Having recognised the potential of insurtech space, players like Fairfax invested about Rs 660 crore in Digit Insurance, a new entrant. Since Digit Insurance’s inception in October 2017, the company has registered immense growth. The company did retail business worth Rs 60 crore and issued about 1.9 lakh policies in August 2018. Kamesh Goyal, Chairman, Digit Insurance, talks to Free Press Journal’s S Narayanan, about the company, its philosophy and the Indian insurance industry.
What is the idea behind Digit Insurance?
We started Digit Insurance with three broad reasons. One, in general insurance, you have a small percentage (10-15 per cent) of customers who game the system, take advantage of products and make exaggerated claims. Insurance, by nature, is prone to fraud. Keeping these in mind, insurance companies have evolved processes to minimise frauds. But these processes do not work for honest customers – that is 80-85 per cent. We try to build processes that work for honest customers. Second, the retail insurance is typically focused on motor and health. The aim of our company was to introduce general insurance products in the overall lifestyle of customers. I think there are a lot of untapped categories here. Third, the need to give the customers the product that they require. Our mission is to make insurance simple.
What is the huge potential in Indian insurance that is getting so much attention?
There are two themes at play here. One, our general insurance industry size is roughly 0.8 per cent of GDP. In nominal terms, our GDP is growing at 12-14 per cent each year. This means that in five years, GDP would actually double. Even if penetration level stays the same, general insurance business would also double. Two, there are so many categories that have not been tapped. For example, consider mobile phones and tourism. More than two crore mobile phones are sold in India every year. At an average price of Rs 10,000, you are talking about a Rs 20,000 crore market size. I think Indians spend about Rs 30,000- 40,000 crore on tourism, both domestic and international. So, you can estimate the business that can come from tourism.
How do you go about deciding which products to launch?
We see what products are available, what are the gaps, what customers are complaining about. We try to understand not just the product but the on-boarding process and the claim process. At each stage, we try and change processes to make them more seamless on the customer side. For every product that we launched, we did customer surveys, market research, and took direct feedback from customers. We came out with a self-inspection application for motor insurance renewal. We made the process more efficient. It can be done instantly and by customers themselves.
We have entrusted the customers with the responsibility to self-inspect their vehicles. In case of flight delays, we made the whole claim process completely self-triggered. We send a link to the customer on delay (from our side) and all the customer needs to do is click on this link and send us a photo of the boarding card. And we pay the claim. In overseas travel insurance, we cover injuries due to adventure sports, games, etc., automatically. As long as you participated in these as an amateur and not a professional. We have provided mobile covers on IMEI numbers. I would not call what we do as disruption at all. For us, it is a very simple and natural way of trying to relate better to customer requirements. Nothing fancy. This is really going down to basics.
How has your claim experience been with all these technology-enabled processes?
We see high levels of customer satisfaction. We are also seeing a slightly higher loss ratio than we anticipated. If we stick to our philosophy, if we have happy customers, growth and profitability will come. Anything we do, we try to improve from a customer’s perspective. This is not taking a high moral ground. We are seeing results in absolute numbers.
What is your take on the ‘research online, buy offline’ customer behaviour? How does it affect a digital player like you?
Yes. I think people do research online before buying. For us, digital is the way we interact with customers and our partners. We have agents, motor dealers and others who sell to customers’ offline. But our interaction is completely digital. There is no paper exchange. Some of our partners like Flipkart are online sellers. We also sell directly to customers. It is the customer who decides from where he or she wants to buy. We are not pushing a particular distribution channel. Our model essentially is partnership.
What is the cost differential you are looking at as compared to a traditional or an existing player?
Investment in the digital model is very high in the initial phase. We are the only finance company in India completely on cloud. This gives us lot of advantages. Since we are the first one on cloud, we have to go through a number of issues as well. Over the next three-four years, we should get some efficiency advantage over traditional players. It is too early to talk about it. This is a journey. Also, customer behaviour is changing rapidly. Industry dynamics are fluid.
Technology is the driving force of your work. Existing companies too are adopting the digital model. How easy or not is it to copy technological innovations that you are bringing in?
We do not have any proprietary technology, which others cannot copy. We have the best people in the general insurance industry today. We have a mix of very senior people with global experience and very good youngsters. We have people from consulting, e-commerce backgrounds and those who have not been in insurance space at all. I am sure others will catch up. Having said that, I must add that we will have to be on our toes all the time to keep this advantage.
When do you plan to break even?
General insurance companies typically take anywhere between three-five years to breakeven. We will be happy to achieve our first breakeven anywhere between three-five years. Right now, we are looking more at quarter-to-quarter numbers.
What challenges do you anticipate?
One, our industry is extremely price competitive. As more companies get in, premium pricing will remain under severe pressure. Second, there is a continuous change in laws and court judgments – these have a fairly big impact on the industry. We have seen court judgments becoming more liberal in case of third party insurance in the last 10-12 years. The regulator is fixing premium by looking at what loss ratios and rules are today.
We never know how these will evolve in the next three-five years. Such changes are difficult for the industry to anticipate and could put pressure on profitability. Another factor is climatic change. The number of floods and such incidents in India has suddenly increased in last four-five years. This is also pushing up loss ratios for the industry. You cannot adequately price such events when competition is so high.