Indian insurtech Policybazaar is planning to launch its IPO
Reports suggest the offering could raise $500m and see the digital platform valued as more than $3.5bn.
The digital platform startup, where users compare financial services from major insurance companies, is currently backed by SoftBank Group Corp, have not yet confirmed details of the move, and have declined to comment on the IPO deliberations. However, Policybazaar first announced its plans to go public in 2020.
Policybazaar’s user-friendly, consumer supportive platform fits the new customer-centric led market by enabling users to compare auto, health, life and personal insurance policies.
The platform has proved massively popular and sold an estimated 400,000 insurance policies in March 2021. It also plays host to over 100 million website visitors annually.
Founded in 2008, the insurtech comparison and solutions platform has experienced a steep growth trajectory within the Indian marketplace.Currently, Policybazaar is backed by Temasek Holdings Pte and Tiger Global Management. Sources suggest the drive to go public could result in Policybazaar becoming the first of India’s unicorn startups to go public in 2021.
Other leading online companies are also in the running for an IPO, including Nyka E-retail Pvt - an online beauty care chain and Zomato, an online food delivery service.
Insurtech in India
According to a recent report by the , The Indian Insurance Industry has seen significant growth since 2017. In 2020, the pandemic prompted a significant increase in technology initiatives, leading to an urgent deployment of digital solutions at insurers in India.
The report states, “Insurers now have the opportunity to play a key role by co-creating and adapting their offerings to the new digital environment. They need to partner with digital platforms and Insurtechs to enable more personalised management and significantly increase the penetration of insurance in India.”
India’s burgeoning technology market has resulted in billions of dollars of investments from global giants over the past five years, including Facebook, Alphabet, Amazon and Google.
Insurtechs are winning the race with legacy system companies
Nestled in its own place within the world of financial services, insurance is arguably more unpopular than retail banking.
That’s hardly surprising given that, from a customer service perspective, insurance is something of an off-kilter transaction. You pay a sizable premium in exchange for a service you hope you will never have to use. This image problem is exacerbated by ubiquitous tales of insurers not paying out when it is time to make a claim.
The insurance sector has long been due to an overhaul, and this is where the disruptive force of insurtech comes in - one of fintech’s most upwardly mobile subcategories. Accordingly, last year, insurtech in the UK alone attracted £262m in investment, a growth of 60% on 2019, according to Tech Nation. Insurtech’s momentous growth has been captured in a new report by The AI Journal exploring this burgeoning sector.
What exactly is insurtech?
Put simply, insurtech refers to technological innovations that seek to make insurance cheaper to buy and more efficient to use. In a similar vein to fintech, the large, established institutions have been dipping their toes into insurtech, but it’s the disruptors who are genuinely looking to shake up the status quo, diving into and exploiting those areas that traditionalists have little imperative to explore.
Examples are price comparison sites (one of the earliest forms of insurtech that was eventually snapped up by the insurers it initially sought to disrupt), claims software, customisable policies, or even smart-tech-enabled dynamic policies whose premiums can fluctuate depending on changing circumstances.
The latter, for instance, could use someone’s fitness tracker or smartwatch to monitor fitness levels, thus reducing the premium of a life insurance policy; or track a GPS system that records the location of a car and assesses risk levels accordingly.
Most consumers tend to shop around for their insurance needs and perhaps end up buying their contents insurance with one provider, their car insurance with someone else, and their pet insurance with yet another underwriter. Managing all these different policies, with their varying renewal dates and payment terms can be complex. This has led to the increase in apps that pull everything together.
More prosaically, insurtechs are developing AI that uses machine learning to act as an insurance broker, eliminating the need for a human intermediary and therefore offering more cost-effective and impartial advice.
Insurtechs and risk
But there are some obstacles in the way of insurtech’s continued evolution.
Insurance companies are averse to risk. Understandably so, as at the crux of the industry is the role of the actuary, whose job it is to analyse and measure the probability and risk of future events. So it’s little wonder that there’s a reluctance among the traditional players to welcome the disruption that insurtech brings.
Insurance is heavily regulated, a minefield of legality and labyrinthine jurisdiction, which means the idea of shaking it up can be anathema. And why would they, when their old-school business models are working perfectly fine?
There’s an understandable nervousness and unwillingness to work with startups, who themselves need to work with the bigger firms in order to underwrite risk.
While it seems like a catch-22 situation, there is growing, if cautious, interest from insurance companies, who can see the benefits of insurance with a friendlier face, innovative solutions, and a competitive edge through differentiation. As that tentativeness dissipates, the growth of insurtech will gather even more momentum.
Tom Allen's analysis is based on the findings of a new report on the fintech and insurtech industries produced by The AI Journal.