You are using an older browser version. Please use a supported version for the best MSN experience.

Never been a more exciting time to be in general insurance, says Digit Insurance’s Goyal

Moneycontrol logo Moneycontrol 15-10-2021 Ishan Shah
a man holding a sign: Never been a more exciting time to be in general insurance, says Digit Insurance’s Goyal © M Saraswathy Never been a more exciting time to be in general insurance, says Digit Insurance’s Goyal

Digit Insurance, a non-life insurer founded in 2017, hopes to expand its business by focusing on motor, health and fire insurance policies, founder and chairman Kamesh Goyal said in an interview with Moneycontrol.

Heavily into motor insurance in its initial years, the company has battled challenges emerging from the pandemic in the form of lockdowns, and now chip shortages in the auto industry, but has also shifted its focus to other non-life segments as well. A 33-year veteran of the insurance industry, Goyal spoke about the outlook for the sector, his growth plans and distribution strategy. There has never been a more exciting time to be in general insurance than now, he said. Edited excerpts:

Q. What is your outlook on the general insurance industry?

The industry grew 6-7 percent last year, but due to the lockdown in the first half, motor loss ratios were low and overall health claims went down. In that period, insurers benefited, leading to pricing competition in motor and health.

Fast forward to the first quarter of FY22, health claims went through the roof due to the second wave and loss ratio was bad across the industry. In the motor business, as there was no strict lockdown, the benefit of lower claims was a lot less and claims have normalized. This year, the bottom line of the industry is definitely being challenged.

Q. From Digit’s perspective, how has the journey been so far?

We have been a bit lucky. Prior to last year, most of our business was motor. As the lockdown happened, there were no sales of new cars and the business took a hit. On the health side, we came out with an industry first – Covid health insurance, which helped us gain traction.

Our customer ratings substantially improved on the back of digital and self-service processes and subsequent investments have gone here. Last year, we saw growth of 44 percent.

In the current year, as the second wave hit, many players had stopped underwriting Covid-19 health insurance but we continued to do that and other business lines also saw a good amount of growth. So far, the first half has been good and growth has been almost 67 percent.

The four-year journey has been good, In the first half of this financial year, we have done close to Rs 2,200 crore of gross written premium, now we have more than 2,300 colleagues. Our geographical presence is decent and on the retail side we have all kinds of products.

So, the four-year journey has been pretty exciting and satisfying.

 Q. You started in 2017. What were some of the advantages that aided your growth?

Starting from scratch enabled us to look at a different technology architecture.

First, we were the first insurer to be on the cloud. When you do things for the first time, there are challenges; we struggled initially but this turned out to be a great decision in hindsight as volumes started going up; we were able to cope with the volumes.

Second, my colleagues from the technology team recommended having a strong core system. We went ahead with the Allianz Business System (ABS) and developed a lot of micro services around it which are integrated with the core system.

The core system gave us the robustness which is required in a financial services company where record keeping and maintenance is critical.

Third, we started with high capital, and in a span of four years our capital base is close to Rs 3,300 crore. Most insurance companies would not have infused this much capital in their initial years.

In a way, all of these were well timed and benefited us.

 Q. You started with the idea of simplifying insurance. Do you think you have been able to do it?

When we started, my understanding of simplifying insurance was from a product perspective and there’s huge scope there. The basic idea is to simplify everything across the customer’s journey -- processes, claims and onboarding, etc.

Within a year of starting, there was realization that my thought process of simplifying was quite narrow, on one side we have made very good progress in policy documentation, customers don’t have to sign, etc.

We have realized that on a continuous basis things can be improved in any form of communication. We have embedded Google Translation for customers, allowing them to reply to our communication in the language of their choice.

On one side we have come a long way, on the other hand we are conscious that there’s massive scope to explore the journey of simplifying insurance. I don’t think it will ever stop.

Q. How’s the outlook on the motor space? Also, what are your thoughts on underwriting for electric vehicles?

The private car segment is not growing as much as the demand exists due to the chip shortage issue. On this, my personal sense is that some of it may flow into the second half of this financial year. In the first half of next 2022, we could see stronger growth for the private car segment. As the economy improves, sales of two-wheeler and commercial vehicles will also increase.

Motor business could see some headwinds in this quarter, but expect good growth in the next 12 months.

On electric vehicle insurance, the electric cars which are coming today are very safe, autonomous riding, cameras everywhere, etc. The trouble is when you hit somebody, an accident happens or a car gets impacted due to floods. The car parts are so expensive and the claim amount becomes huge. This exactly happened with Tesla in Hong Kong, where Axa had stopped providing insurance.

There are challenges but the opportunity is huge and the number of electric vehicles will only increase.

One should also keep in mind that some of it would require different kind of underwriting.

Two years back, we saw this as a different area where we needed to understand it ourselves better. We fairly have a good market share in the two-wheeler and three-wheeler electric vehicle space. Most of these EV players are scaling up and the opportunity for insurers will be big and our experience has been good so far. We are focused on it and the future is there.

Q. How is the focus beyond health, travel and motor?

We do underwrite property insurance (including factories, refineries, toll-roads, power-plants, SMEs, etc.). Fire Insurance is pretty big for us, last year we had done close to Rs 325 crore premium in the whole year, this year we have done that in the first half and should be crossing Rs 500 crore in this financial year. Fire will be the third biggest line of business after motor and health.

Q. How is your solvency ratio looking like?

It was 180 as of June 30. After the approval of the recent capital raise I would expect it to be more than 300 by December 31. It will be one of the highest in the industry.

Hoping the approval should come sometime this month and we will close the transaction within thirty days.

Q. How has your distribution strategy evolved?

We feel that we should be present across all channels, and are channel agnostic. Different digital interfaces have been built and it depends on which channel customers and distributor partners wish to log-in from.

One interesting channel which our team has developed in the last one year is the point-of-sale (PoS) channel. This has given us reach from extreme east to west and north to south. These interfaces have given us reach across India in a span of four years, which was something unimaginable 10 years back.

Q. As a new age insurance player, what is your innovation and product strategy?

It happens in two ways, one with feedback from customers and distributors, most of the time this is the starting point. Some products pick-up, some don’t. The Covid-19 product launched in late February 2020 picked-up but our Jewellery insurance even after market research didn’t pick-up as anticipated.

On Innovation, it typically happens when we find a pain point or customer expectations are different. In my case, I read a lot about what other players or industries are doing and if it is exciting, we start thinking about whether we can do something similar. Copying does help, sometimes.

Q. After a long time, consolidation was seen in the insurance space, would you look at inorganic opportunities?

In the next 6-12 months, our focus is not to get into acquisition, we feel the opportunity is quite strong on the organic side.

In this business, it’s very difficult to say we will do this or never do this, because you never know how an opportunity can arise.

Q. Any plans on listing?

Do we want to list? Yes. When? We don’t know at this stage.

This is something we always thought that we wanted to be a listed company and have completed four years, we have raised a recent capital round. We will see where we are in 6-12 months’ time.

Q. Outlook for the second half of FY22?

We work on a month-on-month plan, because we don’t want to lose out on an opportunity that comes up.

One area we want to continuously work is to keep on expanding, growing and keep improving our service levels rather than it going down. As you grow fast, that’s the biggest thing we would want to focus on and we are conscious about it.

Q. You set the tone by becoming a Unicorn in January 2021? How does it reflect on the insurance side?

The momentum will continue because Insurance is hugely underpenetrated.

Having spent 33 years in the insurance industry it has evolved from working on pure paper to pure digital, there has never been a more exciting time to be in the general insurance industry than it is today.

It has been an amazing journey, the competition has increased and so have rates come down which ultimately benefits customers. But the whole opportunity, provided by capital, technology and market is simply amazing.

More from Moneycontrol

image beaconimage beaconimage beacon