Why we invested in Bharatsure: The insurance protection conundrum
At Capital-A, we have been evaluating the Insurtech space over the previous years, primarily because the Indian economy is plagued by the lack of coverage and penetration and the status quo is ripe for being upended by technology disruption on distribution play. The insurance landscape of India is an intriguing escapade of providing financial protection for India’s 1.42Bn citizen en masse. The penetration of insurance in relation to the GDP (metric computed as total annual premiums/GDP) stands at a meagre 4.2%, which lags the global average of 7%. This pegs India’s insurance market to be the fourth largest in general insurance in Asia and 14th largest globally.
Another metric that underpins the lack of insurance coverage for our population aggregate is that of insurance density. Insurance density is computed as the total annual premiums/ population. This metric is interpreted as the extent of insurance coverage per person, within the country. India has an insurance density of $91 per person vs. $ 872 global average and $8,193 for the USA.
We second the notion that Insurance remains to be a ‘push’ product in the country. Complexity in understanding insurance policies, lack of last mile coverage & inadequate financial literacy scourge insurance penetration. The industry is plagued by distribution channels which operate in an archaic fashion. Insurance Industry was largely dominated by offline channels like corporate agents, offline brokers, or banks. Rapid digitization, product innovation and progressive regulation policies have made it possible for consumers to buy insurance through multiple distribution channels with the click of a button.
Altering consumer perception of insurance as a necessity requires radical shift in consumer thought-processes and that will require monumental catalysts to drive the change. That said, solving for distribution and last mile coverage is a great growth lever for insurance penetration and enabling ventures that empower intermediaries is a pragmatic approach to solving the issue at large, and we are supportive of the infrastructure theme.
Tailwinds: Progressive policy support & outlook
While our bullishness stems from the fundamental understanding of supporting paradigm shifts in distribution channels and consumption of the same, the regulatory outlook on the industry is encouraging such ventures. IRDAI, the incumbent disposition and macroeconomic factors in India have streamlined objectives and operations to provide a conducive environment for the growth & penetration of Insurance across all sects and demographics of our economy. Indian insurance landscape is witnessing tailwinds from both, the demand and supply factors:
- Growing per capita & household income, increased percolation of financial literacy, multitude of insurance products available across multiple price ranges, inclusive of subsidized policies provided by schemes such as Aam Aadmi Bima Yojana, Ayushman Bharat Yojana, there is a definitive growth trajectory impending, setting the base for Insurtech ventures to encroach the space and capture the market.
- Favorable policy stance: allowing PE funds to invest up to 25% without being named as promoters, increasing FDI limit to 74% amongst other positive changes, the macroeconomic and policy levers accentuate growth in the insurance landscape.
- The maximum number of tie ups for Corporate Agents (CA) and Insurance Marketing Firms (IMF) have been increased, CAs can tie up with 9 insurers (previously 3) and IMFs can tie up with 6 insurers (previously 2) in each line of business of life, general and health for distribution of their products. This provides wider access of products through various distribution channels and facilitates the reach of insurance to the last mile.
The Employee Benefits & Group Benefits Opportunity.
The Indian insurance market is is slated to increase four folds in size over the next 10 years. The non-life insurance segment, which is comprised of: general insurers, standalone health insurers and specialized insurers, was valued at Rs. 1,281 billion (US$ 15.5 billion) in 2017 and was anticipated to expand at a compound annual growth rate (CAGR) of ~24%.
There exists an enticing opportunity for players to disrupt the health & group employee benefits segment. Specifically, the health insurance space offers promise in the non-life product domain. Gross Written premiums for health insurance was 97,700cr which accounted for 38% of Non-life GWP in 2023.
Delving deeper, Group business GWPs were ₹46,245 crores which accounted for 51% of total non-life insurance GWPs, signalling the eminence of building for and disrupting the Group Insurance space.
Group insurance provide standardised coverage to employees. These policies primarily constitute the ‘white collared’ workers which make up merely 4% of India Inc’s workforce. Over 85% of workers are employed in the MSME sector, which remains largely underserved from a coverage dimension. One of the primal causes of a dearth in penetration happens to be an inefficient distribution channel, ridden with leakage and outreach constraints. The distribution aspect can be solved from a broking angle as well as an infrastructure enablement angle which empowers incumbent intermediaries to solve for MSME employee welfare.
Life and non-life insurances, well-being offerings are constituents of the ‘Employee Benefits’ gamut, which is an enticing opportunity that grows with employment levels and growth in economies. The global employee benefits market is currently valued at $52 billion and is poised to attain $71.8 billion by 2029. India’s young demographic, striding ahead to attain employment amplifies the need for comprehensive ‘employee benefits’ offerings & is a viable market gap to go after.
How Bharatsure solves for the distribution dilemma:
Having delved deep into the insurance industry at Capital-A, we realised that Indian economy is positioned in an ‘agent-driven economy’ mould, deep-rooted in a trust-based environment, where the end consumer seeks comfort in accountability that comes with an intermediary (distributors, brokers etc.) This is emphasized further in ‘push products’ like insurance wherein the demand is generated by agents who educate and distribute policies and act as point-of-communication for grievance redressal. Bharatsure empowers these intermediaries, equips them with appropriate artillery of technology infrastructure & product services to be able to better serve the market. This tech stack accentuates penetration of insurance cover across the multitudes of tiers in the country, as agents will be able to traverse these markets efficiently, with minimised leakages and greater reach.
Bharatsure is a full stack employee-benefits-as-a-service platform, vertically integrating in the employee benefits domain offering:
Employee benefits suite: Multitude of health, accident, group term life insurance along with health checkups, medical consultations, mental and physical wellness offerings.
Infrastructure-as-a-service: Technology infrastructure and operational support to provide holistic offerings to intermediaries as per their requirement.
With their full stack product suite, Bharatsure solves for various stakeholders:
- Corporate & MSME Employers:
India houses over 1200 large corporations & 64 million MSMEs which generate employment for over 410 million, paucity of penetration makes this segment an elusive avenue to build in. Their one-stop employee benefit platform provides a satiating mix of pricing and value delivered. - Intermediaries:
Distribution channels in the country are fairly occupied by traditional intermediaries who deploy dated methods in their practice. In the case of group life insurance, 87% is driven by individual and corporate agents. While for health insurance, 70% is driven by individual, corporate agents, and brokers. The ‘infrastructure-as-a-service’ offering will empower these agents to increase their reach and capture the markets swiftly with great efficiency. - Employees:
The employees stand to gain from their access to a seamless dashboard that streamlines all the benefits made available to them by their employers in the form of consultation, mental wellness programs, insurance related queries and other value-added services.
Since their inception in 2021, Bharatsure has been able to exhibit seminal growth, having partnered over 500 organizations, impacting more than 150,000 lives through its group benefits platform. Their performance added to our conviction in their offerings.
Founders’ fortitude:
Beyond the appeal of the product itself, our investment decision in Bharatsure was significantly influenced by the impressive team steering the company. Conviction that emanates from founder’s commitment and ability to execute & deliver is something that we weigh highly at Capital-A & Bharatsure’s founders Anuj Parekh and Sanil Basutkar exude these attributes thoroughly.
“IaaS (Infra as a Service) is a loosely used, abused and mutilated term by folks building in this space — either to sound fancy or to attract investor interests. Still early days for Bharatsure — but Anuj and Sanil understand the fundamental premise and distribution dynamics and how infra will be the one of the most important pieces in the value chain.”
- Ankit Kedia, Founder: Capital-A
Anuj is a CA and holds an MBA from IIM-B. He has 9 years of experience in program management, consulting, sales, and corporate finance with companies like Auctus, SmartShift, Citi. Sanil, also a CA, holds an MBA from ISB, and is a 1X Founder. He has 9 years of experience in product management, financial services, and management consulting. With their varied experiences & domain expertise, they make a solid foundation for their venture.
Upon our initial encounter with Anuj and Sanil, we were impressed by their enthusiasm & driven nature. As they shared the early years of their entrepreneurial journey, it became evident that their passion to make a meaningful impact in the field was palpable. Drawing from their experience in distributing group insurance through HealthySure, they are well-positioned for success in establishing Bharatsure, a cutting-edge insurance tech venture.
The Indian insurance industry is long overdue for innovation, and we believe Bharatsure stands to be at the forefront of it. We are excited to partner and support them in their journey!
As the insure-tech space undergoes dynamic changes, we, at Capital-A, are active proponents for innovative disruptions & support enablers of the same. If you are an operator, founder, or investor enthusiast in the Insure-tech domain — we would love to chat. Please reach out to aswani@capital-a.in, raashi@capital-a.in, aditya@capital-a.in, hello@capital-a.in.
