Insurtech Gets a Boost in India Amid Rising Digital Adoptionby Fintech News Singapore March 12, 2021
Fundamental shifts in consumer preferences, favorable regulation, and rising interest from investors are stimulating the growth of insurtech in India.
Results of a survey conducted by the Boston Consulting Group (BCG) and the Federation of Indian Chambers of Commerce and Industry (FICCI) found that 65% of general insurance customers in India had a digital footprint in the purchase journey, and 30% got influenced during the journey. The digital trend is expected to grow moving forward with 88% of Indian customers expressing willingness to purchase through digital channels.
These findings come on the back of rising investors’ interest in the country’s insurtech sector, which continued to pour money into startups in the space despite COVID-19. Between 2016 and 2019, insurtech funding grew steadily at a three-year compound annual growth rate of 225% to reach US$376 million in 2019.
Though in 2020, funding contracted in response to the global pandemic, signs of recovery were already visible in the second half of the year with considerable deals taking place including Turtlemint’s US$30 million financing round, and Plum’s US$4.1 million funding round.
2021 already saw notable developments in Indian insurtech space. In January 2021, the sector welcomed a new unicorn when Digit Insurance raised nearly US$100 million at a US$1.9 billion valuation.
On the regulatory front, the Union Budget 2021-2022 announced in February is proposing to enhance foreign direct investment (FDI) limits in the insurance sector from 49% to 74%, a move aimed at taking insurance to a larger sector of the Indian population. Industry players have welcomed the proposal, stating that this could help digital insurance companies scale up their businesses, bring in better technical know-how and innovation, and ultimately, improve insurance penetration.
Insurtech in India
India is home to about 100 insurtech companies, according to India’s Dynamic Insurtech Map by the India Insurtech Association and the Digital Insurer, among which unicorn startups PolicyBazaar (valued US$2.4 billion) and Digit Insurance. With two insurtech unicorns, India is neck and neck with China, but behind with the US with six insurtech unicorns.
India’s insurtech sector has historically been dominated by multi-insurance players including PolicyBazaar, an insurance aggregator, Coverfox, an insurance broking firm, and Renewbuy, a health and motor insurance specialist, but since 2018, the general insurance segment has recorded strong growth with players like Acko and Digit Insurance emerging as champions.
This trend is further evidenced by surging investment going towards general insurance companies. Funding to general insurance-focused insurtechs increased from a negligible share in 2014-2016 to almost 75% of the overall funding in 2020.
On the other hand, the health segment has seen relatively low traction so far, signaling an untapped opportunity for innovation in India.
Following global trends, India’s insurtech sector continues to mature, with the pace of late-stage investment and the number of US$10+ million funding rounds increasing considerably since 2014-2015.