Credit a better bet for fintechs looking to expand: Yashish Dahiya is the CEO of PBFintech
PBFintech chairman Yashish Dahiya told ETtech that major Indian fintech firms wanting to enter insurance following success in payments or wealth management should concentrate on credit due to the larger margins available.
Dahiya, who heads the Gurugram-based company that runs insurance marketplace Policybazaar and credit marketplace Paisabazaar, said in a free-flowing conversation from Dubai that those looking to invest in the insurance space should look for people who have already shown some returns.
According to him, the majority of the disruption in the insurtech area is occurring in distribution, which represents a $250 million income potential.
While conceding that there is a viable company to be built by digitising the physical agent network, Dahiya believes there is a bubble developing in the insurtech market due to sky-high valuations.
“You have to always pass on 95% of what you earn to these agents, and on top of that, it is a ‘buy’ market with almost no loyalty,” he said.
Policybazaar is moving into physical distribution with its PoSP (point of sales person) business, but Dahiya wants to develop slowly, keep prices low, and wait for the competition to burn out.
Concerning insurance technology
Dahiya pointed out that one method to save expenses is via technology, and that integrated insurance is an even more effective option. Without data analytics and technology, the insurance industry’s long-term development and sustainability would be jeopardised, he said, adding that the regulator (Insurance Regulatory and Development Authority of India) is also heading in that direction.
Though 95% of insurance in India is currently offered offline, he believes that data and technology will be the future in 20 years.
Super apps getting into insurance
After seeing payment success, players such as PhonePe ventured into insurance. After gaining market dominance in ecommerce and payments, Amazon expanded into insurance distribution. While he did not name any specific companies, Dahiya said that the true margins are in credit.
Furthermore, selling health insurance is more difficult than selling a credit card or a personal loan. Startups will do better if they pursue financing rather than insurance. Insurance is a misunderstood business, he says, and people prefer to hear what they don’t understand.
“People are wasting time trying to do insurance,” he said.
Insurance coverage
While the insurance industry claims 5% penetration, Dahiya believes otherwise. According to him, the business should concentrate on increasing health and term insurance penetration, which is an even smaller portion of the 5%.
Given that 75% of the insurance market sells savings products, Dahiya believes the sector’s ‘protection gap’ should be prioritised. The ‘protection gap’ is defined globally as the difference between the quantity of insurance that is economically advantageous for the nation and the amount of insurance that is actually bought.
Rather of concentrating on insurance penetration, Dahiya believes the business should concentrate on closing the protection gap in the economy.”In the last 10 to 15 years, our sum assured would have more than quadrupled,” he said.
Treatment prices are rising
Despite the fact that insurance is quite cheap in India, most Indians do not get it because they feel their family would bail them out in the event of a medical emergency. However, Dahiya argues that as more individuals live in nuclear families, there would be fewer people to aid during a crisis.
He pointed out that even business insurance would not be adequate if someone gets a chronic condition. According to him, in 80% of such situations, the individual loses their employment and their safety.
He believes the industry and media should do more to highlight real-life case studies in order to instill the habit of purchasing insurance among Indians.
While the industry regulator has made significant efforts to guarantee that health policies in India may be renewed indefinitely, Dahiya believes that Indians should take advantage of such advantages and spend money on purchasing health insurance for themselves.
Massive marketing budgets
According to Dahiya, Policybazaar has spent over Rs 2,500 crore to market health and term insurance since its establishment. Even today, it spends roughly Rs 300 to Rs 400 crore per year on advertising, he noted.
He does not want to wait for the industry to do anything by pooling its resources, like AMFI (Association of Mutual Funds in India) has done for the mutual fund area. Every year, Dahiya conducts over 100 advertising campaigns to promote health and term insurance to customers.
Bima Sugam and the Insurance Industry’s Future
Dahiya believes that initiatives such as the online insurance marketplace Bima Sugam will help businesses get greater access to data, reduce fraud, and build stronger underwriting processes.
Insurance as a business does not speak about underwriting enough and instead concentrates on sales and marketing. He believes that if Bima Sugam becomes a data pool, it would be a tremendous thing for this sector.
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