Can sachet offerings drive insurance penetration in smaller cities?

Unique insurance offerings at a low cost to cover missed flights, loss of baggage or medial emergency, insurance for salary protection, cycle insurance, marathon insurance, ‘pay-as-you-use car insurance or dengue insurance are increasingly gaining popularity in metro cities. “Sachet products are short term policies, premiums for the same are affordable compared to the annual coverage policies. The purpose of such products is to make Insurance a way of life and increase penetration of insurance across all strata of population especially considering its affordability,” said Gurdeep Singh Batra, Head – Retail Underwriting, Bajaj Allianz General Insurance.

But, is it serving the purpose? These affordable insurance products click with the millennials. But what about smaller cities? Affordability and awareness are two important aspects when it comes to insurance penetration. While the idea of sachet insurance is commendable, it seems it is yet to make an impact where it is most needed.

“Not only insure-techs but also insurance companies are excited about sachet-sized products. But product reach is not far and wide. People based in stats such as Bihar or Maharasthra are dealing with floods. The danger of dengue and Malaria is more in villages there than metro cities. People living in metro will already have a full-fledged health insurance. Vector-borne disease cover is amazing but it should reach needy in far-off places in Bihar and Maharashtra,” said Ravinder Kumar, founder and CEO, WIMWIsure.

Distribution is a challenge

A wide-scale distribution chain is key when it comes to insurance products.

While such products can be bought easily via digital medium, but a large part of India is not digitally savvy. “We need to figure out ways to distribute these products at a large scale. Being low-cost, the distributor commission is too less. Unless they sell at least 1000 policies of a sachet product, it wouldn’t be profitable for them. We need innovation in distribution,” said Kumar of WIMWIsure.

World Cover, an Africa-based insure-tech firm, offers climate-based insurance to farmers by tying up with payment firms such as M-Pesa. It provides covers against droughts and rains. A similar model across different insurance products could work in India. World Cover has plans to expand operations in India, Indonesia and other developing countries with low insurance penetration.

Bajaj is associated with payment solutions and e-commerce platforms along with a few retailers for sachet insurance products.

CoverGenius, an insure-tech in the embedded insurance space, is planning to launch sachet products for tier-3 and tier-4 cities.

“We are in advanced talks with a couple of neobanks and buy-now-pay-later platforms in India to sell embedded insurance. When a small shopkeeper or a business owner opens an account with a neobank or signs up on buy-now-pay-later, we shall notify them to have relevant insurance such as low-ticket life and health, two-wheeler, property or fire insurance. We’ll make the process simpler for them,” said Arijit Chakraborty, Managing Director, India and SEA of Cover Genius.

The insure-tech has a global distribution platform XCover that claims to deliver personalised insurance products in any country and language.

Local tie-ups

Summing up the gap in the insurance penetration in India, Kumar said unless a neighbood paan-wala becomes a distributor of insurance, you cannot tackle low insurance penetration in India.

Sachet-sized insurance products are affordable and have a use-case in smaller cities, but no denying that the coverage is not adequate. A beginning with a sachet product moving to the full-fledged insurance is needed.

“India has more than 90% protection gap. The penetration has to start at the root level with bite-sized insurance. Our plan is to first fill in the protection gap. It is better to have a Rs 5 lakh life cover rather than not having any,” said Chakraborty.