Meeting with Yashish Dahiya, co-founder and CEO of PolicyBazaar.com, India’s largest online insurance aggregator and distributor, was an exciting opportunity for us. What really amused us even before the meeting started was the fact that Mr. Dahiya came out of his office himself to receive us and escorted us back to his cabin. A very humble man with a mission to change India’s insurance industry from ground up, for the better; an immensely huge task which he himself says will take a lifetime of devotion which he is willing to give. A mathematician by education, IIT Delhi and IIM-A alumni, Yashish has had an illustrious career in the corporate sector before starting PolicyBazaar. Within 5 years of its inception, PolicyBazaar has got hold of more than 90% of the online insurance market in the country. An hour long conversation with Yashish was a real eye-opener about the insurance industry in India.
Yashish Dahiya in a candid conversation with LifeBeyondNumbers(LBN) about insurance, PolicyBazaar.com, entrepreneurship and more:
LBN: What was the motive behind starting PolicyBazaar?
Yashish: A few facts about insurance when PolicyBazaar entered the market: with roughly 3 million insurance agents in the country, and only 25 to 30 million policies sold in a year, meant on an average, an agent was selling less than 1 policy a month. And if the agents would explain all the nuts and bolts of the product they were selling, 90% of the consumer, I’d even go the extent of saying 100%, wouldn’t even buy that one policy. Becoming an insurance agent in 100% of the cases is a job of last choice in someone’s career. This means the quality of the agents couldn’t be amazing. Now imagine, you’ve got a bad product, you’ve got a bad medium and it’s all becoming unproductive. An industry as huge as this (insurance) cannot be run on mis-selling. There was a huge need for knowledge from the consumer’s perspective of what product they wanted and we set up PolicyBazaar to fulfill that need: What product does the consumer wants and for that product, which is the best option.
LBN: How is the competition for PolicyBazaar at the moment?
Yashish: All our competition put together is about 5-7% of the market. PolicyBazaar is about 90 plus percent of the online insurance market. I think we are in a very solid position, we are leading in the market, and we are growing the distribution base and the market.
LBN: PolicyBazaar is just a 5 year old company and account for 90% of online insurance market in the country. How did that happen?
Yashish: See, we all know that to survive one needs 10-20 thousand rupees a month. Now the agents who sell that one policy in a month, has to make 10 thousand rupees from that one policy because he can’t sell 10 policies in a month. Now the worst part: because you are selling based on lies, the more you tell the consumer about the product, the more knowledgeable the consumer becomes, the less he/she is likely to buy it. So everything is stacked up against the agents. So all we had to do was make the consumer knowledgeable. And then the consumer comes to a point where he/she wants to do a Rs. 1000 transaction. Agents couldn’t do it. Reason they couldn’t do it is that they would have to make 20 transactions in a month. They can’t do 20 transactions a month, because you know what, 20 transactions a month means one transaction every day. That means he has to find someone who buys a policy from him every day, which he can’t do. The genesis of PolicyBazaar is to spread the education, bring down the cost of distribution, and bring good products to the consumers, products that no other channel has an interest in selling. PolicyBazaar accounts for 50% term insurance being sold in the country and is the largest distributor of health insurance policies in the country. How did that happen? It’s very simple: We are selling the right product. The way we are going about things, I think PolicyBazaar will save the industry. Because if the industry continues the way it is, they will lose billions of dollars because the consumers can’t be fooled forever. And we’ve seen it in the last few years in the decline. The decline is nothing but consumer knowledge. You know, I speak to so many insurance companies and they say, “The education of the agent is inversely related to his profitability.” Because the more you educate and the more he knows, the more he cannot mis-sell.
LBN: If the consumers are buying the wrong products, why are they still buying it or continuing with it?
Yashish: You see, people trust blindly. It is said that an insurance agent sells mostly within his circle of family and friends. 80% of his sales come from his own circle. Now, investment wise insurance is the second most important decision in life after a house. This decision needs to be an informed one. A decision where the consumer knows what he/she needs and has options to make comparisons and then decide on the purchase.
I will give you some figures of lapsation rates of insurance policies in our country. After 3 years of buying a policy what percentage of people continues with their policies: let’s take the figures of one of the largest life insurance companies of India.
For this company, lapsation rate is 47%. This means that 47% of the people, who take a policy from this company, cancel that policy within three years. Now, here’s the catch: 33% cancel it within the very first year. How many products that we know where a consumer buys a product and is willing to lose the money but not continue with the product? And this is for the largest insurance company in the country. Mostly till 5 years you lose money if you pull out. 33% of the buyers are willing to lose that money to get rid of the whole thing in the first year itself. Something is terribly wrong, isn’t it?
At PolicyBazaar, the Lapsation rate is less than 10%. This happens only because at PolicyBazaar we empower the consumer with the right knowledge to buy the relevant product.
LBN: How often does it happen that people visit PolicyBazaar to compare policies and make the purchase offline?
Yashish: Every month PolicyBazaar gets about 600K enquiries and there are only about 20-22K transactions. So what explains that gap; where do these 580K people go? They didn’t come to see Shah Rukh Khan or Katrina Kaif (laughs…). These people come to compare and then they go and buy offline. They are not totally convinced of online policy purchase. But this conversion rate has been increasing. Let me put this in perspective: the 600K has not changed too much in the past one year or two. But, two years back PolicyBazaar was selling just 1000 policies a month. Now we are selling 20K plus policies a month. So the conversion rate has gone up at least 20 times. So it’s not like more people are coming, it’s just that more convinced people are coming. And it’s all happening because of awareness and knowledge.
LBN: Where is PolicyBazaar heading to in the next 5 or 10 years? Are you looking to diversify?
Yashish: We are likely to stick to insurance, and do a little bit of loans and credit cards. See, insurance itself is a big enough industry. We are still nascent. The industry itself is nascent. We are less than 1% of the whole insurance market, and I don’t think we need to diversify. When we get to maybe 20-30% of the whole market, then we might want to diversify. My view is that focus is more important than diversification at this point. I think we need to get to 20% of the market in the next 10 years, and then maybe think about other countries, other markets, etc. I’d say that to our competitors also: focus on what they are good at rather than diversifying all over.
LBN: What kind of awareness initiatives is PolicyBazaar undertaking to fill the knowledge gap?
Yashish: We are running some television shows. There are 4 television shows every week towards consumer education on channels such as Headlines Today, Zee News, Zee Business and CNBC Awaaz. We do full half an hour shows month on month where we talk about different products, how to make better decisions at buying insurance, identifying their insurance needs, finding the right product, etc.
LBN: Your advice to budding entrepreneurs.
Yashish: If you don’t see yourself doing it for 10-20 years, you shouldn’t get in to it; because there’s likely to be no conclusion before 10 years at least. You know a lot of people come to me with an idea. The first question I always ask them is, “Are you willing to give it 10-20 years?” “Is this an idea that’s going to excite you for the next 10-20 years?” If it doesn’t then please don’t get into it as you’d waste your time, you’d waste investors’ money and eventually nothing’s going to come out of it. It’s very unlikely that something’s going to come out of it. Do experiment, but don’t commit to it. At least don’t take money from someone, because you’d be letting them down.
But if you do have 10-20 years and you have an idea which you believe can last and keep you excited for 10-20 years, then definitely do it, because then it will be very rewarding in terms of your career, and if it lasts 10-20 years it must be a very exciting problem you’re trying to solve.