India’s insurance industry is one of the predominant sectors experiencing a consistent growth graph. The country is said to be thefifth largest life insurance market in the world’s emerging insurance markets, growing at a rate of 32-34% each year. In recent years the industry has been experiencing fierce competition among its peers which has led to new and innovative products within the industry. According to S&P Global Market Intelligence data, India is also the second-largest insurance technology market in Asia-Pacific, accounting for 35% of the $ 3.66 billion insurtech-focused venture investments made in the country.

In an exclusive interaction with Entrepreneur India, Kapil Mehta, co-founder of SecureNow Insurance Broker, talks about the insurance sector’s post-pandemic changes in customer behaviour, SMEs, impact of Union Budget 2023 and as well as his business viewpoints.

Small Businesses

As per the government estimates, there are about 65 million small businesses in the entire country. While sharing an overview about the role of the company in the insurance ecosystem that is said to be an under penetrated or underserved sector, Mehta said that, “There are now about 40 thousand of small businesses on our roll. But, 40,000 is a small number and pales into insignificance when compared to the 65 million that are out there. I think the amount of work that has to be done, it’s just so huge in terms of increasing penetration. That is going to take a while and it’s not going to happen by the traditional way. So, you’re bound to see that under penetration will continue for some more time as you go through.”

To tackle the aforesaid penetration challenge, the operational scenario in the sector has to be discussed. In this context, Mehta segmentalized and compared the working pattern of insurers and insurance companies as well as the impact of the same. Mehta opined that usually an insurer is a large company that has a standard product and it will not bother much about small businesses. This will eventually force the MSMEs to approach agents or advisors and within a short span of time they will get frustrated. On the other hand, the insurance companies with excellent tailored products will attract the SMEs with proper guidance.

“The impediment is basically the distribution pie that is missing in the industry. You need new ways of distributing and that gap we’ve been trying to bridge. It is difficult to make money in this because when a small business is buying insurance, premiums are lower, the commissions are lower, so you have to manage in a far more cost-effective manner. And, really the past 3-4 years for us has been to fine-tune those distribution ways so that we can do it in a profitable manner. That’s what we’ve done. And, in a country of our size one-size-fits-all is not going to work because even amongst SMEs there are just so many different segments. You really need a segmented approach to distribution. That’s what we have been building successfully so far.”

According to India Brand Equity Foundation official website, the insurance industry of India has 57 insurance companies – 24 are in the life insurance business, while 34 are non-life insurers. Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company. There are six public sector insurers in the non-life insurance segment. In addition to these, there is a sole national re-insurer, namely General Insurance Corporation of India (GIC Re). Other stakeholders in the Indian Insurance market include agents (individual and corporate), brokers, surveyors and third party administrators servicing health insurance claims.

Distribution Channels

Amid all these players, Mehta explained the company’s working in the pipeline that is not so robust along with the evolution of the ecosystem. As per his words, the company has three distribution channels; the digital channel that provides an end-to-end information about all the insurance products; the hybrid channel in which the entire transactions can be done theoretically online in order to verify the credibility of the products; imbedded insurance channel to find partners for doing some businesses as well as check the relevance and design of the product embedded in the platform.

“All the three channels are profitable. We measure something called the gross margin, which is revenue minus direct expenses. All are in high profitability, in all the three channels,” noted Mehta.

Post-Pandemic Changeover

Through the pandemic, the insurance industry has enhanced its operations and adapted to changes with best governance practices. Being asked on the change in customers’ behaviour especially during the post-pandemic, Mehta highlighted that the demand for the health insurance has significantly increased in the post-pandemic and also there witnessed an absolute customer behaviour change in the need of SMEs also.

“Similarly, the demand for term life is extremely high and all the small businesses are aware of it there. They had difficulty buying it because of something like group term life when they needed it most during the pandemic. The insurers were not really offering group term life because of the high death rate and so it was like a chicken and egg kind of situation. So, it was a kind of odd situation wherein SMEs wanted it but nobody was willing to sell. But they are very aware of it and the moment they could buy they have all started to buy.”

“There’s a lot of emerging need, especially in the non-health related areas, to take something like property insurance. Generally, overall the awareness for commercial insurance has gone up significantly, particularly on the health and the life insurance side of it. There’s no doubt about that,” Mehta further added.

SecureNow’s Distinctive Technology

Among the many insuretech players in the ecosystem, Mehta signified SecureNow’s peculiar technology which is claimed to be several steps ahead of what others have. He said, “In the way we deliver our insurances, we are several steps ahead of the others. Many competitors, many others who have raised funds are monoline insurers. So, their focus is on one segment that will focus on the most common thing like group health insurance for a small business. I think that’s a very inadequate way of looking at it because business has many risks and you have to be able to manage not just health risk but also property risk, liability risk, engineering risk, project risk. So, it’s important to have a multi-line focus which is not easy to build because we spent years building the underwriting capabilities and the team who can actually do this.”

The company aims to achieve its current position in a sustainable manner by effective use of technology. It is also claimed that the company’s success can be gauged by the fact that it has over 30,000 clients and acquires new clients rapidly.

“We have about 550 Brokers who contribute to 30% of the business. Many of these Brokers are small in size, subscale and they don’t have access to Capital, or product or technology, the way we have. And so, I want to acquire them, bring them on to our platform. This is an excellent outcome for the small brokers because their economics improve significantly, and it’s a good outcome for all of us because our negotiating power with insurers, and our ability to sort of reach new clients goes up substantially. So, this is what I want to do,” said Mehta.

Insurance Products in Union Budget 2023

The Indian insurance sector has been recording double-digit growth in recent years and shows potential of maintaining this growth trajectory over the next decade. A score of factors has modernised the insurance sector in recent years and there is an unmistakable hunger for customer centricity, product innovation, and profitability.

Within this frame of reference, Kapil Mehta discussed the Union Budget 2023 where the main concern was taxing the high-value insurance products. “Frankly, I, in the medium term I don’t see this as a major issue and I’d like to sort of go. The level of debt cover we need to be carrying on, should be much more. You know, I really don’t see a long-term impact. And you know, like I said earlier, because of the entire pandemic and all the stresses the economy has gone through, the awareness of insurance is just so high. I don’t see an issue where the whole category is not making sense. People still want insurance for the fundamentals. I’ve actually never been more positive on what’s happening in the sector.

According to the Budget 2023, an individual will be liable to pay tax on the maturity amount of life insurance policies where the aggregate annual premium exceeds INR 5 lakh. However, this will not affect the tax exemption provided to the amount received on the death of a person insured.