First, a mere 2% of insurance policy sale is digital-only, with zero advice from an on-call or in-person insurance agent. An insurance policy buyer in India still tends to trust a face and a voice. It is the remaining 98% that may use a web aggregator like Coverfox or PolicyBazaar, browse through the insurance company website and even read all terms and conditions, now available as conventional companies invest in digital strategy. But she is likely to buy only after talking to an agent or a broker or someone she trusts.
The second reason is Dua’s professional baggage, who as the CEO of Coverfox made similar claims of a ‘digital-only’ web aggregator. Coverfox, which raised $42 million over three rounds, was touted as a replacement for call center-based web aggregators like PolicyBazaar. But he failed to deliver.
Investment of the insurance companies
In addition, Acko will compete with all established insurance companies who are investing in digitization.
Then there are a few other insurtech startups. For instance, Digit Insurance in Bengaluru, which raised Rs 385 crore in June from Fairfax Holdings of the Canadian billionaire Prem Watsa, who had sold his stake in insurance major ICICI Lombard in May.
In addition to Digit, Acko would compete with Toffee Covers in the National Capital Region, which has raised $2,00,000, in angel funding to operate as a corporate agent for new-age insurance policies. “We want to completely digitize insurance, and make this process as simple as buying a coffee. The key is a small ticket, highly targeted and super simplified product aimed at millennials,” explains founder Rohan Kumar.
Toffee is working with conventional insurance majors including Apollo Munich to create products that can be sold under a maximum premium of Rs 999. One such product, according to Kumar, is that which ensures a weekend backpacking trip, against theft, emergency evacuation, and injury.
Differentiating the insurers
It is new-age products that will differentiate digital insurers, believe Dua. He shares examples of insuring mobile phones, as soon as they are bought online, or a cab ride, or even delay in flights. “Digital creates new opportunities, if we make the product contextual, the customer begins to see immediate value in buying it,” says Dua.
Creating a new insurance product is just the beginning for these companies; using the generated customer data is the second step. “Over the long term, customer data can be pooled to create databases like CRISIL, CIBIL offering combined intelligence on frauds. Fraud in insurance cannot be eliminated but it can be drastically reduced,” added Kumar.
Currently, Acko, Digit, and Toffee Covers are awaiting approval from the insurance regulator; each eyeing a Diwali launch.
Kumar understands the hard work begins after that: acquiring customers. “Marketing and acquisition costs will take you on a negative line for a while at least,” he adds.
Dua, however, disagrees: “A digital-only insurance product becomes cheaper as it eliminates the agent’s commission, which can be up to a third of the first annual premium.”
This is not the first time Dua has overreached.
Web aggregators for insurance policies were the first wave of digitization in the large policy agent-driven market with one clear leader —PolicyBazaar, which brought together the web with a call center in 2008. Five years later, Dua claimed that call center follow-up could be disrupted: “If the information is put out in a sensible, easy to comprehend fashion, customers will be able to pick their insurance on their own.”
“He was confident that he would disrupt the leader in this category with a no-call-center policy. He missed the mark completely by not seeing that insurance sale was more than just user experience play,” said a senior executive of PolicyBazaar, who doesn’t want to be seen as commenting on his former competitor.