When Yashish Dahiya, chief executive of PolicyBazaar.com, a web aggregation, technology and marketing company, approached insurance companies in 2008 for a partnership, his business idea didn't appeal to anyone. It took four to five months for PolicyBazaar.com to grab eyeballs.
Till 2010, the scales of the insurance sector were tipped towards distributors, who earned handsome commissions in the first three years of the policy term; most policies were investment-cum-insurance ones (unit-linked insurance plans). Due to the incentives agents earned, they sold policies to one and all. On why agents didn't sell basic products (term, health or motor insurance), which were more beneficial, most said nobody wanted these.
After his father was cheated by an agent his family knew and trusted for long, Dahiya decided to start his own company. "Every three years, the agent would sell a new policy to my father. These charged huge premiums and helped the agent earn Rs 90,000-1,00,000 as commission," he recalls.
Earlier, Dahiya had worked for travel aggregator Ebookers Plc. This helped him start the aggregation business. Given the dearth of investment advice for consumers, PolicyBazaar commenced operations with the idea of largely showcasing basic plans, as these were more beneficial for individuals, as well as providing details of investment-cum-insurance plans. These included costs and commissions, which most buyers were unaware of. "As a result, none of the companies wanted to partner us. Then, we decided to analyse or un-code the products in the market and put these up on our website. This helped get traffic," says Dahiya.
Thousands of policies were sold and now, insurers started seeing value in partnering PolicyBazaar. The sector which was used to agents filling applications forms and writing wrong/misleading details; it could now get correct/honest buyer data online. Dahiya claims the online data from his website helped reduce claim ratios of companies by about a third, as insurers took informed decisions on whom to sell policies to (considering details such as the buyer's age, occupation, health details, family history and lifestyle). Dahiya says his website asks 80-90 questions to a potential buyer.
Thirty per cent of the policies sold on PolicyBazaar are term plans. Health and motor plans account for 30 per cent each, while the remaining 10 per cent are accounted for by investment-cum-insurance plans. In comparison, investment-cum-insurance plans account for 90 per cent of the industry's sales.
Insurers have a different story to tell. The distribution head of a private general insurance company says, "PolicyBazaar has not been able to generate good business for us, though it is a user-friendly website." He added pricing might not always be the best criterion to judge an insurance product. "Therefore, in niche products such as travel, it is advisable for an individual to take assistance from an insurance agent, rather than go to aggregators," the official added.
PolicyBazaar also works in the loans and credit cards segments. It develops information technology platforms for insurance companies and helps them with online marketing.
Earlier this month, the firm secured funding of Rs 27.50 crore from investors led by Inventus Capital Partners. Existing investors Info Edge and Intel Capital also participated. The company aims to use most of these funds to strengthen the brand and enhance the platform and customer services. Before this, PolicyBazaar has raised funds twice.
With more and more people carrying out online transactions, Sudheer Kuppam, managing director of Intel Capital Asia-Pacific, sees immense potential in India's consumer internet space.
In 2011, Intel Cap joined the company with an investment of Rs 30 crore; InfoEdge invested Rs 10 crore. In October 2008, InfoEdge made its first investment, worth Rs 20 crore, into the company. Initially, the founders had invested Rs 80 lakh. Currently, the PolicyBazaar management holds 22-23 per cent stake in the company, while Dahiya holds 10-11 per cent; the rest is held by Info Edge, Intel Capital and Inventus Capital Partners.
Dahiya says though there is no crying need for funds, more of it would put the company in a comfortable position, considering it expects to breakeven this financial year. "For four of the last 12 months, we were in the green," he says. Through the past three to four years, the company's revenues have doubled year after year. "In financial year 2012-13, revenues stood at Rs 45 crore, against Rs 25 crore in 2011-12 and Rs 11 crore in 2010-11," says Dahiya. In 2013-14, PolicyBazaar hopes to record revenue of Rs 70-75 crore and touch the Rs 100-crore mark in 2014-15. "In 2008, we were recording revenue of Rs 3 lakh a month," says Dahiya.
He refused to provide details of the company's product-wise revenue mix, owing to company policies. Sector sources said last year, the loans and credit cards division accounted for eight to nine per cent of the revenue.
Insurers feel the portal should restrict itself to insurance, to ensure its target customers are glued to the website. An industry insider said though diversification might bring more hits, it might also pose the risk of turning it into a generic website.
To achieve success, PolicyBazaar has had to tweak its business model. Dahiya says when the Insurance Regulatory and Development Authority (Irda) brought out guidelines for web aggregators, the business turned unviable. The regulations fixed leads at Rs 10 each, to be shared only with three insurers at a time (which means only up to Rs 30 a lead), when the sourcing cost was more than Rs 500 a lead. The norms also fixed the commissions earned by aggregators. If a broker earns 10 per cent (Rs 2,000) for a premium of Rs 20,000, an aggregator would earn only 25 per cent of Rs 2,000 (Rs 500), though the efforts put in by both the parties are the same. Also, commissions on renewal premiums are available to brokers, not to aggregators. And, aggregators can't earn through advertisements - the biggest advantage for an online company. Aggregators are not even allowed to rate products, which could have allowed them to secure more buyers.
Deepak Yohannan, chief executive of MyInsuranceClub.com, an Irda-approved web aggregator, says the tweaking of PolicyBazaar's business model was a smart move, as now, it earns more than an aggregator.
"What we did was provide leads to insurance companies, which passed it on to their back office/call centres. These followed up with the leads or potential buyers and then, a salesperson closed the deal. After the regulations, we proposed to manage the call centre operations for insurers, follow up with the lead and close the deal. Now, we're a distance marketing company, and there's a distance marketing regulation as well," Dahiya says.
Through the past two years, the number of visitors to the PolicyBazaar website has dropped. Against four million visitors a month two years ago, the company today records about a million visitors a month. "That is primarily because now, we do not accept visitors coming from indirect channels; we accept only those who come directly to our website. This also helped us achieve a higher conversion rate. Till 2011, 85 per cent of our revenue came from lead generation and advertising. Now, 85 per cent comes from e-commerce or policy sales," Dahiya says.
A major challenge faced by the company is that Indians aren't comfortable buying products online. This keeps away a lot of traffic from PolicyBazaar's website. Also, the sales platform of insurance companies isn't very strong, both online and offline. This results in low transactions and commissions for PolicyBazaar. Dahiya said to ensure a smooth buying process was in place, his company started considering call centre services, as well as the development of an information technology platform. Now, things are beginning to look up.
Till 2010, the scales of the insurance sector were tipped towards distributors, who earned handsome commissions in the first three years of the policy term; most policies were investment-cum-insurance ones (unit-linked insurance plans). Due to the incentives agents earned, they sold policies to one and all. On why agents didn't sell basic products (term, health or motor insurance), which were more beneficial, most said nobody wanted these.
After his father was cheated by an agent his family knew and trusted for long, Dahiya decided to start his own company. "Every three years, the agent would sell a new policy to my father. These charged huge premiums and helped the agent earn Rs 90,000-1,00,000 as commission," he recalls.
Earlier, Dahiya had worked for travel aggregator Ebookers Plc. This helped him start the aggregation business. Given the dearth of investment advice for consumers, PolicyBazaar commenced operations with the idea of largely showcasing basic plans, as these were more beneficial for individuals, as well as providing details of investment-cum-insurance plans. These included costs and commissions, which most buyers were unaware of. "As a result, none of the companies wanted to partner us. Then, we decided to analyse or un-code the products in the market and put these up on our website. This helped get traffic," says Dahiya.
Thousands of policies were sold and now, insurers started seeing value in partnering PolicyBazaar. The sector which was used to agents filling applications forms and writing wrong/misleading details; it could now get correct/honest buyer data online. Dahiya claims the online data from his website helped reduce claim ratios of companies by about a third, as insurers took informed decisions on whom to sell policies to (considering details such as the buyer's age, occupation, health details, family history and lifestyle). Dahiya says his website asks 80-90 questions to a potential buyer.
Thirty per cent of the policies sold on PolicyBazaar are term plans. Health and motor plans account for 30 per cent each, while the remaining 10 per cent are accounted for by investment-cum-insurance plans. In comparison, investment-cum-insurance plans account for 90 per cent of the industry's sales.
Insurers have a different story to tell. The distribution head of a private general insurance company says, "PolicyBazaar has not been able to generate good business for us, though it is a user-friendly website." He added pricing might not always be the best criterion to judge an insurance product. "Therefore, in niche products such as travel, it is advisable for an individual to take assistance from an insurance agent, rather than go to aggregators," the official added.
PolicyBazaar also works in the loans and credit cards segments. It develops information technology platforms for insurance companies and helps them with online marketing.
Earlier this month, the firm secured funding of Rs 27.50 crore from investors led by Inventus Capital Partners. Existing investors Info Edge and Intel Capital also participated. The company aims to use most of these funds to strengthen the brand and enhance the platform and customer services. Before this, PolicyBazaar has raised funds twice.
With more and more people carrying out online transactions, Sudheer Kuppam, managing director of Intel Capital Asia-Pacific, sees immense potential in India's consumer internet space.
In 2011, Intel Cap joined the company with an investment of Rs 30 crore; InfoEdge invested Rs 10 crore. In October 2008, InfoEdge made its first investment, worth Rs 20 crore, into the company. Initially, the founders had invested Rs 80 lakh. Currently, the PolicyBazaar management holds 22-23 per cent stake in the company, while Dahiya holds 10-11 per cent; the rest is held by Info Edge, Intel Capital and Inventus Capital Partners.
Dahiya says though there is no crying need for funds, more of it would put the company in a comfortable position, considering it expects to breakeven this financial year. "For four of the last 12 months, we were in the green," he says. Through the past three to four years, the company's revenues have doubled year after year. "In financial year 2012-13, revenues stood at Rs 45 crore, against Rs 25 crore in 2011-12 and Rs 11 crore in 2010-11," says Dahiya. In 2013-14, PolicyBazaar hopes to record revenue of Rs 70-75 crore and touch the Rs 100-crore mark in 2014-15. "In 2008, we were recording revenue of Rs 3 lakh a month," says Dahiya.
He refused to provide details of the company's product-wise revenue mix, owing to company policies. Sector sources said last year, the loans and credit cards division accounted for eight to nine per cent of the revenue.
Insurers feel the portal should restrict itself to insurance, to ensure its target customers are glued to the website. An industry insider said though diversification might bring more hits, it might also pose the risk of turning it into a generic website.
To achieve success, PolicyBazaar has had to tweak its business model. Dahiya says when the Insurance Regulatory and Development Authority (Irda) brought out guidelines for web aggregators, the business turned unviable. The regulations fixed leads at Rs 10 each, to be shared only with three insurers at a time (which means only up to Rs 30 a lead), when the sourcing cost was more than Rs 500 a lead. The norms also fixed the commissions earned by aggregators. If a broker earns 10 per cent (Rs 2,000) for a premium of Rs 20,000, an aggregator would earn only 25 per cent of Rs 2,000 (Rs 500), though the efforts put in by both the parties are the same. Also, commissions on renewal premiums are available to brokers, not to aggregators. And, aggregators can't earn through advertisements - the biggest advantage for an online company. Aggregators are not even allowed to rate products, which could have allowed them to secure more buyers.
Deepak Yohannan, chief executive of MyInsuranceClub.com, an Irda-approved web aggregator, says the tweaking of PolicyBazaar's business model was a smart move, as now, it earns more than an aggregator.
"What we did was provide leads to insurance companies, which passed it on to their back office/call centres. These followed up with the leads or potential buyers and then, a salesperson closed the deal. After the regulations, we proposed to manage the call centre operations for insurers, follow up with the lead and close the deal. Now, we're a distance marketing company, and there's a distance marketing regulation as well," Dahiya says.
Through the past two years, the number of visitors to the PolicyBazaar website has dropped. Against four million visitors a month two years ago, the company today records about a million visitors a month. "That is primarily because now, we do not accept visitors coming from indirect channels; we accept only those who come directly to our website. This also helped us achieve a higher conversion rate. Till 2011, 85 per cent of our revenue came from lead generation and advertising. Now, 85 per cent comes from e-commerce or policy sales," Dahiya says.
A major challenge faced by the company is that Indians aren't comfortable buying products online. This keeps away a lot of traffic from PolicyBazaar's website. Also, the sales platform of insurance companies isn't very strong, both online and offline. This results in low transactions and commissions for PolicyBazaar. Dahiya said to ensure a smooth buying process was in place, his company started considering call centre services, as well as the development of an information technology platform. Now, things are beginning to look up.
| EXPERT TAKE Sushanto Mitra Today, the strong base of India's economic growth, combined with an increasing internet reach and relatively low insurance penetration of four per cent, makes the business of selling policies online an interesting one. PolicyBazaar is one of the leading aggregators in this field. It is well-funded, too, with the recent infusion of $5 million of venture capital. Its experienced management team and staff of about 1,000 put it in a comfortable position, compared to its rivals. However, at its current scale of operations, the company is yet to break even. As the company builds more infrastructure and recruits staff for expansion, we expect it would take some time to record profits. With the changing Irda regulations, PolicyBazaar is now developing a back-end call centre. Now, it would increasingly start resembling a marketing services company. Given this fact and the possible competition, we think margins would remain under pressure. In the coming years. How well it uses technology to automate operations and achieve and maintain profitability, as it expands, would be closely watched by investors. With the backing of its investment relationship with InfoEdge and the experience gained so far, we think it's worth the wait. Author is Director, Hyderabad Angels. The views of the author do not necessarily reflect those of the organisation |