The number of deals bagged by insurtech start-ups surged in the January-July period of 2020, even as the overall funding took a hit due to Covid-19. According to a Nasscom report titled ‘Reviving the Indian start-up engine during COVID-19’ that analysed the impact of the pandemic in India, nearly 65 per cent start-ups witnessed reduction in funding.
But the insurtech sector in India paints a rather positive picture. The sector encompasses insurers, insurance aggregators and companies that create software and analytics in the space.
The number of deals bagged by insurtech start-ups in the January-to-July period in 2020 stood at nine, the highest in the last six years, according to data from Venture Intelligence, a firm that tracks private companies’ investments, financials and valuations. The funding figures also do not disappoint. A total of $186 million was invested in eight companies this year during the period, 66 per cent higher than the $112 million invested in six companies during the same period last year.
Increase in demand
“Globally, and in India, insurtech start-ups have gained lot of significance after Covid-19 hit the global economy. More number of people are insuring themselves and their businesses to protect themselves from future pandemics of this scale,” said Anuj Golecha, Co-Founder, Venture Catalysts, adding, “Besides, a lot of companies have also started seeing massive traction on demand for pandemic-related health covers, and insurtechs and some fintechs have particularly launched Covid-specific products. This is driving investor sentiment not only in India but elsewhere in the world. Hungary, for example, has witnessed a record-breaking rise in insurtech deals.”
Insurance Regulatory and Development Authority of India (IRDAI) data showed that the current insurance penetration in India is only at 3.7 per cent, as against 7.1 per cent in the US and 10.6 per cent in the UK. Experts said that while in western markets a large section of the population is covered under employer health schemes, in India, the sector is still largely un-organised and needs more efficient, transparent models to ease distribution and reach more people. With insurtech being disruptive, issues such as inclusion and access can be addressed better.
Tech-driven models
A major factor boosting the growth of this industry is the increasing customer reach. With the pandemic accelerating digitisation across mediums and industries, existing incumbents could reach out to a larger section of the population with the help of services from tech-enabled insurance start-ups.
“Technology-enabled models have aided customer communication including educating the need and the type of products available within insurance, beyond just life insurance — medical insurance, vehicle insurance, accident insurance, property insurance, others,” said Pankaj Raina, Managing Director, Research and Investments, Zephyr Peacock India, adding, “Growing awareness about benefits of insurance, ability to compare, better communication and competitive pricing have contributed to the growth of insurtech user base. This, in turn, is a big validation for any investor.”