Digital Disintermediation Drives Online Insurance Sales In India

A younger, digitally savvy generation is now powering online insurance sales in an unprecedented manner.

While 2020 will be remembered as the year of successful tech initial public offerings (IPOs) after a disappointing 2019, the immense success of US online insurance distributor Lemonade’s IPO—more than doubling in value on day one—made online insurance startups a focal point in the fintech world. Lemonade’s value lies in its popularity with millennials searching for home and rental insurance online. Similarly, in India, a younger, digitally savvy generation is now powering online insurance sales in an unprecedented manner.

Digital disintermediation in the Indian insurance industry is proceeding quickly. Well-financed online insurance startups have emerged, with Policybazaar now the dominant player. Backed by SoftBank and Singapore’s Temasek, each of which own a 15% stake, Policybazaar has a 50% market share in online insurance sales and is readying a 2021 IPO, likely to be in the $500 million range (a $3.5 billion valuation range), with listings in the US and India. As of August 2020, the company reported over one million transactions a month across life, auto, home and investment-linked insurance products. The huge success of the SoftBank-backed Lemonade IPO is prompting a speedier IPO from Policybazaar, which is widely expected to be the first of India’s 21 startups with valuation in excess of $1 billion to IPO.

The insurance sector hasn’t fully participated in the digital banking, payments and financial disintermediation boom in India until now. With the improving regulatory environment, global giants such as Amazon and Ant Financial have also started to invest in the distribution of home, medical and auto insurance in India. Google has been reportedly looking to invest $150 million in Policybazaar. With insurance penetration at just 3.7% of GDP versus a 6.3% global average, insurance sales are now one of the fastest growing financial sectors in India, growing at 15% per year.