Policybazaar - Insurance Online

INTRODUCTION:

PolicyBazaar was founded by Yash Dahiya (Group CEO), Alok Bansal (CFO) and Rahul Agrawal (CTO) in the year 2008. Sarbvir Singh was appointed the CEO of PolicyBazaar in 2020.
It started by listing the details of multiple insurance policies for customers to choose from. It began as a price-comparison website, and an information portal for learning about insurance and insurance programs. The website subsequently expanded to becoming a marketplace for insurance policies.
The company generates revenues through commissions by selling insurance and additional services to insurer partners, as well as commissions earned from its lending partners through Paisabazaar. It also provides online marketing, consulting and technology services to its insurer and lending partners.
Earlier, only registered as a web aggregator, Policybazaar has recently received the license to work as a direct insurance broker, which will relax certain regulations related to the company’s commissions and offline-sales ability.
Paisabazaar is an independent digital lending platform that enables Consumers to compare, choose and apply for personal credit products.

POLICYBAZAAR

PolicyBazaar proposes to simplify the buying process of insurance policies and provide comparison of various schemes available in the market. It analyses the various products on the basis of price, quality and key benefits. It is a policy web aggregator.

• As on September 30, 2021, a total of 48 insurance providers sold their products on Policybazaar, constituting 84.5 per cent of all licensed insurers in India.

• Around 70 per cent of customers who bought health-insurance policies through its platform in 2014 have continued to renew their policy through the platform.

• The company has over 48 million Consumers registered on the platform as of March 31, 2021, of which 9.6 million unique Consumers purchased over 19 million policies from their Insurer Partners in Fiscal 2021.

• It does not charge its users.

In Fiscal 2021, the company originated new premium of ₹2742 crores for their partners and a total premium of ₹4701 crores including renewals, representing 41.7% of new premium growth. The company uses the behavioural and other data insights in bettering its offerings and selling it to their insurance partners meanwhile creating a competitive edge.

The company has 2 Models of Digital Insurance Distribution Digital distribution in insurance. They are based on the types of consumer interactions:-

• Online insurance distribution model:
This model focuses on aggregation of demand. It is fully digital and unassisted and provides consumers an end-to-end online experience. In this model, consumers can search for insurance products online from various insurers, compare and buy suitable policies and manage them digitally.

• SAAS for agent aggregation (SFAA):
In this model, SFAA players onboard individual agents on their digital platform to interact with consumers and sell partner insurers products. These agents collate the data and upload it on digital platforms, helping insurers to issue policies digitally. While this model helps educate the consumers, there is a limited digital experience for them and no data insights for insurers apart from policy application details.

(Currently, the SAAS model assists in pilot testing and impact assessment of new technologies.)

The company’s strategy is asset-light and they do not underwrite any insurance or retain any credit risk on the books.
Policybazaar is registered with and regulated by IRDAI as a direct life and general insurance broker. Until June 2021, it was registered with IRDAI as an insurance web aggregator. On June 2021, the company received the direct life and general insurance broker license from IRDAI which will allow Policybazaar to target offline and corporate business in addition to the online business.

The company plans on expanding presence through offline channels and provide in-person Consumer engagement and services in local languages through our offline retail offices across India.

INDUSTRY:

• At the onset of a surge in the Covid-19 positive cases, India’s insurance industry found itself digitally unprepared with significant reliance on physical KYCs and in-person medical checkups, affecting the consumer acquisition process resulting in a 24% fall in new business premiums for life insurance and a 16% fall in gross direct premium for non-life insurance in Q1 FY2021.

• Industry participants are focusing on simplification of insurance process across the value chain ranging from documentation to underwriting to issuance. Introduction of eKYC, tele medicals, digital application forms and claim filing through website and linked bank accounts are some of the changes introduced by industry incumbents.

• Online players are playing a big role in making insurance purchase simpler and more convenient. Additionally, product and process innovation by manufacturers as well as insurtech players is narrowing the gap with consumer needs.

• Better policy management and easier claims process is also playing a key role in enhancing consumer experience. For example - adjustable life insurance, in which companies give policyholders the flexibility to modify premium payments, period of protection, and face amounts, thereby building confidence in life insurance products.

• Companies are also becoming better at assessing risks by adopting and deploying emerging technologies like data analytics and artificial intelligence and offering customized underwriting based on customer profile.

• Measured in terms of gross direct premium, India was the world’s 15th largest non-life insurance market, worth US$ 25 billion in FY2020.

• In FY2020, Policybazaar was India’s largest digital insurance marketplace with 93.4% market share in terms of the number of policies sold. 65.3% of all digital insurance sales in India in FY2020 happened through it.

• In FY2020, India had a US$102 billion insurance industry, measured in terms of Total Premium. This industry is expected to grow at a 17.8% CAGR to reach US$ 520 billion by FY2030, with life, health and other non-life insurance growing at 18.8%, 15.3% and 13.5% CAGR respectively. India’s life insurance market is expected to grow at 18.8% p.a. to reach US$ 425 Billion.

• The major competition for PolicyBazaar in the online policy marketspace is companies like BankBazaar, EasyPolicy, PolicyAdvisor and online policy brokers such as Coverfox and Acko.

PAISABAZAAR

In 2014, the company launched Paisabazaar with the goal to transform how Indians access personal credit by accentuating ease, convenience and transparency in selecting a variety of personal loans and credit cards. It is now an independent digital lending platform that enables consumers to compare, choose and apply for personal credit products.

Paisabazaar was India’s largest digital consumer credit marketplace with a 51.4% market share, based on disbursals in Fiscal 2020. It is also widely used to access credit scores, with approximately 21.5 million Consumers cumulatively having accessed their credit score through the platform.
The company has built 54 partnerships with large banks, NBFCs and fintech lenders who offer a wide choice of product offerings on our platform across personal credit categories, including personal loans, business loans, credit cards, home loans and loans against property.
The business model for Paisabazaar is on the same principles as PolicyBazaar. A platform for customers to compare and contrast their financial products and get the best deal for themselves.
The company’s revenue generation is from:
• The commission from Lending Partners based on a percentage of the loan disbursal amount or a fixed fee in case of credit cards
• Credit advisory and related services
• marketing services provided to financial services partners and other third parties
The company came in partnership with all four credit bureaus in the country, offering free access to credit reports. Approximately 21.5 million unique Consumers have accessed their credit score from Paisabazaar as of March 31, 2021. This brings the customer to their platform.
40.0% of the disbursals in the last three Fiscal years, including 67.0% of the disbursals in Fiscal 2021, were to existing Consumers, most of who were acquired by Paisabazaar using the free credit score utility.
During Fiscals 2019, 2020 and 2021, Paisabazaar enabled disbursals of ₹5100 cr, ₹6549 cr, and ₹2916 cr, respectively.

FINANCIALS:

• The company’s revenue is concentrated with the four largest partners who accounted for 32.8% of its revenues in FY21.

• Insurance Web Aggregator Services accounted for 63.0%, 66.9% and 68.5% of revenue from operations for FY 2019, FY 2020 and FY 2021, respectively.

• Other Services segment includes Paisabazaar and other entities, including PB Fintech. They accounted for 37.0%, 33.1% and 31.5% of revenue similarly.

• The company has a high total expenses as a percentage of revenue from operations. 176.0% in FY 2019 to 149.2% in FY 2020 and further to 124.0% in FY 2021.

• Advertising and promotion expenses as a percentage of revenue from operations reduced from 70.3% in Fiscal 2019 to 41.5% in Fiscal 2021.

• The company reported a loss of Rs 196 crore in the last 12 months ending June 30, 2021.

• It has a positive working capital and a working-capital cycle of around 30 days.

• The company has cash and cash equivalents of more than Rs 1,500 crore, along with a fresh issue of Rs 3,750 crore providing enough capital to internally fund expansion plans.

The company justifies that advertising and promotion expenses are major expenses to help acquire and retain Consumers.

The financial details are available on screener here:
https://www.screener.in/company/POLICYBZR/consolidated/

PROMOTER, MANAGEMENT & INVESTORS:

Policybazaar is a foreign-owned and controlled company. While Makesense Technologies (Info Edge) holds 14.56 per cent stake in the company, global funds have a large holding with SVF holding 9.45 per cent stake, followed by Tancent (9.16 per cent), SVF Holdings (6.31 per cent), among others.

The company’s founder Yashish Dahiya has a 4.27 per cent stake in the company and is not classified as a promoter because of the minimum promoter holding requirement of the Securities and Exchange Board of India.
Policybazaar had raised US$366 million in 7 rounds of funding since its inception in 2008.
Info Edge, invested ₹30 crore (US$6.9 million) as the seed fund in Policybazaar in mid 2008. Intel Capital and Info Edge invested ₹60 crore (US$12.86 million) into Policybazaar in May 2011 as part of the venture round.
Leading to 2018 Policybazaar raised a total of US$238 million in June 2018 in its series F funding. Tokyo-based Softbank Group’s Vision fund led the round with its US$150 million investment that gave it a 15% stake in the parent company.

The Series F investment saw Info Edge put in $45 million in the company through a special purpose vehicle, effectively lifting its stake to 13% from 9%. Softbank invested an additional $130 million to increase its stake to 15% in July 2020, valuing Policybazaar at around U$1.5 billion.

GROWTH PLANS:

• To supplement Policybazaar’s digital presence, it plans to expand through offline channels by leveraging our recently approved direct (life and general) insurance broker license. As of July 15, 2021, the company has set up 15 physical offices with intentions to develop up to 200 physical retail outlets across all city tiers in India by the end of Fiscal 2024.

• For Paisabazaar, the company’s key focus area is to continue with the already in traction plan of acquiring more customers through the free credit report programme.

• The company recently listed Saral Jeevan Bima scheme on the platform to promote standardised products, with 20% online preferred pricing making it the cheapest Saral Jeevan Bima plan. (Saral Jeevan Bima is a regulatory initiative offering standardised individual term insurance plan wherein all insurers offer same features and benefits.)

• The company, which currently has operations in Dubai through a subsidiary, plans to scale up its operations in the broader Gulf Cooperation Council (GCC) region as well as South-East Asian countries. It plans to replicate the success of Indian model in the Gulf region, and has already allocated Rs 375 crore from IPO proceeds towards such potential business expansions internationally.

IPO offer:

On 21 July 2021, Policybazaar’s parent company, PB Fintech Ltd, filed a DRHP with SEBI to raise ₹5,826 crore (US$770 million) through an IPO.The IPO opened on 1 November with a price band of ₹940-980 per share, and completed on 3 November 2021. PolicyBazaar is scheduled to be publicly listed on 15 November 2021.

RISKS:

  1. Online insurance is extremely competitive and has low entry barriers. Additionally, each insurance company is improving their own online marketing and servicing, which can make business less profitable for Policybazaar as customers may use it as a comparison tool and then actually do the transaction on the insurer site/app.

  2. Insurance commissions have increasingly been under the regulatory scanner and reduced over the years. It can change in the future as well.

  3. The business requires telemarketing which can become violative of any new personal privacy laws that may come in the future.

CONCLUSION:

  • The company has distinguished itself by making 2 distinct brands for itself in the financial market. A different delivery model in a very old traditional system.
  • There is network effect in play when the company has been able to retain old customers and be aggressive with the new ones.
  • It seems unlikely that Insurers deepening online presence will hurt Policybazaar. On the contrary removing as many hurdles and making purchase easy from comparing to renewals with boost business of both.
  • Paisabazaar is a unique data aggregator whose direct competitor is the unlisted CRED as they have similar strategy in customer acquisition but they differ in the end usage.
  • Marketing and Advertisement expenses has run the company in a constant state of loss so far where it can only fund itself through equity dilution. The IPO proceeds will be deployed in a similar aggressiveness to capture more untapped market.
  • There is no promoter to the company. The management has run no red flags so far and seems very clear about the plan of action.
  • Valuations of the company is quite steep, which tends to happen when private equity comes in play. This is new territory for Indian markets and is a different risk to take.

DISCLOSURE: No financial interest in the company, only academic interest.

33 Likes

Few good points made about PB regarding the push product nature and need for a hybrid model.

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Disc: not invested.

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PPFAS D2C seminar.

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Paisabazaar.com reaches $1.1 billion annualized loan
disbursal rate, provides access to credit across 668 cities

Management seems to be very arrogant. Not answering questions in right manner

Worth reading
pb fintech icici securities.pdf (1.2 MB)

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can you please share complete report pdf ?

Studied This Company Recently: Highly Impressed by their Model but Risk is very Much more than reward. Every Insurer wants customers to directly contact them instead of PB so they can find a solution to it , what if top Insurance company pull out their product from PB, What if they are dreaming of going digitally won’t work , Also they have good no of peers thus Not an MONOPOLY business.
I find risk is much more then reward. Need to track PB for couple of years for making investment decision

Disc: Only want to study their Model

I feel that insurance premiums will increase every 3 to 4 years , Policy bazaar can provide customers with lower premium for that same scheme, they dont have underwriting stock.

After 1 year anchor lock in is over, there will sell off, right now free float is around 93%, some ESOP expenses will continue till more 2 years, then you will see some meaningful performance in financials. Growth story is intact

The company has a monopoly with >90% market share in the digital marketplace. Other players are small and a few like Coverfox have exited/pivoted from the D2C model. I don’t see the top companies pulling out from the them as selling insurance digitally is cheaper and few players have launched digital only business model like Acko.

Disc: Not invested but tracking it closely.

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Recently heard of the platform from IRDA

If implemented… Believe this Could impact the policy bazaar

Disclosure : currently do not hold any quantity

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Notes from FY22 AR:

Business Model -

  1. Enable consumers to research and compare a wide range of insurance and credit products offered by our partners, thereby increasing choice and transparency. Our end-to-end online service reduces purchase time by providing all pre-purchase research tools on one platform. Once consumers give their profile details, we provide them with multiple options with related costs so consumers can make an informed purchase conveniently. We offer assistance through tele/ video/ chat/ in-person engagement. Our wholesome servicing throughout the consumer lifecycle comprises of facilitating renewals, endorsements, grievance redressal, and claims processing.
  2. Asset-light capital approach- Does not underwrite any insurance or own any credit risk or do not own any offices.
  3. Our leading brands -Policybazaar & Paisabazaar.
  4. Two reportable segments:
  • Insurance Brokerage Services under Policybazaar (Online and Offline). 51 insurer partners, or 89.5% of all licenced insurers in India, are marketing their products on Policybazaar. Obtained direct (life and general) insurance broker licence on 10th June 2021 to deliver in-person Consumer engagement and services in local languages. Established 45 corporate offices and retail stores in 25 cities as of March 31, 2022, and endeavours to grow to 50+ cities in India by the end of the current FY. By utilising their direct (life and general) insurance broker licence, PolicyBazaar will also be able to provide on-the-ground claims support to its existing and future consumers. These actual retail shops are currently planned to be tiny offices in each city, close to its insurer partners’ headquarters.
  • Other Services, which includes Paisabazaar’s online marketing, consulting, and support services primarily to the financial services industry. Paisabazaar, started in 2014, is a leading marketplace platform that partners with banks and NBFCs across the ecosystem and expect it to break-even by the last quarter of 2023. It has also started making trail revenue

Why our service is preferred?

  • Industry’s leading “Pull” driven insurance platform where consumers come of their own accord to buy insurance. Consumers who conduct their own research and buy, have higher disclosure levels and lower churn. This leads to a better quality of business (lower claim rates, higher renewal rates) for our insurance partners. Our consumers in turn get a better level of service and in many cases, higher claims paid ratios from insurers.
  • Higher intent consumers Policybazaar advisors have significantly higher productivity and earnings opportunities as compared to the rest of the industry.
  • Provide our Insurer and Lending Partners with access to the large consumer bases of both Policybazaar and Paisabazaar to enhance their sales. As per Frost & Sullivan, the consumer acquisition cost for our Insurer and Lending Partners is one of the lowest through our platforms.
  • Over half of our country’s consumers conduct their research on Policybazaar before purchasing health or life (term) insurance.
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The stock tanked 65% since it’s listing (mid Nov 2021).
There’s no clear path to profitability.

PB, Nykaa, Paytm, Zomato etc are not expected to show profit any time soon. Investors would, however, expect YoY growth in topline. Like, good sustained 25% to 40% kind growth, while keeping the cash burn low enough be survive the next few years. Profits will come in a J curve, but timeline is unpredictable.

Looking at current PE multiple is a pointless exercise. At best, one could estimate Net Profit from revenues, by segregating the amount invested in future growth.

If topline growth is dull, and profitability is absent then its worrisome.

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Policy Bazaar will become profitable in FY24, says the CEO.

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