This combination of endurance and impatience has seemingly paid off. PolicyBazaar, India’s largest insurance aggregator, just raised a mammoth $200 million venture round. From arguably the world’s most sought-after VC fund, SoftBank. A venture round that saw the company enter the unicorn club—startups with a valuation of $1 billion or more.
Dahiya is also a maverick. He pooh-poohs the most investible theme floating around when it comes to insurance—“insurtech”. You know, the use of technology to unbundle and disrupt traditional insurance through apps, wearables, nifty micro-insurance policies and entirely software-based processes? Heck, SoftBank’s most prestigious insurance investment globally is ZhongAn, the Chinese insurtech pioneer that went from starting up to IPO to a $10 billion valuation in just over four years.
“These are tick-box products,” he says, pointing to one of the most popular micro-insurances these days—domestic travel insurance. “The claims ratio is 5%. Why would you ever pay for something like that? A good insurance product has 75-80%. ”
The world is moving to small, impulse-driven insurance products like flight delay insurance or e-commerce returns insurance (ZhongAn’s top seller). Likewise, PolicyBazaar’s younger and nimbler competitors are partnering with e-commerce sites to upsell tiny policies along with a bigger purchase (show delay insurance with a movie ticket, for example).
Dahiya, however, wants to go in a different direction. Back to selling the classic idea of insurance—as genuine protection against death, disease and disability. He is doubling down on trying to make PolicyBazaar a destination for customers to educate themselves and buy insurance. When every insurance startup worth its salt is figuring out how to not just distribute third-party policies, but also create newer ones, Dahiya says he will “never” create his own policies, “ever”.
And then there’s his co-founder and CFO, Alok Bansal. “We didn’t really have a need for the $200 million. Or a very clear use of those funds,” Bansal says. “In fact, our existing investors were willing to invest up to $500 million, but we took the money from SoftBank in order for an ecosystem alignment with an important player like it,” he says.
None of this makes sense. It flies in the face of everything we understand about insurance, venture funding and unicorns.
“I will be at odds with everybody, I don’t care,” says Dahiya, underlining his conviction in the mission he has embarked on.
Insurance is the subject matter of…
The fundamental problem with insurance in India is that people do not know what they’ve bought, says Dahiya. “Take 100 life insurance policies holders, and 98 will not be able to tell what they bought. They only know how much they have paid.”
The fault for this lies with a legacy industry, still selling insurance in the guise of investment, or, perhaps, investment in the guise of insurance. They do this because Indians, like others the world over, are notoriously wary of paying money to protect themselves from an event that may not happen. Their irrational minds tell them it’s a waste of money.
So, insurance companies package life insurance policies as investment products, offering “guaranteed returns” over the returns. Because no one wants to “waste” money on pure insurance. And because these lemons come with commissions for the agents and brokers who sell them to unsuspecting customers. These commissions can be as much as 30-60% of a lemon policy’s first year premium.
The relationship between insurers and agents is a curious one, part symbiotic, part parasitic.
The industry uses agents to mis-sell investment products masquerading as insurance to customers. But the same agents also mis-sell customers to insurers, masking their true risk profiles in order to make a sale. It’s a dodgy proposition for both customers and insurers.
Meanwhile, the elephant in the room, says Dahiya, is that many Indians spend 80% of their life’s wealth in the last 40 days of their life. Out of pocket expenditure constitutes 62% of healthcare costs. Which is why PolicyBazaar wants to focus on health insurance. “When we started, sales of health insurance were higher than life and motor insurance; then life insurance increased. Now, motor is the largest. But we want to make health insurance the next big thing,” says Dahiya.
The OPD opportunity
Most Indians do not buy healthcare insurance because most policies sold only cover serious ailments that require hospitalisation. Being the irrational human beings that we are, we tend to underestimate the impact or likelihood of serious health problems. Instead, we wonder why insurers rarely cover primary care. Logically, we should need insurance for unforeseen events that have the lowest incidence, but the highest severity. Instead, people want insurance for exactly the opposite—OPD (the Out Patient Departments in hospitals that treat patients that leave the same day they walk in).