In my 2 years of following InsurTech in India, I’ve never been more excited! There are 3 topics to unpack today; time to buckle up!
Amazon & Insurance
Amazon’s interest in Insurance can be traced back to its $12M investment in neo-insurer Acko Insurance in 2018.
2019 should have been the year for Amazon & Insurance: Amazon Pay’s foray into insurance was inevitable since it obtained its payments licence  and a corporate agency licence (to distribute insurance in partnership with Acko) 
Since March 2020, I’ve noticed adverts on Amazon India’s website & mobile app to purchase Acko’s motor insurance. However, these adverts redirected to Acko’s website to continue the purchase.
But, that’s changed since yesterday (reference below) – you can complete your motor insurance purchase journey from within the Amazon mobile app (i.e. from the customer lens, Amazon is facilitating the insurance purchase)
But, that’s not all! There are discounts for being a Amazon Prime customer. It’s important to delve into the significance of the above:
- “Prime enters insurance” – For an existing prime customer, any discount on motor insurance represents additional customer value generated by being a Prime member (i.e. the “opportunity cost” of dropping Prime increases -> further Amazon ecosystem lock-in!)
- “Zero cost Prime” – A non-Prime customer owning a motor vehicle classified as a “luxury” car for motor insurance purchases could actually get Prime for “free” – the ₹ 999/- maximum discount coincides with the Prime annual subscription fee. Therefore, customers on the “margin” of purchasing Prime would be more incentivized to do so! (even if they don’t get the full discount, it’s still value for money!)
- Lifetime Value growth – From Amazon’s perspective,insurance represents an “infinite gross margin sale” since its CAC is zero (barring the opportunity cost of lost advertising income from banner adverts – well, if Acko is paying for these adverts, then literally *zero CAC*) and Amazon would get paid ~ 20% of premiums as commissions. Even post the Prime discount, Amazon would have positive unit economics
- What’s next? Motor insurance might not be applicable to every Prime customer, but health insurance certainly is applicable – with Amazon’s foray into grocery delivery & its e-commerce data, it has a lens into Prime customers habits. And, Acko can underwrite health insurance; perhaps, health insurance next?
“Rahul – let me pay for your Amazon Prime (India) annual fee next year; the discount on my car insurance will cover the whole fee” – My grandfather to me earlier today.
Napkin Mathematics: Amazon Prime has ~ 10M users in India; assuming a 3% conversion to purchase motor insurance, a base premium of ₹2000 p.a and a 20% commission on premiums, my “worst case estimate” of Amazon’s revenue from launching motor insurance for Prime customers is $1.6M per annum (at no cost to the company).
“Zero CAC in financial services exists only when you own a consumer platform that drives unprompted user engagement” – my hunch is that insurance will become a “money printing machine” for Amazon Prime in the coming decade.
WhatsApp & Insurance
With ~400M MAU (Monthly Active Users) in India, WhatsApp has had a rocky journey with financial services in India – WhatsApp Pay hasn’t really taken off; it remains mired in regulatory controversy (there was some hope after their pilot expanded from 1M in 2018  to 10M users in 2020 .
“WhatsApp India is set to launch pilots in the segments of small-business loans, micro-pension and insurance in partnership with domestic service providers..” – WhatsApp at the Global FinTech Fest 2020
I jumped off my chair reading about insurance since it reminded me of WeChat & Insurance
- WeChat’s insurance agency – WeSure has ~ 33M MAU with 100M policies in-force. 
- Tencent (WeChat’s parent) has a portfolio company Shuidihuzhu (a “mutual aid” or alternative community based insurance provider) which has ~ 80.6M customers; it operates on the WeChat ecosystem!
With ~ 890M MAU on WeChat in China, we can assume a 3% conversion rate of users to insurance customers i.e. a “worst case” estimate of health insurance premiums collected off WhatsApp India would be ~ $7.8M per month (base premium of ₹50 per month) or ~ $18M per annum in revenues
I am completely discounting any SME lending, micro-pensions or other insurance opportunities here!
Furthermore, this announcement deepens my belief that the Facebook investment into Jio is centered on WhatsApp as a lynchpin for financial services (I touched upon this in my piece on Jio x Insurance)
PhonePe & Insurance
As a UPI-first payments platform, PhonePe is one of the victims of “zero MDR” (Merchant Discount Rate) i.e. it has continuously seen its payments income stream shrink – causing it to look towards other monetization opportunities.
However, PhonePe has turned adversity into opportunity with its foray into insurance beginning January 2020 – across (domestic & international) travel insurance, Covid-19 insurance and a hospital cash product (yesterday).
PhonePe is up against stiff competition with both BharatPe and Paytm entering the PoS segment this year!
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 not have any financial interest in any firm mentioned in the article above; this article is produced for educational purposes.