Distribution Landscape Set To Change Dramatically

Kapil, what led you to leave a successful corporate career as the CEO of a Life Insurance company to set up SecureNow? What was the gap you were trying to fill - and do you think you’ve achieved it?

Kapil: While at Prudential, where I worked earlier, I met some fabulous first-generation entrepreneurs in the US and India. One company in particular, SelectQuote, inspired me. This company sold only term insurance, which is pure risk, very efficiently and was probably the largest US distributor with revenues of over US$ 150 million. When I looked at the Indian market I saw quite clearly that the demand for pure-risk insurances, on the life and general insurance side was extremely high. Insurers have good products. What was missing were the pipes linking insurers to customers. Those were the pipes that we set out to build.

It took us a year or two of struggle to understand that the most exciting opportunity, suited to our way of thinking, was commercial insurance for SMEs. There was a telling moment early in our journey when an exporter, based in Chandigarh, wrote an email to us. His customer in the US had mandated that he buy a public liability insurance but his agent in Chandigarh told him that this was a foreign concept not available in India. It took us 24 hours to give him what he needed.

This is the gap we continue to bridge. We have a long way to go. Commercial insurance sales are US$30 billion, growing at 25 per cent each year and still penetration is one third of world averages. Less than 30% of these insurances are sold through brokers which, in my view, is the most sensible way for companies to buy. We would like to take that proportion to over 70% like in the rest of the world. Imagine the combination of a large, fast growing, under-penetrated market where brokers are increasing in relative importance. The work to be done is massive.

Your company recently raised capital. What was your thought process behind diluting your equity at this stage of your business? I believe you had stayed bootstrapped for a long time following your inception…

Kapil: We raised a series A of about Rs 20 crore after bootstrapping for 4 years. The difficulty in building the business out ourselves, without funding, was that we wanted to experiment more and grow faster. We have a strong sense of urgency to build and scale. The main use of the series A capital has been to develop the various business models that, when expanded, can get us to cross a Rupees 1000 crore premium over the next 3 to 4 years. We have an experienced team and technology in place. The technology capability is powerful because we have portals for our institutional clients, apps for their employees and enormous, high quality content. Many of the softer aspects of building a business such as training capability, recruitment ability and governance are also established.

Our base is over 5000 clients and growing fast. Two years ago, we used to acquire 10 clients a month, now we get 10 a day. Insurers have customized at least half a dozen insurance products specifically for our clients. The client base includes hospitals, vets, shops, manufacturers, service firms, professionals, NBFCs. It is truly a diverse mix.

Tell us a bit about your business model. Is it strictly B2B? What type of insurances do you distribute and to whom? Do you assist your clients throughout the entire life cycle of the policy, or only at the point of sale?

Over 95% of our business is B2B. Our products are split three ways, employee benefit that includes group health and group accident; liabilities that include professional indemnities, directors’ and officers’ insurance and property that includes fire, burglary and marine insurance.

Many SMEs visit our website to research the product they want, select the coverages and budgets and then leave enquiries. For SMEs that are not internet savvy we reach out through associations and industry bodies. In all these approaches the heart is to develop a product that is immediately relevant to the target group and that they will struggle to buy elsewhere. For example, we market a jeweller’s block insurance where we offer cover that includes shoplifting and courier transport of gold. This allows us to penetrate the jewellers market speedily. Finally, we also have a B2B2C model where we are providing individual insurances to employees of the companies we serve. There are about 150,000 such people today on our books and we have just begin to penetrate this database. Our acquisition costs are low because we have already acquired the SME for their commercial insurances.

There is also significant value that we add in claims and servicing. We process about 15 claims and over 50 service requests every day. On claims our team will present the case to insurers in a manner that gets approved fast. If a claim is incorrectly denied we have the ability to correct that. Servicing is a less understood concept in insurance. For example, small companies struggle to manage an active list of assets for property insurance. Through our portal we provide SMEs a real-time view of the assets that are insured. If they want to modify the list they can do that through our portal as well.  

In your view, what key trends will drive the growth of the insurance business in India over the next three years? What should the industry be focusing on?

I think the distribution landscape will change dramatically. At a pace that is not understood today. To be at world average penetration, the commercial insurance would need to increase from US$30 billion to 90 billion. There is just no way this can take place with the current infrastructure. So, I see considerable emphasis on groups being formed. In a sense these groups are companies with similar needs that buy a specific insurance. We can see such groups cutting across professions such as chartered accountants, lawyers, contractors, shopkeepers; economic strata such as unorganised workers or farmers and geographical regions.

Today, most distributors are sub-scale and dependent upon personal relationships for business. This will change as some of these distributors become more corporatized. Technology has to be a key part of this scale up. The technology may not be visible the way it is for e-commerce companies but works silently in the back-end to build efficiency.

I see many new insurances coming into the market. Some work on these is already underway. For example, title insurance to protect people that buy homes with faulty ownership papers or mobile insurance that is not a loss-making proposition for insurers.

There’s been a lot of talk about blockchain technology and its potential role in revolutionising the claims settlement process for Life Insurance, which is still unwieldy. What are your views on this?

I don’t like the tendency to take a technology and tout it as the next big thing. The problem to solve must first be identified and then the best technology brought it. I think blockchain’s main benefit will be in implementing smart contracts that pay up claims superfast based on external validation. Today, if a vehicle breaks down, the customer has to call the insurer who then appoints a surveyor who then co-ordinates with the repair shop. There is a sequence that has several bottlenecks. On blockchain, if the vehicle were taken to a prescribed workshop then the payment could be made without seeking approval from the insurer. Another idea could be in rural markets where validation by others in the village could be used to settle death claims fast.  

There is no doubt that speedy claim settlement that is transparent and fair is an issue that the industry struggles with today. Block chain can make a difference there.

What’s your take on the Health Insurance landscape in India? There’s a lot of confusion and opacity when it comes to pricing, features and other aspects of policies. End users are complaining about this. What needs to change?

I actually like the way the health insurance market has evolved. The regulator has these provisions that ensure that health insurances are renewable life long and premiums cannot be increased based on specific claims. This guarantees that the insurance you buy today will remain with you lifelong. Claims settlement numbers are increasing and a much larger set of companies settle over 85% of claims than what used to happen 10 years ago.

The issues are different. The hospital system is not organised and there are many examples of cost increases because a person has insurance. The co-ordination between the hospital, TPA, insurer and patient is poor which results in delayed discharges and frustration around settled amounts (this may be another problem where blockchain could help).  The biggest problem is that majority of health care costs are through OPD which is typically not insured. The industry has to find a way of linking chemists together and making them part of a network the way hospitals are today. This, of course, is easier said than done because the market is far more diverse than even the hospitals.

We are actively looking at parts of this eco-system to see the role SecureNow could play. One area that is particularly important for us to solve is to create a platform on which the different participants of the health eco-system could exchange information real-time. I think this will disrupt the way claims are handled.  

Lastly, do share some of your company’s plans for the next two years. Are you planning any new initiatives that you can share with us at this time?

We will expand our current businesses aggressively. This means that in the next two years we should be present in all the major state capitals and have specialised products for at least 25 SME segments. We will also apply for a reinsurance broking license over the next few months. This will allow us to work directly with reinsurers to develop the products for our market segments. We will make our platform the one-stop for all parts of the insurance eco-system. We are closely evaluating the rural market for partnerships. That is another large and underserved area. On the technology side we have a slew of products in the pipeline that we will offer SMEs to increase their stickiness to SecureNow. There is a lot to be done!