India’s insurance sector is both large and small. Large in terms of quantum of dollars of premium, number of insurance providers (50+) but small in terms of per capita coverage in terms of percentage of folks covered as well as in dollars per person. Various segments within insurance continue to grow at high double digit rates and should do so in the medium term. The incumbents are innovating but at the same time are somewhat hampered by legacy distribution, mindsets and tech infrastucture.
The industry is fairly regulated and has traditionally been slow to evolve. However, due to multiple factors in play- among them:traction in digital distribution, gradual regulatory opening up and strong policy action on covering the least served- leading to building insurance awareness, the sector presents many opportunities over the medium to long-term.
Internationally, newer, digital approaches have come of age only in the last decade e.g. in the US the better known disruptive players are the likes of Oscar health (2012 tech-driven, customer engaging health insurance), Clover health (2014 data driven co optimizing expenses for health), Lemonade (2015, fully digital delivery of insurance and claims combiend with social good, Home & Property). China has also seen new age insurers such as Zhong-an (2013, JV between Pingan, Alibaba and Tencent) achieve massive scale (1.6Bn policies sold) in the past few years via digital distribution and claims. Ping An, a large insurer, has been a leader in developing an extended digital and services strategy to capture a large base of some 400Mn users. Its quite something to see that all this has happened in just the past 5–6 years.
India has been following a somewhat similar path with Policybazaar being the early scaler and leader with digital price comparison/distribution. Subsequent models have emerged via agent aggregation (Renewbuy), digital first insurers (Acko, godigit), micro-insurance (Toffee), 360 health coverage for the lower-mid segment (Clinikk). The coming decade should see a lot more action and innovation and scale build out among the new generation of players in India’s insurtech.
The factors driving change and value creation in the segment in India are: digitization of sales, increased competition due to regulatory changes and entry of new-age players, potentially deep integration of insurance and care via the Healthcare stack, dislocation caused by weakening of the traditional agent model (e.g. for SME insurance), need for better data for emerging sectors such as agri-insurance, building awareness due to government coverage of the underserved and of course rising customer expectations and usage of digital price comparison.
There are several entry points for companies to emerge without initially being a full-stack insurance product company (which has a high capital entry bar)- data led/automated claims processing, fulfilling insurance at a lower cost (e.g through reducing claims incidence, or cost of repair), combine insurance with other financial products/services (e.g Revolut, Kaleidofin), underserved and small ticket insurance and the like.
At WEH Ventures we are optimistic about seeing many interesting plays emerge in the insurance sector which would be worth 100s of billions of dollars in the years to come.
