What inspired to become an insurance broker?
I had worked in large companies before setting up SecureNow. In my last assignment, I was the Managing Director of Prudential Financial’s life insurance business in India. My co-founder, Abhishek has worked with McKinsey India.
Six years ago, we saw a huge opportunity in commercial insurances for SMEs. The size of the market was large. There are anywhere between 20 and 40 million SMEs in India. These SMEs are aware of the risks they face and the fact that insurance could help them mitigate that risk. However, they have not a good experience in buying insurance because the people they spoke to did not understand commercial insurance. Though a few insurers have very good products that could mitigate the SME’s risk, the problem was with distribution.
What challenges did you face in your initial days?
Getting a business off the ground is difficult. Initially, we operated from a two-room small office on the third floor in Hauz Khas Village, Delhi. There was no lift and in fact, one of the senior insurance executives complained to me that his head used to spin when he had to climb up. We have rectified that now by having an office on the ground floor!
However, more seriously, we struggled to get traction from insurers and more established clients. In fact, we spent hours waiting in the reception to acquire the large corporate clients. In a way, this has increased our resilience because we saw how poorly small companies were treated.
How did you get your first clients?
Our first clients came through word of mouth. A veterinary doctor, where I had taken my pet dog, bought a comprehensive general liability, property and medical insurance. Abhishek had a few friends who bought from us. These people helped us get referrals.
However, the initial growth was slow. In the first year of operation, we acquired, on an average, just two clients per month. Today we acquire 10 clients every single day. That is a huge step forward.
We recently sent our first 100 clients a thank you note and it was lovely to see that most of them are still buying insurance from us.
What has also been satisfying is to see the pace at which our clientele has grown. A very large proportion of the SMEs who bought insurance from us in 2012 are no longer SMEs, by any definition. As they have grown, so have we.
How did you grow your client base?
Our client base has grown rapidly. We are now over 5000 clients and by December expect to cross 6000. We acquire 10 clients every day and this will double over the next few months. We have been following a diverse set of marketing approaches. The common theme to all these approaches is that solutions are tailored specifically for SME segments that have identical needs.
What kinds of services do you provide to your clients?
SecureNow is a single point contact for all insurance related issues that an SME may have. We negotiate insurance with insurers on behalf of our clients, place the policy with all the facts properly documented, provide support on servicing and step in when there are claims.
The servicing and claims part of our offering are critical. Today we process about 15 claims a day. This is not a small number. The probability of a claim getting addressed, when we manage it, is much higher simply because we know how the case should be presented and have the ability to make sure the case gets a proper hearing at the right level within the company. Sometimes, if we are dissatisfied with the claims outcome, we provide support in approaching the Ombudsman for resolution.
Servicing in insurance is not well understood but is an important aspect. We get about 50 servicing queries every day. Companies have people leaving or joining throughout the year. Assets are being purchased or disposed. These changes need to be regularly updated in the insurance. We do this using our portal where clients can upload requests and see the status at any time. The most recent active list is always available to them at the click of a button.
In a few cases, some companies have approached us for a risk assessment and critique of their existing insurances. Some of the mistakes we find in their insurances are horrendous. For example, they may have bought a fire insurance 5 years ago on book value basis without any adjustment of sum assured. This means that if they have a claim today, the company will get a small proportion of their replacement cost. On the other hand, we may find that the company has accepted a warranty such as round-the-clock security that they do not comply with.
How do you segment your market? What is your approach?
We see the SME market as large groups with similar insurance requirements. These groups could be along the lines of professions, geography or economic strata. For example, contractors, jewellers, chartered accountants all have very similar and specific insurance needs. Geographically, all the units in an industrial area would have similar requirements. Economically, contractual blue-collar workers struggle to get basic health and life insurance benefits.
We identify such groups, develop products that are most relevant for that group and then think through the most efficient way of distributing, creating the pipes that I referred to earlier.
Since most of your clients are SMEs. What are the challenges in catering to this segment?
The most pressing issue is how to reach this segment cost-effectively. Since premiums per client are low for SMEs, it becomes key to use technology to reach them and eliminate expensive distribution processes.
The other aspect that is challenging is risk management. Since the extent of underwriting done for SMEs is much lower than larger clients, it becomes imperative to build in risk safeguards, particularly to prevent anti-selection. That means, people who know they have the highest risk or an imminent claim are the ones who purchase insurance.
There are, of course, many benefits of dealing with SMEs. For starters, the decision-making is much faster and there are few conflicts of interest. The insurance that is best for the company is what the proprietor will buy. In large companies, decision-making is complex as departmental issues come into play. The purchasers are employees who may have their own objectives to meet.
What are the needs and aspirations of such clients?
No company wants to be classified as small. When we started operations, it was quite annoying to be told by insurers that the SecureNow relationship would be managed by the small broker team. This was generally a pseudonym for poor service and low responsiveness. Small sized companies want to grow big. They are looking for solutions that really help them mitigate risk. In fact, these companies are less concerned about purely compliance related purchases.
Many of the companies that were small sized when they made their first insurance purchases have grown significantly now. We have grown with them. Also, small clients are looking for good quality, no-nonsense support.
SMEs like to work with multiple brokers. What are you doing to increase your wallet share?
Most of the clients that we work with do not have insurance. 70% of our clients bought insurance for the first time from us. We do not see competition from other intermediaries including brokers. The competition we have is from the insurers or their agents who distribute 70% of commercial insurances. That is a David versus Goliath battle but with the odds stacked in favour of David, that is we. There is just no way insurers can compete with us as we have access to multiple insurers and the ability to select insurers based on their proclivity to a certain risk. There is no compulsion for us to sell products of any one insurer.
We do aim to increase our share within a client by selling multiple products and having them buy larger insurance amounts over time. On average, we sell three insurance policies to every two clients and we are working hard to increase that proportion. Our ability to cross sell is high because we know the clients intimately. Renewals are also an important factor in our economics. We provide several technology related hooks to our clients to ensure that they renew with us even if the insurance company keeps changing.
Do you charge a fee from your clients?
No, we do not. Our fees are built into the premium and it is paid by the insurer. The amounts we are paid are regulated and capped.
What are your future plans?
We have a long way to go. Over the next 3 to 4 years, we would like to build an insurance book of over Rs.1000 crore. Even this is small. Given that the market today is about Rs.1 lakh crore and growing fast there will be a handful of companies that have an insurance premium of Rs.5000 crore, 8 to 10 years from now. We want to be in that set.
Over the next few months, we will apply for a reinsurance broking license because that allows us to work directly with reinsurers to develop products for the market. It is also a way of introducing international experience to our market segments. We are closely evaluating the rural insurance market. It is clear that this will grow dramatically over the next few years. What we need to work out is the specific role that we can play in this segment.
How big is your team size?
We have about 140 people. Over the past year, we have built a strong leadership team of people with over 10 years of experience. The profile of our recruits is generally those who have been stable in their previous companies for four to five years and are from outside the insurance industry because they come with a fresh outlook.