The Asia Insurtech Podcast spoke with Naval Goel, the founder and CEO of Policyx.com.
Michael Waitze
Hi. This is Michael Waitze. And welcome back to the Asia InsurTech Podcast. This is the only podcast in Asia focused on insurance that gives entrepreneurs thought leaders and investors a platform to discuss how technology is reshaping the insurance industry in Asia, and, frankly, the rest of the world. Today, we are joined by Naval Goel, the founder and CEO of Policyx.com. It’s a great name, by the way. Naval, it’s great to have you on the show. How are you doing?
Naval Goel
Thank you, Michael. I’m doing well. Just you know, about 15 days back recovered from COVID. So you already know the situation in India, but touchwood? You know, we are all well and recovered?
Michael Waitze
Where are you based?
Naval Goel
So I’m in India.
Michael Waitze
I understand. And how bad is it there just for people that may not really either read or believe the news that they’re hearing.
Naval Goel
So I think it’s pretty bad, because you know, the number of cases daily have spiked up to four lag. And that is when you know, the testing is not happening. So I was trying to book a test for one of my mates day before yesterday, and the test waiting period is about seven to 10 days. So if this is the kind of waiting, which is there, for testing, and out of which four lakh people are actually being tested positive. So I think the situation is much worse than then what is reported.
Michael Waitze
And for people that may not understand the numbering system, four lakh is what 400,000
Naval Goel
Yeah, it’s 400,000.
Michael Waitze
Yeah, just so people outside of India can understand that’s a lot of people. And I think you’re right, that it’s likely that the numbers are probably higher, because there are plenty of people that either aren’t getting tested or aren’t even well enough to go. Right.
Naval Goel
Right. Right. Absolutely. And even in rural areas, you know, the testing infrastructure is not that great. So if you really idiotic might be much worse.
Michael Waitze
Yeah, well, I’m glad you’re okay. And I mean, I’ve spoken to a ton of people, I have a lot of friends and a lot of business colleagues in India, I’ve spoken to a lot of them over the past few weeks, and it’s dire. So for anybody who’s listening to this, I can do anything to help that would be useful as well. Okay, let’s just jump right into this. From your perspective, what do you think is the biggest trend in InsurTech which is obviously becoming more and more important right in India right now.
Naval Goel
Right. So, I think the biggest trend is obviously digitization. So, you know, in the last five to seven years, what we have seen is insurance companies have adopted digital in a big way. And obviously, the reason was that customers are now comfortable buying online, the payment infrastructure in India has kind of evolved and the digital infrastructure as well as evolved. So, insurance companies are embracing technology in a way that you know, they also are replacing their existing distribution channels and they are kind of trying to you know, digitize most of the processes. So, that that gives them access to a lot of data from the customers because, once the process becomes digital, you know, the chances of customers filling up their forms themselves becomes much higher due to which they get a lot of, you know, first hand data from the customers and in insurance, you would understand that data is the most important raw material basically, because that helps them assess the risk, calculate the risk accurately and kind of price the products better. So, digital is helping insurance companies in a big way to also become much more efficient from a servicing standpoint, from a selling standpoint. So, distribution costs would generally be lower and also, you know, claims processes etc, are becoming much more smoother and better for the customers. So, and the biggest thing that digital is also doing is it is kind of, you know, improving the customer sentiment towards the insurance companies. So, India, what was happening is, you know, around 1015 years back to get a claim, it was a very lengthy process, and, you know, customers had to really go through a lot of hassles to get a claim. Now, with digitization customers are, you know, experiencing much better and smoother claim processes, due to which the confidence of customers towards the insurance companies is increasing multifold and that, that is likely to kind of, you know, become become a vicious cycle in itself in you know, in a way that it will kind of help more and more customers. adopt the insurance because in India, what was happening is, most insurance policies were being sold. You know, if you talk about 1015 years back, or even seven years back, most insurance company policies were being sold by either bank agents or some friends or families. So they were not really need based. But now with the adoption of digital, I think the most policies are being bought by customers, customers are now you know, much more, much more knowledgeable about the insurance products that they buy. So I think there’s a little bit of
Michael Waitze
What’s the right word misunderstanding about what digitalization particularly in the insurance space means, right? I don’t think it’s just taking your existing process and putting putting it into bits and bytes, right? I mean, is there a business process change that’s going on here as well, even a business model change that’s taking place to that maybe you can explain?
Naval Goel
Right, so it’s not just about you know, changing your process existing processes to becoming more digital, it’s also about you know, adopting new things. So, for example, if you’re selling insurance online versus selling insurance offline, there is a sea change, you know, offline usually an agent fills up the form on a on a pen and a paper. So, basically, you know, that has to be obviously fed into the system and then you know, most of the times the agent is filling up the form. So, there is a very big chance of making an error and all that, but, but when, when the insurance company is selling the policies online, the customer himself is filling the form, so, the chances of making mistakes are very low, and also the chances of fraud have gone down. So, that is one area. The second is obviously because of the access of data, the real time fraud analytics processes, you know, through the use of artificial intelligence and data analytics technologies, these these companies are able to detect fraud and you know, improve on them very quickly. So, the turnaround time in kind of assessing wrong businesses, you know, lowered significantly because of technology. So, that is that is one second is obviously claim processes, you know, claim was a big issue in India earlier because there was a lengthy process, you had to file a claim, you had to submit a number of documents, etc. Now, most of the companies are offering cashless facilities even in term insurance life insurance, the claims processes are so simple now, that everything is linked, you know, because, obviously, digitization is not just from an insurance company’s perspective, the overall digital infrastructure of the company is also required of the country, sorry. So, if you look at India, in the last, you know, five to 10 years, there has been a sea change in the digital adoption by the government itself, you know, they have, they have launched payment systems, which are, which are one of the world class payment systems, you know, and the largest payment systems in the world. So, and also they have launched Aadhaar card, for example, now, that is kind of a unique security number, which is there, which was there a long time back in us and other developed countries. But in India, there was no unique security number. So, Aadhaar card is one thing, which has really, really changed the, you know, change the way insurance companies can collect data France, then France, the National ID, right? Yeah, yeah, that’s the National ID just for people that don’t know.
Michael Waitze
So can I ask you this? If everything is getting so much easier, right? If claims are getting easier, if they’re simplified, if what is it if if payments are getting easier, if filling out the forms is getting easier, if distribution is easier, why do you think that insurance penetration in India still remains really low?
Naval Goel
So, see, insurance penetration in India is still very low from from a perspective that you know, per capita premium is low. So, I think that number also has to be adjusted for purchasing power parity, because, you know, if, so, if you talk about us, if they are spending, let’s say just just a random number, if they’re spending $20 per per person for insurance, in India, they are spending let’s say $10. So, that does not mean India has a you know, 50% penetration, because $10 in India is worth $30 approximately, you know compared in terms of PPP, so, that is one but having said that, even if you adjust for that the penetration is low, because in India generally the people are very, very, you know, they believe that nothing will happen to them, so they are not very acceptable of the risk that they carry. So you may call it a religious bias also, because a lot of people, they, they just don’t buy life insurance because they don’t want to even think about death of their family member. Interesting. So, so if you talk to a lot of rural households in India, if you talk to their, you know, mothers fathers of, of the person who is actually, let’s say, a young guy who needs to be insured, so therefore, Father, Mother will, you know, immediately tell that, you know, no, no, we don’t want to buy life insurance for my child. And that comes from the belief that, you know, nothing will happen to him. And also, they don’t even want to get into thinking of about that kind of, you know, situation or that kind of an event. So, so that is one. Secondly, obviously, till now, till five, seven years back term insurance was not very much, you know, promoted by insurance companies, it was only traditional plans. Now, if you think about it, traditional plans don’t offer that much of a security from a life insurance perspective, right. They are mostly for an investment vehicle. But since most of the agents are getting higher commission for those products, and the ticket size was higher, so they were pushing that kind of product, they were not proceed pushing pure life insurance product. So with the advent of online and digital, actually, the term insurance product is being sold more and more. So that is why the penetration is now likely to go up very, very significantly. Got it?
Michael Waitze
Can you back up a little bit and just give people a little bit of your background? I’m curious, what got you interested in insurance and in InsurTech?
Naval Goel
Right, so, so I was a, you know, consultant, mostly financial consultant, and I was doing valuations for for a lot of companies across the globe. So as a part of my consulting assignment I was in AIG, us. AIG is a large insurer, right? So, and then we I was doing valuation of their subsidiaries across the globe in 2010 11, which is when they wanted to kind of, you know, hive off a lot of their branches or divisions across the globe, because they were going through a financial stress. So that is, when I started to, you know, look into the insurance industry, I saw how big it was, you know, before that, prior to that, I didn’t even know that this was a large industry. So, yeah, yeah. So I thought that there must be an opportunity in India as well. So I came back to India, and I wanted to launch a platform for insurance agents, who were kind of you know, not having any digital access as in, if I had to ask them a premium for my car, they had to do like n number of calculations to actually get to the premium. Now, when I saw that, I was like, key, I mean, this process is very, very archaic process, I mean, you are taking 15 minutes to actually generate a premium for me, which can be done at a click of a button if I generate and, you know, online calculators, so I started building that online calculator. But the regulation in India did not allow me to kind of, you know, big create a lot of agents under me. So which is now allowed, which is under post model now. But at that time, it was not allowed. So I thought that since that is not allowed, and it will be kind of not being legal business model. So I converted into an online platform for customers directly. But my initial plan was to kind of have insurance agent, use the platform to serve customers.
Michael Waitze
Got it? And when did you found this company policy x?
Naval Goel
So it was in late 2013?
Michael Waitze
So it’s not that new. Right?
Naval Goel
Yeah, it’s been seven, eight years now.
Michael Waitze
So talk to me about this, did you make a conscious decision back in 2013, not to raise external funding, when you founded the company? Or did it just fund itself not by accident, but sort of at the time, you just never need to raise capital.
Naval Goel
So, when I started, you know, I was just figuring out the business model initially, so I didn’t have a very strong business model that online would work or you know, lead selling would work or an agent aggregation would work. So, first one or two years went by, you know, just exploring different types of business models and knowing about the industry. After that, we did get some interest from private equities and venture capitalist But till that time, we were already making money. So and you know, I was of the belief that you know, I should dilute only when we reach a certain size and that philosophy kind of, you know, initial two, three years went by and after that, you know, it was pretty, pretty much you know, growing by itself. And we in the online space, we are doing pretty well in terms of growth and also retention of customers. So, and, you know, funding? Yes, I agree that funding might accelerate that growth. May but right. Yeah, so we might explore funding now. But at that time, we were just, you know, not ready for funding.
Michael Waitze
Do you think just based on your experience, do you think the investment landscape itself has changed for India based companies since you started?
Naval Goel
Absolutely, I mean, you know, if you look at the size of funds that have come to India, you know, that type of investments happening, I think, there is a huge global demand, partly because funds are available in the developed countries at very, very low interest rates. So, you know, it is creating a lot of liquidity in the market. And that is that is kind of flowing in the developed world. And the philosophy with which, you know, private equity companies work is, you know, obviously, they they kind of want to play, play, play the industry, where they see a large market, large addressable market. And they already know that, you know, only one in five or one in 10 will succeed, but that is already baked in, you know, one one itself will give them 100x returns, so, kind of it averages out. So, I think that demand is because there have been a lot of success stories as well. You have seen, you know, in the last year, we have seen so many billion dollar companies being built in India. Yeah. So, so there are lots of successes and few failures. So, which is fine, you know, the tech industry works that way itself.
Michael Waitze
And what exactly is PolicyX doing? Like, how is it different when Why do you think, though, you mentioned earlier that customer retention is really high? So, how high is it? And why do you think it’s so high? What’s the difference?
Naval Goel
See, if you come to think about it, we are selling the same policies that anybody else would be selling in the market, okay. So we are basically aggregators, right? So we, we tie up with insurance companies, and we can sell any insurance policy. So in terms of product, final product, it is the same, but the difference lies in how you serve your customers. So, you know, maybe because we are more customer obsessed, or maybe just because we are small, we are able to serve our customers better. And, you know, offer them a very good experience in terms of the buying process, because it is kind of an advisory business, right. So if your advice is good, then obviously everything else is secondary. And also at the time of claims, you should be able to help your customers. So I think these are the two areas where we kind of focus a lot and have improved ourselves over the last seven, eight years. And that is why our retention rate, if you talk about in health, we have we have a retention rate of over 85 90%. So 85 90% of our customers renew their policy every year with us.
Michael Waitze
Can I sorry, go ahead.
Naval Goel
And, you know, most of our business is also referral business. So which is very important in insurance. So 30% of our business comes from referral from our existing customers.
Michael Waitze
There are some pretty big players, I would call them giants actually in your space and tell me if I’m wrong, but the first one that comes to mind is policybazaar. Do you compete directly against them as well?
Naval Goel
Yeah, I think they are our biggest competitors. Actually, they are very, very large compared to our size. But yes, we are doing the same thing.
Michael Waitze
So how many people are in policy acts like how many employees do you have?
Naval Goel
So we have about 260 employees give it that’s not small.
Michael Waitze
I mean, policybazaar is bigger, they have about 13,000. But 260 is not? It’s bigger than a traditional startup, right?
Naval Goel
Yeah, I think it’s all relative, you know, if you. Yeah, absolutely. I think you know, if you talk if you ask me whether this is where I thought I would reach in seven, eight years. Without funding, I would say absolutely not. You know, I never had this idea that I would be able to reach to 60 to 70 people at that point in time, I had just 1015 employees, and it was actually difficult to kind of manage a 1520 people organization is. So from that perspective, yes, we are large. But if you look at the market today, if you look at the funding that people are raising, I think we are very small compared to that.
Michael Waitze
Yeah, I think that’s a little bit of humility, unnecessary humility, I’ll call it but we can move on. What is the insurance Price Index? This is very interesting to me. And what is it trying to tell you or us about the trends of health and term insurance in India? Like what’s the point
Naval Goel
Right. So, in India, there are, you know, 24-25 life insurers and around 29-30 General Insurance. Okay. So, you know, every time one company raises the price of term insurance, a lot of journalists, you know, they carry out and use that term insurance prices are going up. And then there is, you know, there are some industry experts coming in and telling that term insurance prices have gone up 30% 20% or whatever. Now, so, there is no mechanism to know whether the term insurance prices have gone up or not. And also, you know, obviously, you can talk about single companies, but you don’t have a index, which says that, okay, the term insurance prices in the last quarter has gone up by 2% 1% 5%, or whatever. So this price index is kind of trying to do that, it takes the average of, you know, 10 insurance companies in term. And it kind of, you know, collects premium prices from these 10 companies across products, and across a lot of, you know, summer short ranges, age ranges, and all that. So it kind of gives you a holistic picture that, okay, term insurance prices has gone up by 1%, or 2%, in the last quarter, and it tracks this, these prices every quarter, and it tracks more than 500 data points. So, you know, let’s say, a company raises a price for a 45 year old, but it does not increases the price for a 55 year old, right? So. So you can’t say a 55 year old can’t say that the prices have gone up, right? A 45 year old might say that the prices have gone up by 20%. So this index exactly tells you where which segment, the prices have gone up, which companies have raised raised raised their prices, and you know, how the price is trending over the last quarter?
Michael Waitze
And do you? Do you get that granular? In other words, do you break it down into age groups and location? Yeah, and stuff like that?
Naval Goel
Yeah, absolutely. So we do basic data analytics, on this data, which is collected. So as I told there are more than 500 data points, which are collected every quarter, and accordingly, the prices are broken into different segments and presented to the customers so that they can decide whether they want to buy it now, or they want to defer it or, you know, they can basically see whether they have done the right thing by deferring the purchase, or, you know, they want to change the insurer now. And all that,
Michael Waitze
what do you publish every month, I mean, every quarter as opposed to every month or every week.
Naval Goel
So, you know, there are not much fluctuations in prices every month. So usually, what we have seen is, you know, only one or two companies are changing their prices, whenever we publish a new data, we see changes in only one or two companies. So if we do that every month, you know, the change will be even more minute. So it will, it will not be for much, much use. If we do it every month or week, and the prices ever go down, you keep talking about how much prices are rising, but the prices ever go down? Does anybody adjust lower? Actually, you know, in the last five to seven years, the term insurance prices in India were actually going down like anything, you know, they were kind of it was kind of a race to the bottom. Only in the last one or two years, the prices have actually reversed and they’ve started going up. But But you know, that this index is kind of launched only this year, okay. So, we will, we will have to see, you know, a few more quarters to see whether that kind of trend comes in. But but from experience, I can see that the term insurance prices had gone down in the last five, seven years.
Michael Waitze
And now there are other ways to use this insurance price index.
Naval Goel
So, you know, obviously, it can be used as a benchmark for insurance companies to kind of compare what they are doing compared to the what how the industry is moving. So they can they can kind of see, you know, which segments they are competitive, which segments they are not. And I think it can be used in multiple ways, by insurance companies and the industry as well.
Michael Waitze
Yeah, I mean, I think people could actually trade around it. But that’s just my Goldman Sachs background coming to the forefront of my head. Does anybody else publish?
Naval Goel
No, I think this is the first I think this is the first one and nobody else publishes as far as I know, in India.
Michael Waitze
Got it. Now, we talked at the beginning about COVID. A little bit, what has been the impact on your business and even on sort of the digital transformation, the digitization that you talked about at the beginning of this conversation?
Naval Goel
Right. So you know, in 2020, when when COVID first hit the country, I think There was a huge rush towards insurance people just started thinking that, you know, you know, the they will be financially secure if they buy their health insurance and term insurance plan at that time. So it really led to a huge rush. And also because people, there was a complete lockdown in India for a few months, right. So at that point in time, the entire agency business, which is the biggest channel for insurance companies today, that was kind of, you know, the business went to almost zero initially, but, you know, then insurance companies kind of, you know, these agents started using the digital platform to kind of book policies. And, and, you know, it accelerated the digitization, because then agents become familiar with the, you know, they forcefully became familiar, because a lot of agents, they were not adopting the digital channel, because, you know, they were just, you know, they were just lazy about it. So, this COVID situation actually forced them to do that, and I think, at the end insurance companies have increased their digital processes significantly because of COVID situation. So, in terms of internal digitization, I think it has significantly improved because of the COVID. Insurance demand also improved, but at the same time, there is a negative impact of higher claims and, you know, higher claims, I
Michael Waitze
believe, fair enough. And if you talk about distribution, right, you said earlier that the traditional forms of distribution like bancassurance and agents, right, need to benefit from digitalization, but when you look at it from an aggregators perspective, are you seeing the channels change? And if you are, what are the new digital channels that you see that are coming up that are growing the fastest?
Naval Goel
Sorry, I actually missed out the first part of the question.
Michael Waitze
So you mentioned sorry, let me just start again. So you mentioned earlier that there were some traditional forms of insurance distribution, right, mostly through agents and some through bancassurance, right, those are there’s the traditional ways that insurance gets sold, right? Even if insurance is being digitized and their digital distribution channels, what are the fastest growing sort of new channels for distribution that are different than just traditional agents or bancassurance sales?
Naval Goel
Right, so I think the fastest growing is obviously the aggregator space, because, you know, customers don’t want to go to different insurance companies portal to buy insurance and compare it. So, they obviously want to go to a single portal where they can get multiple plans and kind of choose a plan which suits them the best. So, I think aggregator is one second is we have seen a lot of insurance companies, you know, focus on their, their own digital assets like websites, apps and all that. So, that is also gaining huge traction. And the third one, which is I think one of the most volume nears is the POS model. So, in POS model what happens is instead of insurance companies, you know, hiring an agent, the agent is kind of recruited by a by a distributor who might be an aggregator or or a broker. So, these brokers are now making agents below them, and they are working as a POS agents point of sales agent. So, this model is gaining huge traction, because now what happens is in the earlier model agent was selling you know, one insurance company’s product, right? And by law in India, you are allowed only one insurance, you’re allowed to become an agent of only one insurance company, one general and one life. But if you become an agent, with a broker, you can actually offer all insurance companies to the customers.
Michael Waitze
Right, so almost like you’re a personal aggregator
Naval Goel
The so that model is gaining huge traction, because obviously it is a win win for the customer as well as for the agent and it uses the existing agent framework right it it uses the existing agent were there in the system. Earlier they were working with an insurance company and offering only one product now they are offering multiple product by becoming an agent of a broker. So so I think that is one model which will grow like anything in India, because, you know, all the existing agent would prefer working in this kind of a model where they can offer multiple products.
Michael Waitze
Yeah, I mean, it’s a much easier sales process for them. If they can offer things that they couldn’t offer before. Yeah. What do you think about companies so in Southeast Asia, right, you have companies like go jack and grab that are starting big financial services, businesses and cluding not just the distribution, but the sales also of insurance. And in India, you’ve had some of the payment companies like PTM say that they’re going to get into the insurance distribution as well. What do you think about ride hailing companies and sort of payment gateways getting into the insurance, sales and distribution business?
Naval Goel
Right, I think, you know, insurance is such a, you know, I mean, selling insurance is still a tedious process, you know, it requires a lot of convincing, it requires a lot of, you know, still most of our sales happens through phone, you know, our, our, in house agents kind of support these people to buy insurance and help them decide, yeah, because insurance by by design is a complex product, it’s not a very simple product to understand. Right. So, with these companies, I think what will happen is, you know, they will be able to sell small products, like attachment products, in their existing journeys, which are more digital products, like, you know, you you just charge 10 rupees for a ride, to insure your ride or, or your, your booking a flight ticket, and you just give 100 rupees travel insurance, 100 rupees is like one one and a half dollar. So, so these small ticket size products, they can really pick up because that is a part of a journey, and they can just put a checkbox and kind of ensure that, but if you talk about full fledged insurance plans, like life insurance and health insurance, I think, you know, this requires a lot of focus. And, you know, apart from the data that they have, I don’t think they have anything else. And, you know, data itself is not enough to kind of sell insurance.
Michael Waitze
I understand, and how do you handle all of the data that you have? In other words, what kind of data analysis data engineering, data science infrastructure do you use? To use the data that you have, you said, you at least use 500 data points just for the index alone, but you must have some other uses for data inside the company, particularly for sales and trends, right?
Naval Goel
Absolutely. So we have, you know, data analytics engine, which kind of helps our marketing team to generate insights on customer behavior. So they keep track of, you know, hundreds of data points and indicators to kind of know where the customer is coming. And you know, what, what is, I mean, we generate a lot of leads, from insurance company pages, from plan pages, and all that. So, there is a lot of analytics involved in knowing how the customer will behave in the future. And accordingly, you know, channelize, their marketing plans. So, so marketing analytics is one area where we use a lot of data, right. Second is, obviously, the renewal engine, which is kind of which helps us retain our customers, as I told you earlier, we have 85 90% renewal rates. So that is where we do data analysis in, you know, kind of checking when to call the customer how to call him and you know, how to kind of get him to renew the policy, and also market him accordingly, you know, according to his behavior, we send him marketing communications, so that there is a higher probability of renewal. So I think these are the two major areas. And third one would be the, the call center piece. So we have a huge team, which is kind of helping customers choose the right policy. So you know, which leads to call when to call, you know, what communication to send to the customer. So that is another part where there is a lot of analytics
Michael Waitze
on it, and how big is your data science team?
Naval Goel
So we have about four people in the data science team.
Michael Waitze
Okay, that’s interesting. Okay, look, I really want to thank you for coming on and doing this today. navall Goyal, the founder and CEO of policy x.com fascinating conversation. I really appreciate your time.
Naval Goel
Thank you. Thank you for having me. It was a great conversation indeed.
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