How insurtech startups in India are increasing insurance penetration in the country


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The outbreak of COVID-19 in India last year had a direct impact on the country 280 billion USD from the insurance sector as more and more people have come forward to purchase life insurance and health insurance. While a handful of large companies dominate the industry, tech companies are looking to disrupt the industry by making the process of buying and settling insurance quick and hassle-free.

Earlier this year, Digit Insurance, a Bengaluru-based insurtech startup, doubled its valuation to $ 3.5 billion in six months with funding of $ 200 million from Sequoia Capital India and IIFL Alternate Asset Managers. Acko General Insurance, backed by Amazon, is reportedly on the way to become a unicorn business because he’s looking to raise $ 200 million. Since last year, Indian tech companies have been rushing to enter the insurance industry. FinTech giant Paytm acquired insurance firm Raheja QBE for $ 76 million in July 2020. Additionally, Sachin Bansal, co-founder of large e-commerce firm Flipkart, invested a large chunk of his fortune. in Navi Technologies, a fintech company that also provides insurance. as loan services.

Total financing in the Indian insurtech sector increased by more than 25 times, from just 11 million USD in 2016 to 287 million USD in 2020. According to Ashish Fafadia, partner of Blume Ventures and head of investments at insurance startup Turtlemint, investor interest in the segment digital insurance product penetration and huge growth opportunities.

“The next 20 years are shaping up to be incredibly good and positive. We will certainly see companies that have a clear digital strategy succeed, ”said Fafadia. As insurance penetration increases, the online insurance space will see more and more unicorns over the next several years, he added.

Redesign of the approach

Before the advent of insurtech, the process of buying insurance and claiming was an ordeal in India, and people tended to avoid buying a plan until they couldn’t. ignore it. Typically, purchasing insurance in the country required multiple visits to the insurance provider’s office or dealing with sales agents to fill out lengthy paperwork and fully understand the details. The terms and conditions were cluttered with jargon, leading customers to agree to take out insurance policies that they didn’t need.

As cumbersome as it may sound, the claim process was worse. In the case of a life insurance claim, one had to visit the specific branch where the policy was issued, submit several documents, and wait months for the claim to be resolved. While the process has become much simpler and faster in metropolitan cities due to digitization, hassles continue to exist in smaller towns.

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These are the reasons why the majority of India’s 1.38 billion people are still uninsured. During the 2019-20 fiscal year, insurance penetration in India was 3.76%, which is not only lower than the world average of 3.35% for life insurance and 3.88% for non-life insurance but also lags behind other Asian economies. In 2019, insurance penetration in Malaysia, Thailand and China was 4.72%, 4.99% and 4.30%, respectively.

However, tech startups that have stepped into the fray, whether as a market or as a direct insurance provider, claim to make things more fluid. Insurance companies allow people to buy a policy with a few clicks and claim to take less than two or three days to pay off bills.

“Until five years ago, even if someone knew about it and wanted to take out insurance, I can’t imagine that they could do it quickly and efficiently,” said Fafadia.

With its booming middle-class population and increasing penetration of mobile telephony and internet, India has emerged as the second largest insurance market in the Asia-Pacific region and one of the fastest growing markets fastest growing in the world. The country has around 66 insurtech companies.

In the first half of the 2020-21 fiscal year, health insurance premiums come first in the non-life insurance segment for the first time in India, according to the General Industry Council.

“When the world was hit by the novel coronavirus, the fear of hospital bills and losing a family member who wins to the virus hit the peak. And so does the need for health protection, ”said Vivek Chaturvedi, Marketing Director of Digit Insurance.

A investigation conducted by insurance provider Max Bupa last year, said there had been a significant shift in consumer mindset regarding the importance of health insurance coverage. The survey found that 71% of those polled considered health insurance necessary after the pandemic hit the country, compared to just 10% interested in purchasing insurance before the pandemic.

Digit Insurance, which became the first Indian unicorn this year, increased by 44% in terms of earned premiums in fiscal year 2020-21. The startup earned a bounty of $ 186 million (INR 13.6 billion) between April and December of last year. Plum, on the other hand, rose 90% month-over-month in terms of premiums recorded in the second wave of the COVID-19 pandemic this year, compared to 30% growth in previous months, Abhishek Poddar , co-founder of Plum, says KrASIE.

Solve insurance problems for businesses

The ease of access to insurance has increased by leaps and bounds since nearly half of India’s population has internet access. People prefer to buy health insurance from insurance companies rather than traditional companies because the former has made the process simpler and faster. For example, Plum Insurance, which helps businesses buy health insurance for their employees, has launched a WhatsApp-enabled claims system, an industry first initiative.

Companies had to contend with a long and opaque buying process that took more than two months from negotiating prices to getting the policy, Poddar said.

“This is the case for companies with hundreds of employees. A startup, as well as small and medium-sized businesses, has no hope of making a smooth purchase because traditional brokerage firms focus on large companies, ”he said. According to him, employees should go to their HR to claim the hospital bill. “Bad user experiences are a common problem for all businesses dealing with Medicare. “

Digit Insurance has doubled its valuation to $ 3.4 billion in six months. Image credit: KrASIA.

Standard pricing, along with fewer health coverage options, has also held back the growth of the industry. Previously, insurance policies had fixed premiums with no possibility of customization. But digital insurance startups are using technology and data to deliver personalized plans and costs.

Digit uses big data, bots and artificial intelligence to find relevant policy for its users. It also uses AI to interpret the terms and conditions in a layman’s way so that customers understand the various expenses covered by the policy they are purchasing.

Digit’s Chaturvedi said, “The industry takes into account around four to five key metrics to determine premium as we look at over 12 key metrics, creating a million pricing possibilities.”

In addition to personalized pricing, insurtech startups are focused on delivering new insurance products to meet emerging needs. For example, insurance coverage for flight delays, trip cancellations and modifications was only available a few years ago.

“We offer customizable products to make them more relevant to our customers instead of imposing a single product. We have 90 minute flight delay coverage instead of the industry standard six hour offer, ”Chaturvedi said.

Plum is working with major insurers to forge new underwriting rules and fraud detection algorithms, Poddar said. “This allows our platform to deliver real-time customizations to meet the needs of any business. So a team with young employees can get a suitable low coverage plan at a relatively low price. An older team can get higher coverage with relevant supplements, like maternity and parental coverage, ”he explained.

What awaits us

Fafadia believes the future of insurance will not be driven by digital platforms alone, but rather by a hybrid structure where digital and conventional insurance players with digital strategies will work together to run the show.

“From providing convenient online consultations to easy registration and claims procedures, insurtech will make health insurance simple and convenient for users. The customer onboarding, customer service, complaints and renewals processes will undergo a massive overhaul in terms of efficiency, ”said Poddar.

And as more companies streamline their processes, efficiency will increase and costs will decrease. “Access to data will lead to more precise subscription and pricing mechanisms. For example, data from wearable products like Fitbit can give businesses insight into the lifestyle of employees. This can be used to lower premiums, mitigate risk and even prevent losses, ”Poddar said.

The intention of insurance companies, according to Chaturvedi, is to simplify the buying process, so much so that it becomes like any other e-commerce product that can be purchased directly from a laptop or computer. a mobile phone.

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