With the advent of digital, the one thing all new-age entrepreneurs have strived for is to bring transparency, simplicity, and ease of access in the services industry. The insurance platforms within the financial services industry is no different. The likes of Acko, Toffee Insurance, Coverfox, Digit Insurance, Insure First, PolicyBazaar, BankBazaar, Turtlemint — the list goes on and on — have made it much easier for Indians to get the right insurance plans, streamline premium payments and continue their daily lives with some degree of peace of mind.
Among these insurance tech platforms, Coverfox is a startup that not only took the early plunge into the digital insurance segment, but it has also successfully created a niche for itself among the big appetite players.
Promoted and operated by Glitterbug Technologies, Coverfox, led by founder Devendra Rane, has managed to establish a clear path to scale and expand its service verticals. It has received funding from global funds such as SAIF Partners, Accel, Narayana Murthy’s Catamaran Ventures, IFC and Transamerica. Having started Coverfox with Varun Dua, who exited the company in 2017 to launch Acko, Rane has helped Coverfox tap into the insurance tech space successfully.
“We got our license in January 2014, but it was only in May 2014 that we were able to sell our first policy. People simply didn’t trust us being a digital player. We have come a long way since then,” Rane told Inc42.
With 35+ insurers on board, $58.59 Mn raised in funding and presence in 800 cities, Coverfox is now aiming to be profitable by 2023 and also float an IPO in a few years. Here’s the Coverfox key milestones in a nutshell.
Finding The Right Opportunity
The year 2013 was a time when digital platforms have just started taking shape along the rise of Indian ecommerce. Yet when it comes to investment decisions like wealth management and insurance, people were quite sceptical about turning to technology.
As Rane said, there is a general lack of awareness among people about insurance plans. This is because key information remains buried under technical words and jargon-loaded policy documents. Insurance mis-selling had been an unfortunate consequence of this very problem. “There was an air of mistrust among customers with respect to insurance companies,” he recalled.
The main reason for this gap was that among the agents, the salespersons and the insurance company, a customer did not know where to turn to in case of an insurance claim or advice. There was little accountability and a lot of dissatisfaction among insurance customers.
Coverfox wanted to create an unbiased online insurance distribution business. “We wanted to restore the power of choice to the consumers, who were buying insurance products that are generally difficult to understand,” Rane added.
Ensuring Success Through Technology
Coverfox today uses artificial intelligence models to create technology-driven insurance platform for its users. Its proprietary technology and algorithm-based policy discovery allow users to compare and choose from a range of plans that suit their budgets and needs across top insurance providers. It is also integrating the process of policy issuance, endorsements, inspection and claims with insurance companies in order to make sales and post-sales service easier through the product.
“Our team of data scientists analyses consumer interaction with various projects to furnish better trends. The product keeps evolving as we collect data on customer behavior and product usage, said Rane.
The company claims its seller platform Coverdrive is also proving to be a big hit among insurance agents and third-party providers. Coverdrive was launched in 2017 primarily as a digital assistant for the new insurance agents, trained by Coverfox platform in the country. It claims to have issued close to a million policies across the country and witnessed 300% growth for FY 2018-19. Coverdrive currently has over 20 insurer partners like Max Life Insurance, HDFC ERGO, Kotak General Insurance, Bharti AXA, Bajaj Allianz, Reliance General Insurance etc.
“About one-third of Coverfox’s total revenue has come from PoS (Point of Sale) agents between January 2017 and June 2019. The customer base vis-a-vis the app broadly comprises of insurance agents, college students, and housewives who are looking out for new business opportunities to work either part-time/ full-time,” Rane told us.
Digital Turns Necessity For Insurance
As Rane said, in India, only 2% insurance sales are made online, leaving ample scope for growth in this market. Thus, he believes that digital is no longer a choice, but a necessity for the insurance industry to upgrade.
With plans to venture beyond India in the next 2-3 years, the platform is now working towards achieving 100% unassisted insurance buying journey for customers. It also plans to completely automate the claims and endorsement process to reduce turnaround time for customers and providers, adding value on both ends of the chain.
At the same time, the founders are also looking at scaling up within the domestic market from the point of view of volumes. For this, Coverfox is venturing into the lucrative Tier 2 and Tier 3 cities. The idea is to add more insurance products and build a complete insurance portfolio for all customers.
“We have achieved digitisation to a great extent with our bike insurance product, wherein 100% of bike insurance business is unassisted. And 80% of these customers insure their bikes in less than four minutes.”
Digital Insurance: Untapped Opportunity And A Maze
The overall insurance industry is expected to reach $280 Bn by 2020. But digital insurance has a penetration of less than 4% in the country. However, the penetration is growing at about 90% annually.
Analysts are of the belief that the insurance market is big enough to absorb a lot of players. Yet the high customer acquisition costs and heavy regulations are a plague to the growth of digital insurance players amid the traditional players like LIC and GIC.
A sustainable and regular revenue flow is extremely vital to sustain long-term in the digital insurance sector. Coverfox is already working on fleshing out this part of its business. It follows a commission model and earns a 12%-18% fee from its partners on sale of policies. It also gets a renewal commission if the policies are renewed through their platform.
Yet this doesn’t seem to be enough. The company filings have shown that Coverfox spent INR 135.37 Cr in FY19 to earn INR 33.29 Cr for the year. In simple terms, Coverfox burned INR 4.06 to earn INR 1 for FY19.
The continuous burn may further put the more nascent digital insurance players in a position to take early exits through the merger and acquisition route, provided their technology or talent and resources are worthy of such a deal.
The need to maintain liquidity calls for investor money and more funding. According to Datalabs by Inc42, around $96 Mn has already been invested into the digital insurance segment between Jan 2019-October 2019, indicating the cash burn the players are going through in this segment.
Whether Coverfox will be able to do that and live its dream earning trust and funds from the public market through an IPO, well, only time will tell. But automation and AI-led processing hold the key to help streamline the insurance market, and in this regard, Coverfox has its bases covered.