'We Believe There Is A Lot Of Depth In Insurance Distribution & We Have Only Scratched The Surface'
What factors do you see contributing to the growth of InsurTech in the times to come?
There hasn’t really been a very significant change in the way we buy insurance over the last decade other than the increase in sale via the online channel. Technological advancement leading to more nimble products will be the key factor contributing to the growth of InsurTech. With companies putting huge amounts of investments on AI, ML and Big Data, new streams of products will become feasible. A move towards algorithmic underwriting based on user data collected via various sources like social media, purchase pattern and claims data of similar users is imminent. We will be able to measure risks more accurately, and the amount of data that the user needs to provide, for making an insurance purchase, will reduce drastically. As an example, in most scenarios, location-based risk assessment of a car insurance is limited to a zip code. It will begin to be measured in meters. There will be a lot more products covering risks for a shorter duration and extremely personalized use cases.
InsurTech will also be moving in a large way towards guiding customers to mitigate risks and hence cut down on the number of claims settled. They can alert customers about least tricky routes to take for a trip or to exercise more and to maintain a certain lifestyle in certain seasons or months. This will help cut down premiums significantly and hence make insurance more affordable. In the offline space as well, the agents are becoming more tech-aided in terms of selling policies. Last year, Coverfox launched a mobile app called ‘Coverdrive’, using which agents get to showcase best options to their offline customers.
How do you see the role of blockchain in InsurTech evolving over the next few years, if at all?
Blockchain has already taken off in a big way in FinTech and has revolutionized the industry in unforeseen ways. Most of the industries are going to follow suit and InsurTech stands no different. Smart contracts with a decentralized distributed ledger, which is the central theme of the blockchain, can aid InsurTech in so many ways. Imagine a smart contract as a part of a policy purchase transaction that automatically transfers a certain amount to the claimer on the claim condition being met. Insuring flight delays and cancellations, crop damage with unseasonal rains and many others fall under such categories. This would bring so much desired trust into the ecosystem. In fact, this opens up infinite possibilities of building risk mitigation products that suit the needs of all kinds of customers, which would require absolutely no human intervention right from purchase to claims. This will just require a software and no central underwriting authority. Such products will be available at dirt cheap prices, leading to exponential growth of the industry. Not only will this blockchain make it extremely easy to access data by required parties of the ecosystem, but will do so in a very reliable and secured fashion. Entire dataset associated with a policy purchase can be securely stored as block in a blockchain. Now with concepts like proof of stake, for adding a new block in the blockchain, the transaction time has fallen drastically, making it a more acceptable technology.
Tell us a bit about CoverFox’s “Insurance Intelligence Engine”. More specifically, how can AI be used by InsurTech companies to optimise the purchase-to-claim journey of a customer?
CoverFox’s “Insurance Intelligence Engine” works in the background to determine the best possible ranking of different premiums offered by various insurers. There’s a big data platform coupled with ML/AI based user profiling models that try to help our intelligence engine to provide a personalized ranking of all available options. It considers factors like price, choices made by similar customers, and market and customer ratings amongst numerous other input parameters. It's getting more refined with us getting more data via various sales channels like the website, our expert advisory team and agents meeting customers offline. Entire dataset associated with a policy purchase done with us is securely stored digitally, which can be retrieved by our specialized express settlement team on the click of a button to give customers a delightful settlement experience.
Does Coverfox plan to go down the ACKO route and procure its own general insurance license at some point, or will it continue to aggregate and distribute third-party products?
We believe there is a lot of depth in insurance distribution and we have only scratched the surface. We will grow horizontal in our offerings and cater to the larger market. There are a lot of areas where technology in insurance distribution can give big wins and haven’t been explored well, we would focus on those areas. Also, as a broking entity we have the option to co-create products with multiple insurance companies and come up with better product offerings, so we don’t plan to procure any general insurance licenses.
With a slew of new entrants, all armed with war chests full of capital, entering the online insurance distribution space – how does Coverfox plan to differentiate its offering?
To create depth in insurance aggregation takes time, unlike any other sector, because of which new entrants, even with a lot of capital, cannot buy time and will need to mature to compete with existing players on equal footing. Having said that, Coverfox is driven by an extremely enterprising and a hungry leadership team which will keep innovating and provide thought leadership to the industry. In the end, we believe that the market separates the wheat from the chaff and the best team will win irrespective of the capital.
Do you see funding continuing to play a critical role in the evolution of FinTech companies? When does Coverfox expect to become profitable?
Funding plays a critical role in the evolution of any industry, more so if it’s a growing one with high acquisition costs. In that sense, FinTech is going through the same phase e-commerce was a few years ago, and funding did play a huge role in shaping the market today. Drawing those parallels makes it fairly obvious that funding is important for the current FinTech players to raise penetration in the Indian market. Historically though, we have seen multiple times that capital infusion without innovation doesn’t lead anywhere and companies have to be at their best to survive and win markets.
We are 4 years old in the industry with reasonable success in raising funds, the most mature player is 10 years old and has raised 4 times the capital. The industry is growing at more than 30-40% every year and the online segment growth is much higher than that. Given the growth potential and our stage, we believe that it’s extremely important for us to expand our business fast, keeping the unit economics healthy and plan for profitability at a much better scale. By the end of this financial year, we plan to touch 900 cr premiums in annual run rate and hope to grow 3-4X year on year till 2020.
