InsurTech in India - Payments focused FinTechs

Author
Rahul Mathur

Rahul is the Startup lead at Accenture’s FinTech Innovation Lab in London. Prior to joining Accenture, he was an Insurance Product Manager at Laka Insurance, a London headquartered early stage InsurTech start-up which recently won at the British Insurance Awards 2019.  Rahul holds a master’s degree in Statistics from the University of Warwick. He is an Ambassador at the Asia InsurTech podcast.

Payments focused FinTechs -Opportunity or Threat?

Payments focused FinTechs are moving into insurance for multiple reasons (e.g.):

Margin capture (higher customer LTV)

  • Pre-existing distribution to customer base (no CAC incurred)
  • Opportunity to collect commission

Revenue diversification

  • Core payments business might be at risk – PSP (Payment Service Provider) fees to be abolished for P2M (peer-to-merchant) UPI transactions [1]
  • FinTechs have already explored lending

Source: MobiKwik (09/19); PhonePe; Paytm (06/19)

Recent insurance announcements by FinTechs

Jan 2020 – PhonePe forays into insurance with a travel insurance product. [2]

Feb 2020Optional benefit against “virus-based pandemic diseases” [3]

March 2020 – Paytm subsidiary gets insurance brokerage licence [4]

MobiKwik – Insurance ventures

[5] [6] [7] [8] [9]

Paytm – Insurance ventures

[10] [11] [12]

Opportunity and Threat

Opportunity

Distribution of micro-insurance and small sachet products

  • Changes to of micro-insurance regulation in India allow distribution via a corporate agency structure.
  • Low CAC and pre-existing distribution channel is ideal for small ticket policies.

Threat

Could Payment focused FinTechs become price comparison website 2.0?

  • Aggregator’s role is to source business; payments platforms have access to distribution (MAU > 100M)
  • Unlike traditional aggregators, payment focused FinTechs have 0 CAC (economies of scope).

Challenge to traditional insurance brokerage model

  • Payment focused FinTechs can go omni-channel via the PoSP (point-of-sales person) model as suggested by Paytm (16M partner merchants)

An unintended consequence

Investor’s might face portfolio co’s conflict (e.g. Softbank Vision Fund)

  • Did Softbank Vision Fund block Paytm’s acquisition of Coverfox due to its position in Policybazaar?
  • What happens now that Paytm has an insurance brokerage licence?
  • What does Policybazaar’s foray into B2B tech (Zphin) and HealthTech (DocPrime) suggest?

Would also apply to Sequoia if MobiKwik got an insurance brokerage licence due to Sequoia’s Turtlemint investment.

Disclaimer

Views expressed in this article are my own and do not represent those of Accenture, its management, its employees or its affiliates.

This article does not constitute investment or any other form advice. The author bears no responsibility in the event of financial or other loss arising from actions taken by the reader or any related party on the basis of information represented in this article. The author does have any financial interest in any firm mentioned in the article above; this article is produced for educational purposes.

For any further queries or complaints, kindly email me at rahul.j.mathur@gmail.com

Author
Rahul Mathur

Rahul is the Startup lead at Accenture’s FinTech Innovation Lab in London. Prior to joining Accenture, he was an Insurance Product Manager at Laka Insurance, a London headquartered early stage InsurTech start-up which recently won at the British Insurance Awards 2019.  Rahul holds a master’s degree in Statistics from the University of Warwick. He is an Ambassador at the Asia InsurTech podcast.

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