How bite-sized insurance is taking over the market

It was a rainy afternoon, but Prateek Dwivedi, 23, was sure he would catch his flight to Kerala on time. A PhD student from IIT Kanpur, Dwivedi decided to take an Ola cab much in advance, but could not reach the airport on time. The flight was gone, but Ola-Acko trip insurance for Re 1 premium that he usually buys for all his cab rides saved his day. The insurance not only covers missed flights but also loss of baggage, accidental medical expense, accidental death benefit and ambulance transportation cover, among others.

"I sent in a claim of Rs 4,000 online and uploaded my flight ticket and identity proof. The settlement process turned out to be quite seamless and I received the full amount."

Welcome to the world of bite-sized insurance where you can cover yourself against cycle theft, gym injury, marathon, malaria, damaged mobile, cyber fraud, home contents, pet insurance, credit insurance and even life insurance. These insurance can be bought for as little as Rs 20 a month to less than Rs 800 a year.

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Angel investor Vivek Gujral had never heard of dengue insurance when Rohan Kumar pitched him for his start-up Toffee Insurance. He could not say no. "Only recently, one of my acquaintances had got admitted in hospital due to dengue. An insurance of such kind would have helped him financially," Gujral recalled. Toffee Insurance, Digit Insurance, Acko Insurance, Symbo and Mobikwik are some of players that have been offering such sachet insurance products. Most importantly, The Insurance Regulatory and Development Authority of India has been forthcoming in giving licences to these new players. Some such as Digit and Acko also provide traditional health and motor insurance policies.

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Perception Change

Digital savvy millennials seek do-it-yourself comfort and instant results of their actions. The very nature of insurance involving complex documents, tardy processes and paying money periodically for future eventuality has made insurance quite unpopular among them. Insurance tech start-ups have begun to change this perception. They identified the need gap that is attractive for not only under-insured consumers but also insurance companies.

"There is a lot of mistrust in the industry. Insurance tech start-ups are helping overcome this challenge. When we talk about bite sized insurance products, it instantly ticks you because these are contextual. Terminologies are simple. Realisation is fast. So, you see the value of the product quickly," Animesh Das, Head - Product Strategy, Acko General Insurance says.

Vivek Chaturvedi, head of marketing and sales (online), Digit Insurance points out that people usually take protection measures such as hiring a security guard when on travel or buying a phone cover and screen guard to protect the new phone. "Why to invest money in buying a thick case and screen guard when for the lesser amount you can insure your phone and at the same time enjoy the touch and feel of the original design. Or, why to hire a guard when on travel when you can protect yourself against burglary for less than Rs 500," he says.

Product innovation and seamless process are integral to the rise of insure-tech start-ups. While some have licences to build and sell products such as Acko and Digit, others such as Toffee, Symbo and Mobikwik partner with traditional insurance firms to co-create and sell sachet products. There are platforms such as Policybazaar, Turtlemint and Coverfox that work as marketplaces.

Product Innovation and Differentiation

These are early days for sachet-sized products. Multiple players are offering similar products. "This segment is relatively new and companies are tinkering with product offerings. Customisation and simplification of product offerings and technology enablement (filing claims, verification, disbursement) will play a crucial role in differentiating various players in the market place," says Ankur Pahwa, partner and national leader, e-commerce and consumer internet at EY India. Currently the focus is on health, appliances and travel insurance, but the scope is huge.

One product that Acko is exploring is pay-as-you-go auto insurance where the user will be charged on either daily commute or mileage. "Since such products are available internationally, discussions are on with regulators to tweak the existing structure of a yearly model. As most cars are equipped with real-time tracking devices, fitting such bite-sized insurance would make sense for consumers and insurance companies from execution point of view," Das of Acko says.

Digit Insurance is experimenting with home content insurance realising the fact that people living on rent only want to protect their belongings and not the structure of the home. The company has sold 355 policies collecting premium of Rs 23 lakh since the product launch in February 2019.

Symbo Insurance is going a step ahead to sell its products to corporates. The company sold its breast and cervical cancer product that it launched on Women's day to 130 companies. "Employers can provide this cover to women employees and male employees can have it for women in their families. Either they can make it free or employees can buy it on a discount," says Anik Jain, CEO, Symbo Insurance. Symbo will soon launch another set of products with focus on women health, fitness enthusiasts, students and micro entrepreneurs.

A Singaporean firm had come up with broken heart insurance on Valentine's Day. Chinese insurance firm ZhongAn offered "watching-football-drinking-too-much" insurance during football World Cup 2014. It had to roll back these products after regulator's intervention.

Kumar of Toffee wants to experiment with Tinder-date-gone-bad insurance that would cover restaurant bills and gift expenses or failed matrimonial discussion on matchmaking websites. However, he is quick to add that while such products are good to create buzz, ultimately insurance is a financial product and it must add financial value to consumers.

Few industry players point out that such products are indeed filling a gap, but there are concerns of consumers being under insured. Customers must know that these products don't replace the need for full-fledged insurance, says Kamesh Goyal, chairman, Digit Insurance. "ZhongAn is a case in point whose market capitalisation slumped drastically as commissions for distributors were quite high. Their own income they were focussed on. Investors finally realised that it is not a sustainable model," he adds.

Rohan of Toffee begs to differ. "Sustainability in the micro insurance space can only be driven via automation in processes including claims, thereby creating a low cost distribution model. ZhongAn's expensive distribution cost model caused a drop in their performance.

If insurance tech companies can find the right balance and a capital light model to innovate and distribute micro insurance products, the market potential is substantial," he says.

How insurers look at it

Can bite-sized segment be a viable source of revenue for insurance firms? Insurance firms do see the potential but currently do not seek profits out of it. "The focus right now is not so much on profitability but helping individuals get introduced to a product and take certain benefits before they decide to opt for a full-fledged cover," says Ashish Mehrotra, MD & CEO, Max Bupa. The insurer recently launched HospiCash product in association with Mobikwik. The product covers hospital expenses up to Rs 2,000 a day for up to 30 days in a year at an annual premium of Rs 135.

Chaturvedi of Digit says bite-sized insurance products should not be examined on the basis of profit and loss. "The Idea is not to drive revenues but create an ecosystem where a buyer of a bite-sized product also buys traditional polices from you."

The bet in terms of policies sold is working in their favour. Max Bupa has been selling close to 100 HospiCash policies daily. Mobikwik has sold nearly 5 lakh policies so far collecting a premium of Rs 4 crore. Toffee Insurance has sold 1 lakh policies having premium of Rs 3 crore, while Digit Insurance has sold 2 lakh mobile insurance policies since the policy's launch in June 2019.

In India, investor community is bullish. Data from Tracxn shows funding in the insure-tech space has jumped from $91.89 million in 2018 to a whopping $252.36 so far in 2019. Coverfox, Policybazaar and Turtlemint are among five companies that have received funds this year.

The underpenetrated insurance segment is ripe for disruption, and insure-tech players are striking the right cords. What sachet consumer products did for retail, sachet insurance products look set to deliver for the insurance segment.

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