The Rise Of Insurtech In India

The growth of insurtech is driven by a shift in consumer inclination toward healthcare products and a massive 167% increase in funding.

According to Inc42’s recent State Of Indian Fintech Report Q2 2022, India’s Insurtech industry offers a $339 billion market opportunity at a 57% CAGR by 2025. It is a representative figure that describes the rate of growth of an investment during a defined time period. This means investments in insurtech are set to clock in a compound return on investment of 57% between 2021 and 2025.2021 was a golden year for Insurtech startups with 34 startups raising total funding of $822 million.

The pandemic hammered home the fact that health insurance isn’t a choice. Families had to dig into their savings to pay hospital bills and manage other healthcare expenses. This realisation combined with the focus on mental health has changed the face of group health insurance in India. Organisations now take conscious efforts to ensure the overall well-being of their employees. Health insurance plans alone aren’t enough anymore. Comprehensive packages that include regular check-ups, mental-health counselling, and customised fitness offerings make the starter pack of employee well-being in 2022.

The insurtech segment can be categorised into five major segments:

• Digital Brokers like PolicyBazaar, Ditto, TurtleMint and Paytm.
• Corporate Insurance Brokers like Nova Benefits
• Insurance SaaS companies like Ensuredit and Riskcovry
• Digital Insurance Underwriters like Acko and Digit
• Health Clubs like Kenko and Even

According to the report, the growth of insurtech is driven by a shift in consumer inclination and a massive increase in funding. Post pandemic, the demand for insurance products has increased. Other factors contributing to the growth include:

• Improved Distribution - Digital brokers like PolicyBazaar have turned the B2C model on its head. You can easily compare and choose from a plethora of insurance products. The rise of B2B2C players like Nova Broking is further improving the access to efficient and affordable products.
• Technology for good -Technological advancement has improved reach and conversion. Data analytics has further helped to identify and target new customers.
• Tailored Products - With more data comes a better insight. The insurtech segment has quickly adapted to personalising health & wellness products. This has further improved insurance underwriting and enhanced pricing propositions.
• The emergence of the National Health Stack - At 4.2%, the insurance penetration in India is extremely low compared to global leaders (In 2019, Taiwan’s insurance penetration was the highest at 20% followed by South Africa and Korea at 14% and 11% respectively). The national health stack will help improve insurance penetration further propelled by the growth of digital infrastructure.

New beginnings

India’s insurtech segment is still in its nascency. For startups to sustain, digitalisation alone isn’t enough. Other key factors to focus on include:

• Expansion - After the pandemic, the demand for health insurance surged in tier 2 cities such as Nagpur and Raipur. The trend is expected to increase YoY.
• Personalisation - Consumer behaviour is rapidly changing. There is an increasing shift towards living healthy. Adapting to changing consumer behaviour and offering tailored products is key.
• Innovation - As the segment continues to grow, innovations in underwriting, introducing tech-enabled distribution frameworks and delivering comprehensive post-sales services will take the centre stage.

But the grass isn’t entirely green. The regulations and compliances are tough to meet. New players often find it difficult to enter the market. There is also a lack of trust in technology-led solutions, especially in tier 2 & 3 cities. Emerging segments like neobanks and crypto are still alien to most Indians. Additionally, the lack of financial and tech literacy mulls the expansion further.

Conclusion

In my opinion, things are changing at a snail's pace. People don’t invest just to save tax anymore. People invest in a better future. It’s only a matter of time before companies give equal importance to health insurance and wellness benefits.The increasing mobile penetration in India has facilitated quality information. As a matter of fact, India is at the forefront of cryptocurrency adoption, ahead of both US & China, albeit with the government’s negative attitude. Insurance is next.We have seen mutual funds & stocks turn into dinner-table conversations. Will health insurance see the same fate? Only time will tell.