India Web Insurance Aggregator Industry is fairly concentrated within the top 4 players constituting more than 90% of total space. While none of the top players is a profit making entity as at FY’2019, we attempt to cover the roadmap for the aggregators in a highly regularized environment. This discussion was a part of the interview series “A Roadmap for India Web Aggregator Industry” and revolved around understanding the insights of the Web Insurance Aggregators Industry in India.
“The interviewee, Mr. Mahavir Chopra, is working as the Chief Business Officer at Coverfox Insurance Broking Pvt Ltd.”
Here are some edited excerpts of the interview:
When did you start working in the insurance aggregator industry and how did you associate with Coverfox?
I had been a part of the industry since 2005 and had been actively writing about this industry in newspapers and through my own blog. In December 2005, I, along with few colleagues, started Insurancemall, the first ever online comparison platform for insurance products in India. The venture could not succeed due to lack of regulatory framework on FDI into an existing insurance intermediary. Secondly, maybe we were too early in the market – and insurers as well as customers were not ready. Then, in 2014, I happened to meet Varun Dua the founder of Coverfox when I decided to join hands and work with Coverfox as a founding member.
How has the industry changed over your tenure?
Regarding the change in industry over the past five years, Mahavir told– Like every other industry going digital we went through the journey of customers researching on our portal and exploring our advisory services, and finally ending up buying offline. The market has changed significantly since the advent of ecommerce, smartphone and high-speed internet in the country. Customer’s trust over the online medium is at an all-time high. On the other hand, insurers and intermediaries have been making serious investment into digital play improving the overall sales and post-sales experience significantly. Besides volumes seeing an upward swing, we also see the average ticket size improving with our portals that was unheard of a couple of years ago.
What are the key dynamics governing the product portfolio of the industry?
Car and bike insurance, being transactional one-year policies, see the maximum number of transactions on the online medium. Given the simplicity and standard nature of the product, auto insurance customers have taken up insurance online well. Online Term is another area where thanks to zero commission products, the differential pricing draws a lot of interest from insurance seekers. Given the transactional nature of the product, and the fact that offline life insurance agents do not market this product aggressively, Online Term has great potential online. In terms of premium and revenue, this would be the number one category for most aggregators. Health as well as Investment products are also seeing above average year on year growth.
What are the factors restricting growth of the industry to its full potential?
The traffic for online insurance is still limited. There are too many players chasing too small a traffic resulting in prohibitive cost of marketing and sales. Various reports suggest that just 2-3% of insurance seekers who have internet access buy insurance online. While there are individual efforts made by some players to grow the online traffic, it needs more people to invest serious money may be collectively so that people are aware of availability of insurance online. Somewhere I think insurers who have access to highest capital are stuck in a conflict between investing in online traffic and developing future business models, versus maintaining and nurturing existing source of business from offline distribution partners.
Coverfox has been known for its Omni-channel distribution strategy. How does the Coverdrive segment complement the business model?
Coverfox has an online broking license and not an aggregator license; therefore it is not restricted to mere online selling of products. When IRDA came up with the POS agent model to increase the number of insurance agents, Coverdrive, a segment focused on building a network of POS agents, was launched by Coverfox to provide a wide array of products to POS agents for selling. As of date, Coverdrive has around 60,000 POS agents on the network which sold more than a million policies in FY’2019.
The stiff regulations imposed by IRDA in terms of restriction on cross-selling opportunities detriment the growth of revenue for aggregators. Do you think IRDA should relax such regulations?
“There are many opportunities available for online brokers within the boundaries of the set regulations such as B2B sales, increasing focus on corporations to buy group insurance and others”, said Mr. Chopra while for the web aggregators. He was of the opinion that relaxation on some regulations that allow cross sell could definitely help keeping businesses and the industry profitable, viable.
Peer companies such as PolicyBazaar have recently expanded to UAE to provide scalability to their operations. Does Coverfox have any such plan of expanding geographically?
Going global is definitely on the long term to-do list of the company while for the next couple of years; the company would be expanding their operations in the Indian market only, with a special focus on Tier II and Tier III cities. Coverfox considers Technology and the quality of the users as their biggest asset and looks forward to capitalize on it.
What do you think about the future outlook of the industry in terms of customer growth and competition scenario?
The traffic on the platform is increasing at around 20 to 30% Y-o-Y, which maintains the cost of customer acquisition to around USD 65-70 (Source: Ken Research Analysis). If the mentioned restraints to the growth of industry are taken care of, Mahavir expects the lead conversion rate to go up to 9-10% of the leads generated, which currently have a conversion rate of 3-4%. On the contrary, if proper awareness and expanded reach to Tier II and Tier III cities are not implemented at an industry level, profitability could decline leading to consolidation or divestures in the next few years.
“Players in the market should strive for a balance between seeking more funding and expanding to different regions while simultaneously keeping the losses under control. In segments of payment processing, post-payment customer experience, the firms could ensure various efficiencies in their business model by successfully deploying artificial intelligence and entering into strategic alliances with technology companies” said Mahavir, when asked about the probable top priorities of a CFO in today’s era.
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