Devendra Rane and Varun Dua have come a long way since they started insurance portal Coverfox Insurance Broking Pvt Ltd five years back. The portal, which aggregates travel, health and motor insurance products of different insurance companies, will now offer life insurance products also. The company, which has received over $14 million in funding from Accel India, SAIF Partners and Catamaran, is also looking to become the largest car insurance aggregator in the country by the end of the year. The online insurance aggregator market is dominated by players such as PolicyBazaar and EasyPolicy.
In a conversation with VCCircle, Rane, co-founder and CTO of online insurance broker Coverfox, talks about the challenges in the online insurance space, and how the Indian customer is gradually coming around to the idea of buying insurance online. Edited excerpts:
What made you start Coverfox?
Varun Dua and I were running a technology services company called GlitterBug Technologies and we were doing technology services for several insurance companies. These companies lacked consumer facing technologies and the technology used for underwriting was very old. At the same time, we were also trying to buy insurance cover and realised that insurance agents were trying to sell it without helping us understand what they were selling us. A few such experiences and we realised that the retail end was completely in shambles. Since we knew the technology part of it, we realised that we could offer a better customer experience.
Most insurance purchases still happen offline. How do you plan to change this?
When we were trying to buy insurance, we were reading a lot of these PDF documents. We realised that the data is present in a legally worded format which few could actually comprehend. We realised it could be worded in such a way that the ordinary customer could understand what each statement means.
When we started explaining them in simple terms, we realised that it is possible to not just place them in a nice format and put it up on a web page but also actually rate the products.
If you consider our health insurance platform, the first one we launched, we take 20-25 parameters to understand the insurance needs of a person. For example, the needs of a customer from Mumbai will be different from that of a person in a tier 2 or tier 3 city. So we take these parameters and suggest plans that suit the customer.
When we started, nobody was doing this and most of the transactions were done offline. If consumers are buying complex gadgets online, they can also buy insurance online. It all just comes down to presenting information in a way that is comprehensible.
Are you looking at an offline model so as to be accessible to customers in tier 2 and 3 cities?
Since the time we started our platform, people from smaller cities such as Jaipur and Indore and other places have bought insurance products online.
If you look at the e-commerce platforms, all of them are getting customers from tier II and III cities, owing to big spends on advertising. I believe insurance will go the same way. A lot of people will spend on advertising insurance, which will move a majority of India into buying online.
How much traffic are you getting from tier 1 cities and what is the sales conversion rate?
About 80 per cent of the traffic is from tier I cities. Initially, people would ask our customer care executive on why they should buy from Coverfox, but now 1.2 -1.5 per cent of those who visit our site get on to a call and a majority of those are converted. We are closer to e-commerce platforms when it comes to conversion rates. About 30 per cent of our sales happen on mobile. About 20 per cent of our sales are through channels such as Facebook which is very unique for a fin-tech player.
How do you plan to compete with other online players such as PolicyBazaar?
For us, technology is going to be the major differentiator. Most of the competition is focused on selling life insurance. We have a deep focus on mobile platform and simple products. We also have a very strong claims department. While many companies are focused on just selling the products, we help in processing claims as well.
Is there space for third party aggregators when insurance companies themselves are selling online?
It is a $7 billion market and online is increasing at 20 per cent year-on- year. What differentiates one insurance company from another is brand value and claim service. There are many niche areas which insurance providers can focus on and build their brand.
In the aggregation space, it’s just two to three guys who are spending money on technology and marketing and that has to change. There should be bigger players who can spend so much money that people start becoming aware about insurance and start going to online platforms. The online market is still a year or two away from that kind of a shift.
How have you utilised the $14 million you had raised? What are your expansion plans?
A lot of expansion is happening on the technology side. We are working with insurance companies to focus on demographics for which special products can be made. So, data analytics and machine learning is one part of the puzzle.
The second thing is a mobile app. Although consumers buy insurance only once a year, we are building an engagement driven and not a sales driven platform. The app will not only be your one-stop shop for all your insurance needs, but will have special features such as an SOS option (for health and motor insurance) and a driving analytics platform which will tell you how good a driver you are. That could impact your insurance premiums.
Unlike a lot of other funded startups, we have utilised less than 40 per cent of the money we have raised. We want to keep our operations costs low. We do not need to raise additional money.
Will you be offering new products in the near future?
There are a few micro insurance products such as for flight delays and road trips which we are targeting, but general and life insurance is a big space and no one has taken a pole position yet. So our prime focus will be general and life insurance. We are still at the experimental stage with micro products. If the results are favourable, we may venture into these categories.
What are the kind of margins in the online insurance purchase space?
If you look at e-commerce, margins are low but volumes are high. In insurance, we have 17-18 per cent margin on auto and health, while it is 30-35 per cent on life. There is already de-tariffing of auto insurance and from what I know, de-tariffing of health and life is next on the cards. So the regulator will help us get better returns in the coming months.
What are your targets for the year?
On a unit economics basis, we will break even by the end of this quarter. We are conducting a lot of technology as well as market experiments so getting the unit economics under control will take some time. Our costs are already under control, so that's one part of the job done. Our immediate aim is to work out the unit economics for experimental channels.
We will launch the life insurance platform this year and plan to be the number one player in car insurance in the next eight months.
