What's Insuring Insurtech Businesses India's insurtech startups are thriving despite a global slowdown. Many startups such as Onsurity, InsuranceDekho and Alwrite have raised funding in the past month

The Indian insurance industry is a rapidly growing market. An IBEF report said that the insurance market in India is expected to reach US$ 222 billion by 2026. The report also said that robotic Process Automation (RPA) and AI would occupy center stage in insurance, driven by newer data channels, better data processing capabilities and advancements in AI algorithms.

"The low insurance penetration and awareness levels present a significant opportunity for insurtech startups to disrupt traditional models and capture a sizable share. It's noteworthy that many insurtechs today are solving for specific problem statements rather than having a one-size-fits-all approach," Yogesh Agarwal, founder and CEO, Onsurity told us. The startup recently raised $24 million in Series B funding.

In fact, despite the overall slowdown, many insurtech startups have been raising funding. InsuranceDekho recently raised $60 million in its ongoing Series B funding round. We are also seeing smaller rounds of funding in the sector. For instance, B2B insurtech startup Alwrite recently raised INR 10 Cr in a seed funding round.

The insurtech players are redefining the way insurance is looked at and brought in the country. This has led to many startups witnessing tremendous growth in the recent years. Recently, PB Fintech, the parent company of Policybazaar, saw its operating revenue surge 79% YoY to INR 2,557 Cr in FY23.

Revolutionizing Insurance

"The recent fundraising by startups underscore a vibrant evolution in the insurtech sector. As these firms secure notable funding, they're not just fueling growth but significantly contributing to a holistic digital transformation, making insurance services more inclusive and accessible, heralding a promising trajectory for India's insurtech landscape," said Sougata Basu, founder, CashRich and executive committee member, India FinTech Forum.

Insurtech startups are revolutionizing the insurance sector through digital innovation, streamlining processes, improving user experiences, and increasing accessibility. "Their pursuit of this digital transformation is fueled by the immense market potential and the recognition of inefficiencies in traditional insurance models, characterized by complexity, high overheads, and slow service. These startups leverage advanced data analytics and AI to enhance risk assessment, policy pricing, and fraud detection, which ultimately leads to more efficient underwriting and claims handling" said Aditya S Kapur, founding partner, The Startup Capital.

Kapur also added that the growing tech-savviness of consumers creates a strong demand for digital insurance solutions, making insurtech a compelling investment opportunity.

Further, insurtechs harness advanced tech like AI, ML, and big data analytics, revolutionizing the insurance sector. "These tools streamline operations, tailor offerings, and improve risk assessment, outpacing traditional insurers in efficiency and customer focus. Insurtech companies are also developing innovative products to address emerging risks, such as cyber threats, climate change, and pandemics. This adaptability positions them well for future market demands," said Agarwal.

The insurtech segment offers a compelling combination of market potential, technological innovation, and customer-centricity, making it an attractive investment opportunity for investors.

InsurTech is also the final frontier in fintech, say experts. "The insurance industry traditionally has some of the largest capital pools across the globe but has been relatively untouched by tech-first innovation, a long-standing dynamic that has been forced to change fast – partly due to COVID-19 where insurance became topical and had to be delivered at scale, and partly due to changing customer experience that needed investments in digitalisation. In many ways, insurance lagged banking," said Chiranth Patil, co-founder, Riskcovry. The Mumbai-based startup raised $5 million in Series A financing round led by Omidyar Network India in March this year.

He sums up the reasons below:

• Digitisation wave across the value chain
• Ubiquity of data to drive curated customer experiences
• New insurance product innovation to meet need for on-demand services
• Talent cross over from traditional to neo spaces
• Upcoming digital public infrastructure and distribution initiatives like BimaSugam/BimaVahak
• A progressive regulator who supports technology as a key driving force behind a massive vision to enable insurance for all by 2047
• Availability of capital to experiment on new-age business models
• Startup founders who have timed the wave right

Building trust and credibility

Legacy insurance companies such as LIC have been around for many decades. So, even today, the majority of consumers continue to trust them more than the new-age companies. So, as newcomers in the insurance sector, establishing trust and credibility with consumers is the biggest challenge for insurtech players. "Achieving this involves transparent communication, consistent service quality, and a proven track record of meeting claims-related obligations. Vital to their growth and innovation is the attraction and retention of skilled talent, especially in areas like data science and technology. To accomplish this, insurtechs should focus on building a robust employer brand and offer competitive compensation packages," said Agarwal.

Also, reaching a vast customer base across India's diverse population poses a significant challenge for insurtech startups. To overcome this hurdle, innovative distribution strategies and strategic partnerships with established industry players are essential to expand their reach, he added.

Additionally, insurance literacy in India is relatively low, with many consumers being unfamiliar with insurtech offerings. Agarwal thus feels that educating potential customers about the benefits of insurtechs is pivotal for driving widespread adoption.

Further, the insurance industry has to deal with regulations. This necessitates substantial investments in legal expertise and compliance tools by businesses to ensure adherence to regulatory mandates. "Also, given the sensitivity of customer data, robust cybersecurity measures and a strong commitment to data protection are vital," said Kapur.

Summing up, Kapur shared the following pointers about the industry:

• As competition intensifies within insurtech, startups must differentiate themselves through niche market focus, innovative product offerings, and exceptional customer experiences
• Collaborations with established insurance firms, although challenging, require startups to demonstrate their potential for complementing existing business models
• The insurtech segment is likely to continue growing. As technology evolves, so will insurtech solutions.
• We can expect more startups entering the space, offering unique products and services
• Traditional insurers will also continue to invest in or partner with insurtech companies to remain competitive