for insurers seeking to stay ahead of their competitors. Hence, they are increasingly teaming up with Insurtech companies that have a strong digital-first approach and leverage technology to improve productivity, acquire customers and retain them. Insurers, on the other hand, bring to the table in-depth institutional knowledge and know of the challenges operating in this space first-hand.
“Many e-B2B Insurtechs are collaborating with large insurance incumbents across different use cases. Insurtechs are also getting a bit more organised and collaborating more deeply with the incumbent insurance companies. Today, there are already more than 60 members in InsurTech association of India,” says Alpesh Shah, Managing Director and Senior Partner, Boston Consulting Group.
Way Forward
Changing lifestyles, diverse interests, and increasing awareness of insurance are driving the new-age demand for specialised products, and several firms have swiftly introduced offerings to cater to such niche segments.
The rapid adoption of digital in insurance and the changing customer behaviour along with the influx of new technologies, have led to key shifts in the industry in terms of product innovations, the emergence of ecosystems and data, and technology-driven innovations across the value chain.
“The insurance tech sector in India is still in a nascent stage of growth. This means that the potential to grow and add value to the ecosystem is immense. There are also many other emerging areas where Insurtechs with their agile technology solutions can enhance both the insurer and the insured’s journeys,” sums up Dhirendra Mahyavanshi, Co-Founder, Turtlemint.
