The Coverfox Founder and CEO talks about how strict norms in the Indian insurance sector create a moat for the startup against competition
It promises to help customers buy insurance policies in minutes, but it took Coverfox over a year to sell its first policy from the time the founders started building the company. After tackling all the regulatory hurdles, the Mumbai-based startup finally got its IRDA Direct Broker licence in 2013.
However, Coverfox is not complaining. In a chat with e27, Founder and CEO Varun Dua tell us why he’s actually happy about the strict guidelines in the sector.
“Stringent regulations in the insurance sector create a moat around us because it takes people some time to get around and understand the regulations,” he says.
“It took us almost 12-18 months to sell our first policy from when we decided to get into this business because there is licensing involved and then you go and tie up with every insurance company involved,” he adds.
An MBA degree and a stint at Tata AIG helped Dua with first-hand experience in the insurance sector and the problems faced by consumers while buying insurance.
His co-founder, IIT graduate Devendra Rane, on the other hand, is the tech brain of the founding duo that founded Glibberbug Technologies that runs Coverfox.
“It’s really tough for competition to come in given how complicated the sector is. You will not find a bunch of kids from IIT suddenly coming up with an idea to get into insurance. So, relatively, competition is less compared to a lot of other sectors,” he says.
What lured them to the sector was simply a US$120-billion insurance industry, of which only a miniscule percentage was online, leaving a vast potential to be tapped.
The differentiating factor, Dua explains, is that, as per regulations, Coverfox is a broker vis-a-vis a lot of other companies that operate under a different licence category called an aggregator. In simple terms, a broker is a representative of the customer and an aggregator is a representative of the insurance company.
“The major difference is that we are allowed to stand for the customer in case of disputes on claims,” Dua says.
What’s in it for the consumer?
“No one enjoys buying insurance, it’s not a fun product to buy. It’s a necessary evil. And we treat it like that, that the necessary evil should be finished in the minimum amount of steps, transparently with peace of mind,” says Dua.
“We get almost 35-40 per cent of our transactions on mobile and competition has less than 10 per cent that primarily because we have been able to create such simple buying journeys for the customers on mobile and make it a click-click-click affair,” he adds.
Cashing in on premium
Sitting comfortably on a pile of over US$14 million it has gathered over a span of a year, Coverfox is busy getting its name recognised through its large-scale television campaign. It’s also investing heavily to improve its technology platform.
“We are extremely focussed on getting the products and technology right,” says Dua, adding that even minor changes to its customer interface has helped increase its sales.
“Most of our money is going into fortifying and developing the product and I think we are slowly building our brand-building strategy. We will invest more money in tactical brand building,” he says.
Earlier this year, Coverfox announced a US$12-million Series B round after raising US$2 million in its Series A round. Most recently, it received an undisclosed amount as investment from Bangalore-based Catamaran Ventures.
Is another round of funding in near sight?
“We are not looking to raise money immediately, we have enough money in the bank. We would probably be looking at it six to eight months down the line. Right now we are extremely focused on execution,” says Dua.
Identifying the cumbersome process and lengthy list of required documentation as the key reason for the low take off of online insurance, Coverfox is trying to disrupt the market by introducing niche cheaper products that are easy to process. Health policies for specific diseases like diabetes, dengue or cancer is something that the company is trying to push.
“In the long run, we look to service a lot more niche needs apart from the regular health, car and life insurance,” says Dua.
“We are working with insurance companies to get products and processes which are much simpler,” he adds.
With health, auto and travel insurance covered, Coverfox is now eyeing sectors including extended warranty for electronic goods, insurance for inter-city relocation, as well as dental insurance.
“We are also now working with used car insurance products where we have a strategic tie up with CarDekho and Mahindra First Choice,” he says.
Any plans to diversify?
“We don’t believe that you need to be a horizontal. We are going deeper into insurance. We are coming up with more products, more processes. I think insurance has enough depth, I don’t think it has been explored. It’s US$120 billion. Somebody needs to spend time and crack it, a lifetime is small to crack it open,” says Dua.
“There are some players that we could look at who are not doing exactly what we do, but are in allied areas, some brokers or technology companies that have been able to crack a certain market very well, or we could look at some technology companies who have been working on trying to provide technology to last-mile agents. Our technology is far superior but they have access to agents,” he says.
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