[Edit Note: This post is by guest author Vivek Doraiswami, the founder and CEO of Zibika.com, a personal finance aggregator which recently made a comeback after shutting down in January 2010. Zibika had ran out of cash in 2010 and Doraiswami went on to join Policybazaar before making a comeback. Read more on that here.]
That technology needs to play a valuable role in making online insurance consumable for customers is accepted by everyone who is engaged with this space. But without investors backing such thinking, how will the online insurance shape up as a solid eCommerce sector?
The Insurance Industry in India currently predominantly depends on the Agency channel for its revenues. The online space as it exists today is but a mere extension of the agency channel replacing agents with agents… telecalling agents to be more specific.
What does this mean for the end consumer? Insurance still ends up being a push mechanism and no online entity is putting in any effort whatsoever in wanting to create true value by providing an online experience or harnessing the power of the internet and technology to make the process of buying insurance more compelling, easier, friendlier and with greater control.
If we look at any success story in the digital space, it would largely resolve around solving a real world problem that has been plaguing consumers in the offline world. But yet, insurance online today is merely a collection of data sets. It’s about who can collect how many leads, who can set up telecallers to chase those leads and how much capital can be spread into this whole process by hoping for a better tomorrow. When consumers will somehow magically end up buying insurance online in volumes just like they buy airline tickets or movie tickets! For now, the sale of the product to the user is not based on best fit; it’s based on who pays the online entity the most.
Is this what we call true innovation in the online space, is this what consumers deserve? We do not think so, we believe that technology should be used effectively to providing means of allowing consumers make more educated choices. Identifying and providing a set of results of a specific insurance requirement as a function of its features and compatibility that is driven by logical algorithms and not just revenue to the internet company.
And to be done without violating your privacy…. It is a huge challenge because no one in the known insurance universe has been able to come up with the right answer. The Zibika model is about addressing that challenge, but until we have adequate capital to scale and grow we can’t say for sure on whether consumers will adopt and allow such entities to survive and even prosper. Given the experiences of a multitude of industries that went online successfully, we are of the opinion that true value, true product innovation will create a more interesting if not level playing field for the Insurance sector online, one that is badly missing in the current context.
The online Insurance sector needs to have stronger investor response, if it has to evolve. It is a lot harder to reach critical mass without raising quality capital in this space as compared to most others because there some serious challenges that one encounters while taking this path. To get to even a proof of concept stage one needs adequate capital. The starting point is in having Investors who are open to change and who are willing to risk capital in innovative environments.
Investor groups in India however aren’t currently warm to the sector and from what I have understood it’s largely based on how things have evolved or rather “not evolved” over the past 5-7 years. There are a few reasons for this:
1) Investors in India have been presented a lot of business plans and early stage startups who have very limited vision and have seen limited traction. The online space itself has not seen the same amount of buzz as it’s happened in other verticals. Perhaps, it because of the lack of innovation and perhaps it’s because in reality there is no tried and tested global formula to emulate in the insurance context.
2) A few leading groups have put in money in some players and that appears to have gone nowhere after years and years of chugging along. We have been approached by these investors and they are eager to know what’s new… and it’s harder for us given the nature of our funding position to want to be open about our plans with them without being concerned.
3) I always encounter doubts on regulatory challenges, revenue accountability and share holding patterns, etc. This is not as complex as people make it sound. The honest truth is that with good legal counsel and accounting processes, it is fairly simple to address. But given the lack of data or awareness about the space, investors tend to shy away because they do not have legitimate information that tells them otherwise.
4) The industry has significant barriers to entry for startups. It is a very arduous task getting insurance companies to play ball and agree to technically integrate with a web platform. While the travel sector has giants like Amadeus and Galileo that make airline ticketing central and usable. In the insurance space in India, each one of us is trying to build our own Amadeus and then face the marketing reality that awaits us. However, I would imagine that if any entity manages to make significant headway with the enterprises in the insurance sector then such a barrier should be considered a positive in that startup’s favour!
5) Insurance is also to be blunt not as sexy or responsive as other ecommerce opportunities. After all, it is a painful subject even for those who consider putting their money in this space. The domain itself is a huge challenge and that’s another reason why hardly anyone succeeds in raising capital in this space.
What all of this tells us is that while it’s true there are a few significant challenges that an online insurance player faces that are far more complex than one that sells retail goods. But if those challenges are addressed, the profitability and scalability of such enterprises can be staggering. The desire to invest in such ideas needs to exist, until that happens, I do not see how innovation will thrive and how this sector will evolve.
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