Indian Unicorns 2022: Digit Insurance Becomes Third Largest Fintech Player in India

According to a report published last year, India’s non-life insurance premium market grew 20% last July to $2.1 billion driven by a strong performance from the health and motor segments. According to S&P Global Market Intelligence data, India is the second-largest insurance technology market in Asia-Pacific, accounting for 35% of the $3.66 billion InsurTech-focused venture investments made in the country. Digit Insurance is among the leading InsurTech players in the country.

Digit Insurance’s Offerings

Founded in 2016 by insurance sector veteran, Kamesh Goyal, Philip Varghese, Sriram Shankar, and Vijay Kumar, Bengaluru-based Digit Insurance uses technology to make the process of getting cover, filing claims, and payments easier. Digit Insurance focuses on its mission, “To Make Insurance Simple” by providing users with innovative solutions. It offers access to zero-touch claims through tools such as audio claims, smartphone-enabled self-inspection, soft-copy document submission, and access to full-time customer care assistance.

Its products span motor, travel, property, and health insurance. Auto insurance is its largest category and accounts for 75% of gross premiums. Fire accounts for 13% of premiums, followed by health insurance at 7%.

In fiscal 2020, it provided Covid-related insurance to almost 3.6 million employees across 32,000 corporates. Since its inception, its platform has provided insurance to more than 20 million customers and processed 400,000 claims. It continues to see strong customer retention with policy renewal rates at 60% for private car insurance, 75% for retail health insurance category, and 90% for insurance covers provided by corporates.

Currently, Digit has an offline distribution network of around 5,000 on-ground insurance agents and dealers. It plans to increase this number in the coming months.

Digit Insurance’s Financials

Digit earns revenues in the form of premiums collected for insurance. For fiscal 2021, it reported a 44% growth in gross written premium (GWP) to INR 3,243 crore (~$435 million). The company has been profitable for fiscal 2021.

Digit Insurance has raised $460.8 million in 7 rounds of funding led by Saujanya Shrivastava, TVS Capital Funds, RS Filmcraft, Anil Arora, Kunal Shah, Susheel Tejuja, Sachin Pillai, IIFL Asset Management, Faering Capital, and Sequoia Capital India. Its most recent round was held in August 2021 where it raised $200 million at a valuation of $3.5 billion. A January 2021 funding round had valued Digit at $1.9 billion. The valuation made Digit India’s third most valuable fintech player and was also one of the largest in India’s general insurance industry.

Digit raised the recent round of funds to maintain solvency. India’s regulatory bodies peg the solvency requirement of 150% insurers’ liability. It is also looking to offer newer health cover products and to expand its on-ground coverage to newer Indian cities.

India’s fast-growing market has attracted several FinTech startups within the insurance space. Digit faces competition from traditional financial institutions in the market along with other new-age players such as Amazon-backed Acko. But Digit has been off to a flying start. Back in 2019, Acko held a modest 0.17% market share in the general insurance category while Digit had a significantly larger 1.04% market share.

Digit, like other Indian Unicorns, is banking on the relationships it is creating with a valuable customer base. It is counting on the idea that its customer lifetime value will be astronomical, and that it will be able to cross-sell other products from its portfolio to this user base. Its monetization prospects will most likely grow. All these are valid investment theses based on the assumption that if a customer buys, say, car insurance, (s)he would also buy home insurance. That’s how insurance markets operate around the world. Also, customers tend to stay with the same insurance provider if they get good service, which contributes heavily to strong LTV metrics. One more factor plays in support of the investment thesis behind the astronomical valuation and capital infusion: the competitive landscape is not over crowded. India has a very large, unmet need for good quality insurance products. In that sense, very important infrastructure is being built through Digit.

But I do still worry about these companies succumbing to Death by overfunding as such companies have historically, often, faltered. Too much easy money often creates a lack of execution discipline. The lofty valuations need to be back-filled with actual execution and value creation.

Let us hope the executive team doesn’t lose sight of the fundamentals and Digit delivers a resounding success!

Photo Credit: Image by Gerd Altmann from Pixabay

This segment is a part in the series : Indian Unicorns 2022