Toffee Insurance: Lessons in Selling Insurance to People Who Don’t Buy It
Insurance is a 70-80 billion dollar industry in India even as Insurance penetration is around 3.42 percent. This is far below the global average of 6.2 percent and indicative of a very large untapped customer base.
In a country largely uninvested in insurance even against catastrophic events, Toffee Insurance, a fully digital insurtech startup is attempting the unthinkable. It’s selling “Bite sized insurance for everyday moments.” Also funny because every other insurance company sells insurance for rare moments – like a fire destroying your house, or a fatal road accident, or heart surgery; claims would be through the roof if it was insurance for everyday moments.
According to Nishant Jain, the co-founder of Toffee, along with Rohan Kumar, insurance for everyday is an untapped market. Out of the 50 million Indians capable of receiving insurance services on a digital platform, the startup targets the youth aged 25 while the insurance buyer of traditional insurance plans is around 35.
“We are trying to get young people, those not really interested in being insured to buy insurance and make it a habit. The youth have no fear, but they do have other risks in life, while commuting on a motor bike, or losing a bag or a tab or phone, or like spraining an ankle during zumba or pilates.”
These are events of less catastrophic proportions and not likely for traditional insurance policies to cover. Insurance products like the ones from Toffee provide cover in such moments, against any loss of income or even if hospitalization is not required then compensating charges for a plaster or physiotherapy for a pulled muscle.
The products are mostly in the health and general insurance categories in a budget suited to the income of a young professional. The plans are priced between 400 and 1000 rupees a year. An anti-dengue insurance plan would be 600 rupees. A rent plan which would cover against loss of valuables for a youth living in a hostel or a PG for example would be 430 rupees.
Targeting the youth is a long sighted game for two reasons:
1. It encourages the use of insurance as an investment option securing against future calamities. “A plan of 1000 rupees can save you 4000 to 6000 rupees in a few years,” says Jain.
2. Toffee has tied up with traditional insurance companies to create these products and is essentially setting up a future customer base for these larger companies. It has license from IRDA to act as corporate agent, and works with nine major insurance providers and underwriters such as Apollo Munich and Ergo, to provide these tailor-made policies. Toffee also would look to inculcate and make insurance buying a habit for the youth, who when they are older and have more income, will be ready to migrate to larger more serious plans.
Marquee investors Kalaari Capital, Omidyar Network and Accion Venture Lab too have bought into the premise, literally. Toffee raised Rs 1.5 million from these investors in 2018 in a seed funding round. Since launching in December 2017 the startup has been in pilot phase, and was released to market in April 2018. Operating for only a few months it is completely a primitive business but has investor confidence: Vani Kola, managing director, Kalaari Capital, said they choose to invest in Toffee Insurance because, “Insurance is highly under-penetrated in India, and it needs product innovation to reach masses. The mission Rohan and Nishant are on, to create simple and small ticket size insurance products and distribute them in a very contextual way, has huge potential to drive the mass adoption”.
Insurance services provided on a digital interface could make penetration faster and wider. Toffee and other truly insurtech companies like Acko are attempting to address this problem by digitizing the entire insurance life cycle to make it faster. Toffee claims buying insurance on its platform takes less than 90 seconds and simple claims are processed in under two hours via a completely digital interface.
In addition, by 2021, the insurance industry would triple but still would have only a few completely insurtech companies in India. Those who would perhaps use AI and Internet of Things (IoT) sensors to provide personalized data to pricing platforms, allowing safer drivers to pay less for motor insurance for example, those who would use ML to augment claims management to handle large sets of data and to automate the process and to even select what claims to fast-track, or those who would use blockchain to prevent insurance fraud or track medical records digitally, would be few and far between, and presents a gap in services with untapped market.
