The insurance sector in India is on an upward trend and startups are at the forefront. Distribution and servicing in general insurance has been raised to a higher level.
Insurance penetration in India for the non-life segment is now around 1.0%, a significant increase over the past decade but still quite under-penetrated (emerging Asia is at 1.7% and the world average is over 4%). The majority of premiums in non-life are taken up by motor and health - thanks to dozens of well-funded startups in the B2C segment. The elevation of offerings is quite dramatic (for example, instant policy purchase, seamless and quick claims settlements, user friendly interfaces, etc). Companies like Loop, Plum, Onsurity and others have built innovative offerings for corporate health insurance which has become much easier to procure and manage.
However, other parts of business insurance remain stuck in time - such as directors and officers liability, cybercrime, product & other liability and the likes. They are still being sold as they were twenty years back. Many of the buyers for these are first-timers, and the requirements and the risks are evolving. Take the fintech sector for instance, irrespective of whether it’s a B2B or B2C play. Every proposition relies on a ton of transaction data and typically for millions of users. This makes it a perfect feeding ground for cyber-criminals. While fintechs have to build proactive IT defenses to protect them from malware attacks and data breaches, it’s almost impossible to predict and prevent all cyberattacks in real-time. This is where a cybercrime policy comes into use. Cybercrime incidents shot up by 69% in 2020 per FBI data and some reports suggest cyber insurance can be a $20 bn industry by 2025 - a growth of nearly 3 times in just five years.
Cybercrime is one example. Other so-called “white-collar” risk-covers are sorely needed beyond the traditional P&C (property and casualty) offerings - which have been tuned to the industrial segment over many decades - and quoted & sold in a certain way. India has a large IT, Saas sector and the largest base of developers in the world. As more products are built in India and shipped to sophisticated clients - the need for these covers shoots up.
While for most of the venture funded companies, covering these risks is a no-brainer.
These risks are not suited to the traditional insurance sales model. Many of the criteria for servicing clients are somewhat antiquated (eg. historical profitability) or the paperwork is fraught. What is needed is a superior level of education, handholding, efficient quotes & flexibility- which the market has not witnessed. This “niche” suite of covers, when packaged and sold right s going to be quite significant play in the Indian market in the medium term.
Global parallels tell us that we should see scaling companies bringing specialized offerings as this market opens up and deepens over time. Vouch (valued at $550 million) is a four-year-old startup focused on providing a suite of insurance products to venture-funded startups- already approaching $6 billion in cover. Next Insurance (worth $4 billion) focuses on the smaller companies in the non-startup space: the likes of Amazon sellers, bike shops, book stores and jewellery shops. Coverage includes general liability insurance, workers compensation, professional liability insurance, business insurance.
Our take is that while the insurance sector has seen a good amount of innovation over the last 10 years, the impact of this has been felt largely in a narrower set of core segments thus far. . There are numerous other high-potential underserved niches with acute dynamics-- waiting to be tapped through a consumer-first approach. We are looking forward to seeing this next wave of insurance over the next few years- as India becomes a more evolved insurance market.
Deepak Gupta is the Co-founder and General Partner, WEH Ventures.
