Summary:
Insurtech startups are pivoting from online sales to a network of physical agents.
Policybazaar and InsuranceDekho are leading this shift with hundreds of thousands of agents.
Sustainability concerns arise from high commission payouts and increasing competition.
IRDAI is scrutinizing the rising commissions and agent-driven market dynamics.
The industry's future hinges on balancing growth with profitability.
Insurtech's Shift from Digital to Offline
Indian insurtech startups, originally focused on online sales, are now making a significant shift towards offline sales by expanding their networks of physical agents. This change is primarily driven by increased competition and the need for market share.
The Rise of Physical Agents
Companies like Policybazaar have transitioned from a purely digital sales model to employing around 250,000 physical agents. In the latest quarter, Policybazaar reported nearly Rs 400 crore in revenue from this model. Similarly, InsuranceDekho boasts over 200,000 agents and has recorded a total revenue of Rs 743 crore for FY 2024.
Industry Growth vs. Sustainability
While the number of agents is increasing, concerns arise regarding the sustainability of such growth. The insurtech industry is experiencing margin squeezes due to aggressive competition, leading to high commission payouts to agents. For instance, motor insurance commissions have surged from 15% to 30%, while life and health commissions can reach up to 45%.
Regulatory Scrutiny
The Insurance Regulatory and Development Authority of India (IRDAI) has taken notice of the escalating commissions and the aggressive nature of this agent-driven market. Proposals have been made to restrict agents to work solely with insurers, raising concerns about the financial viability of current business models.
Conclusion: Navigating Challenges Ahead
As insurtech startups dive deeper into offline sales, they face numerous challenges, including regulatory scrutiny and the need to balance growth with profitability. Companies are exploring ways to create value for agents beyond just high commissions, emphasizing technology and service reliability. The future of this shift remains to be seen as the industry grapples with its evolving landscape.
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