A masterclass on insuring rural India | GramCover
A masterclass on insuring rural India | GramCover
Imagine an India where every farmer has a safety net against unpredictable challenges. Gramcover is turning this vision into reality through its innovative insure-tech startup.
Fundamentally, an insurance company is in the business of transferring risk. It takes individual risks and transfers them to a group of individuals, thereby reducing the maximum loss of individuals.
In India, there is no section of the population more at risk than farmers. Farmers don’t have a fixed income, they are constantly gambling on everything they own and they are at the mercy of numerous external factors like the weather, global economic conditions, and state and national level policies.
This is what makes a company like Gramcover so important. It is the only insure-tech startup that is focused on expanding the insurance base in rural India. This Noida-based startup makes use of some very unique strategies to sell low ticket-size insurance to the bottom of the pyramid.
Dhyanesh Bhatt talks about building GramCover and shares his amazing insights from his 2-decade-long journey in the field of insurance!
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Additional readings:-
1.How a missed opportunity in insuring rural India became the business model for Gramcover
2.Delhi-based agri insurance startup gramcover is de-risking rural india with affordable products
3.How parametric insurance breaks the mould of traditional insurance?
5.Interview: Dhyanesh Bhatt, co-founder and CEO of GramCover
Read the text version of the episode below:-
Dhyanesh Bhatt: Hi everybody. I'm Dhyanesh Bhatt. I'm the co-founder and CEO of Gramcover, a rural focused InsureTech platform.
I joined I C C from campus in in 2005. At that point of time, I c lumbar was just starting their rural and agribusiness division. They had come to campus to recruit people for the rural and agribusiness division. At I CS lumbar I started my journey with corporate insurance.
I was in Ahmedabad for the first couple of months and I moved to Mumbai in 2006. From there, it's the standard journey that you would have as somebody who's working in a large corporate enterprise. Started at the bottom as a relationship manager, working with multiple clients, they work with a larger set of customers, with larger clients across different domains.
Worked across telecom, across the oil and gas, across aviation, across large government institutions and then some others as well. Did all of that for around seven years. In my last stint in ICICI, I was on the corporate side I was looking at part of Mumbai as a territory.
I was kind of responsible for and at that point of time somebody within the organization from the rural division was moving out. The call from the management was that, you have a background in rural and looking at somebody to really look at this rural business piece.
So I would be an area of interest. I said I've been doing corporate insurance for a very long time. I think rural would also be a steep learning curve because typically government businesses and rural businesses are very significantly different from corporate businesses. I thought it would be a good learning opportunity for me.
I got into rural insurance. Started by doing working on crop insurance. Also started working on the low cost health insurance program. Then looked at other lines of businesses, which are not subsidized.
Work with livestock insurance, multiple things in partnership with say for example, I c partnership with I c Bank. Their banking team used to do something on the laptop for and all. So idea was to if you look at other products which are not subsidized. And then the last milestone was IC cell's foray into the CSC setup.
Akshay Datt: What is CSC?
Dhyanesh Bhatt: CSC is a common service center initiative of the ministry of Electronics and Information Technology. Through that there is a village level entrepreneur who has access to multiple G2C and B2C services, then they can offer to the rural or to the urban consumer. And insurance is one the services that is provide to that particular setup.
Akshay Datt: No, there's like the ITC had that echoupal something like that.
Dhyanesh Bhatt: It's just similar to that. But ITC e- would've been limited to ITC products and typically more to with agri inputs and aggregate trading. This is more ministry level initiative. So there are multiple services.
For example, you want to do something on your app, so a lot of G2C services and B2C services can provided to the CSC setup. So ICICI Lombard had evaluated the opportunity at some point of time in the past but 2017 was a part of something that we call as whitespace initiative when we are identifying new opportunities
I worked on the whole CSC initiative. We looked at how it has grown over the last couple of years. What are the chances of getting into a larger space. So we made the case presented into the management, got the approval to launch the initiative.
The launched the initiative, did the tech integration, and then started with around four states in which we wanted to roll this out. That was another one, one and a half years.
Akshay Datt: And what products did you roll out?
Dhyanesh Bhatt: Personal accident motor insurance. Motor insurance is a large part of what happens even to the CSC.
Akshay Datt: Just tell me the difference between the subsidized and non-subsidized business or what all is subsidized?
Dhyanesh Bhatt: If you look at businesses like crop even for that matter, Ayushman Bharat, so a part of the premium is paid by the farmer, but there is also a state government subsidy and probably central government subsidy also involved.
So the farmer or the customer doesn't pay the full premium, whereas in a voter insurance policy or any of the other policies that you look at, whether it's retail health or its motor or any of the other names of businesses that are there, all the policies the customer pays the full premium. So only in certain government programs there is a subsidy.
Akshay Datt: What percentage of ICICI's business was subsidized?
Dhyanesh Bhatt: A small percentage; would say maybe around 15 to 20% at any given point of time. Generally, subsidized businesses for most insurance companies would be in that range. It'll never be hundred percent of anybody's portfolio.
I think this would hold true for some of the other companies as well.
Akshay Datt: And what are rural channels of distribution for reaching ruler India? In urban India, you have that bank as one channel, and you have the agency channel and you have the corporate broker channel. What are the comparable channels for rural India?
Dhyanesh Bhatt: BankLink insurance is one part of it. If I were to look at any asset insurance. So if there is any bank giving a home loan or a vehicle loan, typically we have some of these hires which are there in place even for rural areas. The second is, for NBFC MFIs which have significant rural presence, who are giving income generational loans and also products like term life insurance, typically gets bundled with the loan. So that's another very significant part of the rural insurance space. Then companies like LIC who have a large rural network of agents and they also are present there in rural where their agents distribute insurance.
And I think over a period of time, something we do at Gramcover has also been evolving. So this whole regulation of partners. So these regulations came around in 2015, 2016, and the whole mandate from the regulator was we want look at individuals who can distribute insurance after being trained and certified to really in increase the insurance density and insurance penetration.
If we look at India currently, the insurance penetration of the percentage GDP is around 4.2%.
Akshay Datt: What does that mean? That 4.2% is the premium collected or-?
Dhyanesh Bhatt: 4.2% is the percentage of GDP. So if totally GDPis so and so then out that only 4.2% is the overall contradiction of the insurance sector.
So, which will include life insurance and general insurance. Life insurance is a relatively larger part around 3.2%. General insurance is around 1%.
And what is
Akshay Datt: this number for developed countries, does 4.2 stand alone?
Dhyanesh Bhatt: For larger Asian economies, I think it'll be in the range around 6%.
For the highest, we'll be probably in the range around 10 to 15%. So this is in terms of insurance penetration. The second is insurance density, which is the per person premium that is paid. So India's number is around $78, and the global average is around $800. So there again, it is like 1/10th.
It's also a reflection or it's also a function of the economic status of the country. As you have more economic prosperity, as you have more disposability, as you have more assets, typically the scope of insurance are increasing. So that's evidence.
And so the mandate was that can we also get insurance distributors who are individuals, who could align with insurance needs or align with insurance intermediaries like ourselves? And distributed the last month. So that's another channel that is now seeing traction where over the last couple of years, more and more products are now brought into the ambience of that.
Akshay Datt: And that common service center would also be a channel, like selling through?
Dhyanesh Bhatt: CSC is a channel. I would rate them very similar to the POSP model, except for the fact that it's a separate channel, which comes under the purview of the ministry.
Akshay Datt: What is that term you used, POSP?
Dhyanesh Bhatt: It's called POSP. It's called Point of sale Partner.
And the whole idea is to create network of people who understand insurance in the first place, who are trained and certified and then who can also distribute insurance. Tomorrow if there is a claim or if there is any support required, then the expectation is that the person who would've taken the insurance from point of sale partner who would reach out to him and say, Hey, I have a claim.
They in turn can reach out to us. And then we in turn can help engage with the insurance companies in the settlement.
Akshay Datt: So this point of sale partner is the same as an agent. What is the difference?
Dhyanesh Bhatt: Two things. One is the regulation and the kind of products that they can sell.
So typically there are certain products which are defined as, point of sale partner, POSP products, which can be kind of distributed by them. These are generally simple, easy to understand, the load ticket size.
Akshay Datt: So these POSPs don't have to clear the IRDA exam.
Dhyanesh Bhatt: They have to, there is a separate exam that they have to clear.
Akshay Datt: Easier exam.
Dhyanesh Bhatt: With an agent there is a 15 hour training that is required with a point of sale partner. Typically, it is a 15 hour training that is mandatorily required. What happens is, as an agent, typically there is an IRDA exam that you need to pass. So when the point of partner guidelines were launched, they had a similar, thought process in place saying, there'll be an IRDA exam that you need to take, but over a period of time they realized that it's fairly cumbersome because the number of POSPs were larger than the number of agents. So now any intermediary, for example, Gramcover, we have the IRDA approved registered course modules on our application.
The POSPs are supposed to study that. We have also created some videos for their consumption and over a period of time, we have it right now in English and Hindi. Probably we will have more vernacular languages going forward. And the thought process is that they will undergo that study material. They will go through it and they will take a test.
Test is administered by Gramcover. It's multiple choice questions, there's a minimum threshold for passing. And once they pass that exam, only then they get access to products. And we also report this data to IRDA on a monthly basis. Of all the people who are certificate registered and record certified as our policy. So every insurance company as well as intermediaries have that ability to administer exams and register and inform the IRDA saying these are the people who are registered with us.
Akshay Datt: And these POSPs earn the same commission as an agent or is there a difference?
Dhyanesh Bhatt: Yeah, almost the same. As an agent of an insurance company, we typically get to sell products of one insurance company as a point of sale partner of an intermediary, typically, depending upon the tie-ups that the intermediary has, there is more choice. So if the customer says, I want to have a policy of a particular company, if I have have choice, then the ability of the point of sale person to make a sale also becomes higher.
So I think that is another distinction I would draw as compared to an agent of an insurance company vis-a-vis point of sale partner to an insurance intermediary.
Akshay Datt: So POSPs are generally with intermediaries only, or insurance companies also appoint?
Dhyanesh Bhatt: Both the models are there, there are insurance companies also.
The insurance companies also used to have their own agent model, so I think it's an extension of the agent model where they say we would also like to have a POSP, so it works both ways.
Akshay Datt: Coming back to your ICICI journey, so you you did that new initiative of CSC, then what?
Dhyanesh Bhatt: So that was around 2018. That was the last project that I was working on.
I knew Jatin from my days in I c Lubar. So Jatin is the co-founder of Gramcover. He also was a co-founder and managing director of a company called Skymet, which is an aggregate weather data company. So when I was doing crop insurance, I c c Lubar Sky was basically weather data provider to us.
So that's how I knew Jatin from those days. And then around the time in 2018 Gramcover had got its license in IRDA license as a composite insurance broker in December, 2017. which is like the fag end of FY 80. Then they were on the lookout for somebody to come and join the organization as a professional, as a CEO.
We had a whole conversation saying, this is a startup. It's not a large organization, it could be a difference of lens of how we look at things. I had a meeting with the investors and then I came on board to Gramcover in October, 2018.
Akshay Datt: Jatin had started Gramcover, tell me a bit about that background, while you were at ICICI, what was happening there? Why did Jatin start Gramcover?
What was his vision?
Dhyanesh Bhatt: So Jatin and I had been in the rural space for a fairly long time. He was running sky. And in 2011 was a time when the government crop insurance program had these whole pilots around weather based crop insurance, they also got into it as a weather data product in a large way.
So Sky has a network of around 8,000 odd weather stations in India, across multiple states. And the whole idea is that they collate a lot of weather data that is kind of given to either state governments or to insurance companies. They also now work with banks.
To do some kind of an alternative scoring of good. Because with weather data or with satellite data, you can actually look at historical range what the production was and how all of that is there. But at that point of time, they were primarily in weather data company and they used provide the weather data to insurance company.
So it formed the basis for us to settle claims. Because the weather station was there. And while Jatin was doing that, he also realized that in rural areas there is this huge gap of actual distribution. So most of the insurance at that point of time was either a government program or it was embedded.
There was no network of distribution in rural areas.
Akshay Datt: What do you mean it was embedded? What does that mean?
Dhyanesh Bhatt: So, which I was mentioning that MFI NBFC- they typically have insurance into product automatically. Insurance, which is equivalent to the value of loan that you've taken.
So there is some amount of financial protection for the financial institution, plus there is a amount of protection for the beneficiary. So that is where you realized that there is this space in insurance distribution in rural also, Jatin, because by the virtue of his being in crop insurance, as a data provider, he also understood and he had experience on the agri insurance side also. The whole thesis at Gramcover was, and is, to start with crop insurance. So when we started the journey, we were primarily doing crop insurance. So FY 18, couple of months we started by ensuring thousand farmers in Himachal.
Akshay Datt: And this is like un-subsidized or subsidized, this crop insurance?
Dhyanesh Bhatt: Subsidized.
Akshay Datt: Crop insurance inherently is subsidized, like there is no such thing as un-subsidized crop insurance?
Dhyanesh Bhatt: So there is and I will talk about it, it doesn't fall under the purview of the government crop insurance program.
Government program, all crop insurance is subsidized. And the whole idea was that you do the first level of insurance for the farmers. So, FY 18, 19, 20, I think most of our business was crop insurance. So we grew from thousand odd farmers to 2 lakh farmers to 12 lakh farmers, across FY 18, 19, 20.
Most of our business was at that point of time crop insurance.
Akshay Datt: And this was as an insurance broker, like there were multiple insurance companies whose products you would sell?
Dhyanesh Bhatt: So as an insurance broker, we obviously worked with multiple insurance partners. So we worked with AIC, we worked with United India, we work with IC and lubar, we work with HDFC Ergo. We are currently working with Alliance. We are currently also working with Reliance General. So there are six or seven odd companies that we have worked with. And the process was that the state government would select an insurance company. Then the insurance company would in turn engage with an entity like ours and the mandate is to take this government program to the non loni farmers who are not getting access. So the bank is to doing the insurance of the loan farmers for the non loan farmers who not of them are small and margin farmers. The whole idea is to really take insurance to them. So that's where we started.
And over a period of time we grew that significantly.
Akshay Datt: And what is the way in which you grow it? Even before joining, how did they grow it? Was it like feet on street? Like you've built up a sales team?
Dhyanesh Bhatt: The POSP model that is there. There are a lot of people that we know.
Jatin has been in insurance for a fairly long time. I have been in insurance for a fairly long time. Our chief Business Officer, Pravin, he has been doing rural insurance and crop insurance for close to a decade. So, there is a lot of synergy in the team in terms of understanding how crop insurance works.
So we have all these geographies. There are certain states in which we are working. So there is work in Assam, there is in Telangana, we are doing some work in Bihar. So we know these geographies and we know how proper insurance operates. So we were able to work with people in these geographies to really take the insurance institutional.
So once the insurance company gives us a mandate, we engage with the insurance company, we engage with the regional office, we engage with the district officials and the block officials. We then do a lot of work around Jingles, or doing some kind of a marketing activity.
Doing a lot of farmer meetings and all of that, and then onboard these farmer meetings into the program. That's how it generally works. It's like a last mile connect through a network of people that work with us.
Akshay Datt: And you sell directly to farmers or you sell to the POSPs, like you appoint POSPs?
Dhyanesh Bhatt: The whole idea is that, POSP is an extension of Gramcover. They registered with us, they are our representatives on the field, and we are responsible for whatever activity that they do in the field. So tomorrow, if there is an issue with the POSP, then the regulator is not going to go and talk to the POSP.
They're going to come and see who's the entity which is responsible for this POSP. I don't differentiate this between saying do I send to the POSP or not, ultimately at the end of the day we are saying we are an intermediary, which has the connect and the tech platform. To really create insurance distribution at the last minute, and obviously at the end the customer is the customer.
Akshay Datt: If you have, 1000 people selling insurance, what percentage of them are payroll employees? What percentage are POSPs?
Dhyanesh Bhatt: Our entire POSP network is all variable. We have a network of around 5,000 odd POSPs who are registered with us.
Our core team strength, which is people who are on the payroll of Gramcover, is roughly around 72 people.
Akshay Datt: So the primary sales channel is through POSP only, you don't have sales people who are going out?
Dhyanesh Bhatt: We might have a district level manager or a block level manager, or a state level manager but we will not have people at the last mile at the gram panchayat.
The basic structure would be to have district level managers who manage multiple blocks and POSPs within multiple blocks and guide them, train them certify them, handle any issues that they might face.
Akshay Datt: How much government licensing is needed to sell crop insurance. You license with district officials and block officials.
What is the purpose for that?
Dhyanesh Bhatt: It is more about creating awareness at the ground level. There is EIC, which gets a mandate to work in a particular district. So they will go and talk to the district officials. They will tell them we have got this mandate but when we go for non loni department enrollments.
There will be some marketing activity that we need to do, there'll be some of the farmer camps that we might do. So there we coordinate with the block level officials. We'll tell them that we are nominated by the insurance company to do non in this geography.
So we'll be engaging with the farmers and all. Once the data gets collated and shared with the insurance companies. In certain cases, the insurance companies also get the data validated through the block level officials. There is more of an operational interaction but obviously we do engage with them in terms of attending any of the meeting that might be happening at the block level, keeping them apprised that we are doing this.
Akshay Datt: By the time you joined, what scale was Gramcover at? And you said they got a license, what was that license for?
Dhyanesh Bhatt: So we are a insurance broker by regulation. If you look at the insurance space, there is an insurance manufacturer or an insurance company.
That's one category. So there are three four kinds there. So there is a reinsurance company. So the General Insurance Corporation of India is the only reinsurer of India. Then they have insurance companies. So, ICICI for example, is a general insurance company.
Akshay Datt: So the insurance company insures the insurance companies basically, they can insurance pass on some of their risk.
Dhyanesh Bhatt: Then there are insurance companies, so there could be a general insurance company. For example, ICICI Lubar. There could be a life insurance company example, LIC or ICICI group. There could be a standalone health insurance company, Star Health, Aditya Birla. These are standalone health insurance companies.
Then there is something called as agriculture Insurance Company of India Limited, which is a Government of India initiative doing just crop insurance.
Akshay Datt: It's like a LIC comparables.
Dhyanesh Bhatt: It's an LIC comparable, but just does crop insurance and then you use something called as ECEC, which is again, like a credit guarantee insurance that is there.
So that's a separate entity. So these are broadly 4-5 categories of insurance companies that are there. The next level is insurance distributors or intermediaries. So again, there are multiple levels. So I could be an individual agent, that is the base level, or I could be a POSP for an insurance company or an intermediary.
That's another. Then there are corporate agents. So as an entity, for example, I'm an NBFC MFI, I'm giving loans to multiple people. I also become a distributor for a insurance company, and I'm building embedded insurance into my distribution mechanism. So then I become a corporate agent. Then there is a broker.
So if you look at an agent by description is a representative of the insurance company. So POSP, it's a representative of Gramcover or of ICICI Inbar, for example, whichever is the insurance company. And the agent is a representative of the insurance company. Our corporate agent is again, as an entity, a representative of the insurance company.
They could have multiple partners, but they're still a representative of the insurance company. Then we come to the broking category. And the broking category is a representative of the client. So that's a fundamental difference between an agent and a broker, where a broker is representative of the client with the mandate to engage with multiple insurance to give them the best possible solution.
There are three categories there. There is a direct broker who will work with insurance companies and will direct insurance distribution. Then there are three insurance brokers who only have a mandate to do reinsurance business. So they'll work primarily with insurance companies and reinsurance. And then the third highest category of license is a composite insurance broker where you have the mandate to do both life insurance and general insurance and reinsurance.
So Gramcover has her license of her composite insurance broker. And that we got in December, 2017. So when I joined Gramcover around October '18, at that point of time, we had not completed a full year of operations The first year we had done around thousand odd farmers. We had done around 59 lakhs of premium. And from there the journey started.
Akshay Datt: Policy Bazaar is also like a composite insurance broker, or give some examples?
Dhyanesh Bhatt: Policy Bazaar was earlier an agent, now they've become a broker.
They're in the process of becoming a broker, I think they're somewhere there.
I don't recall the exact stage where they are.
Akshay Datt: Is there any difference in how these two operate like a broker and a agent? Because both sound similar.
An insurance agent can have multiple tie-ups, and a broker can also work with multiple insurance manufacturers. Generally, an agent will not have the flexibility of having multiple types, or a corporate agent .
Dhyanesh Bhatt: Corporate agent is an institution, so that typically will work only for embedded insurance product. If I am an NBFC, I will say with every loan that I give, I will bundle certain insurance, which is what works on (inaudible). They will not go say, for example, motor insurance or health insurance retail customer.
So generally agents are representative of an insurance company or an entity and restricted to that. Whereas a broker is typically the representative of the client and can engage with multiple insurers. I think that is a fundamental difference. An agent within a network of family could have multiple people working with multiple insurance companies, but one agent would typically be assigned or aligned to one particular.
Akshay Datt: And as a corporate broker, you can have a negotiated pricing for your set of customers because you are the customer representative, so you can have more customized products.
Dhyanesh Bhatt: Price negotiation is just one part of it. The value add for any intermediary and software pro for the broking community lies in providing the solution.
Let me give you an example. If I am looking at a health insurance policy a very simple product, let me talk about a product. So there is a product called a Hospi- Cash. What it basically means is that if you're hospitalized for more than 24 hours, there is a fixed payout that you can get. 500 rupees, 1000 rupees per day, whatever is the pre-agreed value.
Now, if I want to offer these to women customers who are say with an MBS, you're getting a loan. If I have a cover which does not cover pregnancy or does not cover maternity, then it is something that is an issue. Because there will be a part of the population which will have maternity during the course of the year, those will not get paid.
So I think as an insurance intermediary, as an insurance broker, the role that we play is to ensure that the policy structure is aligned to whatever the exposure is. As an insurance intermediary or as any partner to an institution there are two categories of insurance that are there.
So one is a repair insurance. So where there is motor insurance, for example, there is health insurance. So these are retail over the counter products. So the product features will be the same for multiple insurance companies there might be different add-ons, but more or less they're similar in nature.
And there is a price that the insurance community decides, and there may be some flexibility in terms of pricing, but it's a limited flexibility. You'll say based on these parameters, there is a pre-agreed discounting that you can do when insurance companies can provide that information to the intermediaries and the insurance.
Insurance interimediaries doesn't distribute the product. There is relatively less flexibility. The second category is group product. So when you work with group policies, something that we call as master policies, you have the ability to customize the coverage. So you engage with the client, you figure out what is the coverage required.
Then you talk to the insurance company. You figure out how it'll work. Then based on the structure that you created, you engage with multiple insurance companies to figure out the price , the service capabilities. Somebody might be more or somebody might be less, depending upon whatever. They do all of that.
And then you identify the one insurance company that will be the partnering agency and then you bring them together and then you work with them. At Gramcover a large part of our businesses all through retail.
Through POSPs where the product is pre-agreed and all of that. But we also have a small part where we customize the coverage. There's something that we call strategic alliances. The idea being that we partner with rural focused organization. Let me give you a couple of examples.
I think that may help. So there is a hand startup that we have partnered with where we embed germination failure covers with the seed package deal. So if say for example, there is very heavy rainfall because of which germination would fail, but there is very less rainfall because of which germination would fail or there is very high temperature because of which germination would fail, there is a cover that is provided to the farmer who's buying the product. We have partnered with another agri tech company to admit person accident insurance with the sale of products worth a particular amount. So for example, if a farmer is buying goods worth say 3000 or 4,000 rupees from a customer.
He or she will have a personal accident cover, which is admitted. So that information goes to the insurance company. The insurance company will issue the policy. The farmer is covered for the next six months. So anything happens to him, either accident, death or disability, there is coverage. We have partnered with another agritech company which is in the space of warehouse capacity creation.
To provide them with parametric insurance cover, which protects them against the risk of extreme weather leading to crop damage, leading to no good store, creating a scenario where they have created warehouse capacity and they're paying the rent for it, but there is nothing to store.
Akshay Datt: Loss of revenue.
Dhyanesh Bhatt: It's not exactly lost revenue. It's increased cost of working. I have already made the expense, but I'm not getting revenues. So that's another example. So there are multiple examples where we customize the coverage and we say, how does it fit into the overall risk transfer scene, our mechanism, and how is it relevant for the customer?
You do that, then you look at for this product structure, what kind of pricing you can get, what kind of technology you can use, how do you deploy all of that? That is the role that any intermediary we should play. In India, if you look at it, there are challenges of awareness.
Apart from challenges of access. Which you distribute. So you're physically there and you distribute. That's one part of it. The third most important part is also the challenge of serviceability. So what happens is you have an insurance product, you distribute and then you disappear.
Then there's a problem for the customer. What happens is an insurance typically has this challenge. So let us say there are a hundred customers, 90 people out of their hundred customers say 10 people have claimed ,out of that eight people, their claim got settled well.What will happen is those eight people will say, this is my right, I have taken an insurance policy. The policy has responded. So that's good. They appreciate it, but that's it. But the two people who don't get insurance claim Seamlessly, they could debate either about the actual fact that the claim is the applicable or not applicable.
The second vote would be about the quantum of claim and all of that. There isdisagreement over there. Then you always hear these things and you see serious examples, even on LinkedIn, for example, where people say, this insurance company, we did not have a good experience.
It's very important to address this. So if insurance has to be a sustainable part of the risk transfer ecosystem. It's very important to not only create awareness and access, but also to ensure that serviceability is something that you're addressing.
Saying that if the customer has a pain point, he should be able to reach out to the partner and say this is my pain point. And then the partner gets into act and engage with the insurance companies and tries and help it out. For rural population, it's fairly relevant.
Because at the end of the day, the insurance policy is a legal contract. Some people might understand it fully, some people might not understand it fully. The ability to engage meaningfully with the insurance company is in certain cases, a challenge. All of these places an intermediary has that mandate to really work on that part.
Spend time on cultivating new business or new policy generation.
Akshay Datt: I like the term you used- the risk transfer ecosystem. Essentially insurance is like transferring risk from one to many. So when you joined Gramcover, had you raised any funds or was it bootstrapped till then?
Dhyanesh Bhatt: Omnivore is one of our early investors. They were already on board. And when I joined at that point of time, post that we onboarded few more investors.
So Omidyar came on board, Flourish Ventures is there. We have EMVC, which is a FinTech investor called Emphasis Ventures. That's the full name. In the Series A that we did last year si SI and in Flexor, these are the two other investors who came on board. So we have six investors, let us say.
Akshay Datt: They'd done like a seed round before you joined?
Dhyanesh Bhatt: They had done seed round before I came up.
Akshay Datt: So tell me about the journey once you joined. In what way did you meaningfully change the trajectory? Did you bring in more technology? Did you bring in a better go-to-market strategy or did you do work on better products? Or like, just help me understand the journey after you start.
Dhyanesh Bhatt: I think that is if I were to look back in the last four years. One is obviously the scale at which we operate has changed. When I came on board, we were at around 20 people. Currently we are at around 70 odd people. But in that intervening period of of this journey from 20 to say 70 odd, which is in the last four years, our premiums have significantly growth.
So from 15 lakh worth of premium in FY 18 in FY 19, around 12 and a half crores of premium in FY 20, we did around 50 crores of premium, in FY 21, we did around 110 crores of premium in FY 22, we have done 280 crores of premium. This has been a significant journey for us in terms of the scale at which we operate. So starting from working with 1000 odd farmers to 2 lakh farmers to 12, lakh farmers to 16, lakh farmers.
Last year we worked with close to around 42 lakh farmers. It's a significant scale. The second, has been the journey on the technology. So, we have been working on the technology side since inception we have our own in-house technology team.
We've been working on multiple products. We started with crop insurance. Today we have motor insurance, we have a bit of health insurance. Some of these group products. We are able to distribute through our platform. so there is an ongoing journey.
I think the larger vision would be to have like a 10 by 10 matrix. So have 10 odd products and 10 odd insurance companies who are offering those products so that the point of sale partner working with us has enough choice to cater to what the customer is looking for. And also provide enough options in terms of risk transfer solutions.
Second is the whole journey on the product side. So as I was mentioning, for the first couple of years, we were primarily a crop insurance company. Now there are almost 35 to 40% of our revenues came from the non-crop side. And motor is major drivers for us. The third part, we've been able to raise some funds during the process.
So last year, we've done our series A. Also the team has grown fairly significantly, plus the whole group business that we talk about where you customize the products in conjunction with the client in an engage with insurance companies. That's been another area of how we are able to contribute meaningfully.
So that's another way of really engaging with the rural ecosystem. And growing the methodology are the models in which you make insurance a meaningful part of the conversation. These are things that immediately come to mind of the traction that Gramcover has seen over the last four years.
Akshay Datt: This is phenomenal growth from 50 lakh premium to 250 crore.
What is your customer acquisition cost? With a normal startup like Policy Bazaar their customer acquisition cost would be like very easy to measure because they would spend money
on Google, then Facebook ads and so on and so forth. What is the cost for you for customer acquisition?
Is there a linear relationship? Like more premium means more cost also, or what is that like?
Dhyanesh Bhatt: The whole course that we've done is majorly in terms of the POSP network creation. Saying that we have to engage with them.
And most of the training or certification that we do, that's all on the application. So obviously there is a cost that we incur but it's more in terms of of creating the network of POSPs and then engaging with them and taking things forward. Because we are rural I don't think we have a lot of people who try to target through social media.
There'll be some such people who will be more active on social media, but, it's not like the primary go-to market for us. So it's through our POSPs that we kinda typically engage. And that's where our expenses are, or the cost is also along those lines.
It's a small network. As of now we are around 5,000 odd people in a country with 600,000 villages and 250,000 odd (inaudible). So as we grow, these things will evolve well even further. But that's where we are at cost of acquisition is more towards creating the network and activating it rather than major spend in terms of say Google.
Akshay Datt: And this would not be like a linear relationship. It's not like for every word of treatment we need to spend 10 paisa or whatever, one paisa on-?
Dhyanesh Bhatt: The whole idea is that there are two or three key levers. The first is a number of products that you have on the platform, which basically enables the point of sale partner.
Akshay Datt: So that increases your average revenue per partner or average revenue per buyer?
Dhyanesh Bhatt: That's one. The second is the network itself. So once I start creating the network and we have a larger network. So one is the incremental cost. If you're doing a good job if you're working well in the rural ecosystem over a period of time, a lot of growth of my partner, that will happen by word of mouth.
Because a person who's working with us would probably recommend that this is Gramcover, they have good products, they have a good system, we have more partners coming on board. So creation of the network should become less expensive as over a period of time. Similarly, I think the second most important part is the lever of activation.
So activation and engagement. So I might have a network of 5,000 odd partners, what percentage of them are, over a period of time I will want to move into a territory where larger percentage of them are active. So that again, increases the revenues that we get from the same network.
The third is, it's more on the ability to engage meaningfully with the partners. So today as I develop the technology platform more and more, a lot of frequently asked questions could be addressed with that, a lot of product information could go through there.
So technology, as we scale that. Apart from being a platform where you can do transactions. If it also becomes a platform where you are getting nudges, where you are getting additional information, all of that leads to making the whole process more cost effective. So I would say that as the network of partner grows I would see all the associated costs that we have on a per unit basis.
So qu over on quantum still go the per unit cost,
Akshay Datt: But by increasing your average revenue per partner using technology, you have that leverage there. I'm guessing that your tech stack is focused on the partner, like he's the primary user for your tech stack and you want him to be more engaged and more active and sell more and increase.
What are some of the things you're doing there to make him successful?
Dhyanesh Bhatt: It is completely focused on the partner app. So we are ordered direct to customer, our platform. We are an assisted tech platform. There is a Gramcover partner application, which is their own Android, which is used by the end of sale partner.
So, the first step for them is to download the application. They give their credentials, so basic information is taken from them. The credentials are created. The first thing that we do is we do the training and certification. So till that point of time, they don't get access to them. Once that is done, in the meanwhile, once they get certified properly and they get trained and certified by us, and that they have passed the exam and they're now certified, they will get access to products.
What we also do is that we have created wallets for each of our partners. So in the rural ecosystem, we realize that there might be certain scenarios where for low ticket site products, customers might want to have alternates of paying. Everybody might not be using a credit card or a debit card.
We facilitate that with wallets also. So there's like a lot of tech that goes into the payment part of.= it.
Akshay Datt: They can take cash and use their wallet to make the transaction?
Dhyanesh Bhatt: They can take cash. They can actually send a link to the customer. Where if, say customer is Google Pay now we have seen Google Pay more they're becoming more common even in the rural areas where there is a smartphone.
So for a part of the population who don't have a smartphone there are these options will work. But where there are smartphones there you see some people kind of, opting Google Pay, PhonePe, even there. So they can do that. They can use typically a credit card, debit card that is also open.
But those options are also there. We've also tried to simplify the journey of onboarding a customer. So for example, traditionally if you wanted to even digitally capture information, you'll say, sir, show me your icon. And I will manually type that information. But for example, we can just scan the QR code of the other and those eight, 10 information fields which are captured in the other, they can come.
So we have done some of those things also to ensure that the data entry is being done seamlessly, there's not too much time and effort wasted to do that. So starting from collection of the client information to showing multiple insurance companies as options to collecting premiums and digitally ensuring that the policy copy is sent across to the customers.
So we have done back to back API integrations and insurance company on multiple product. So then what happens as soon as the transaction is complete. The customer will receive an SMS saying here is a link to your once copy document, and they'll have a PDF that they can download. So typically for customers who don't have a smartphone that will not work, but the general expectation of the general train, we have seniors that within the house there is at least one smart phone.
So the son will have it or the daughter will have it, somebody with the family will have it. So then they can access it there. And obviously at any given point of time, this particular document is also available with the point of silver. So tomorrow there is a theme in the person which is out, he or she can help.
Akshay Datt: And this document is available in vernacular language also?
Dhyanesh Bhatt: No. So most of the policies typically are still in English. Fortunately, unfortunately, there is a mandate to move to vernacular but that is still a journey and, what happens is when you look at technical language in English or legal language in English vis-a-vis legal language in Hindi, legal language in Hindi, if you're not used to it, is also fairly complicated to understand.
I'll give you a example. So I got into rural insurance after doing seven years of corporate insurance. So first meeting that I went to was in a large Hindi speaking state. I'll not take the name of the state, but Hindi speaking, where in the meeting they said,
(Hindi) But if you've not heard first time you don't get it. My mom is a Rajasthani, I've been speaking Hindi from childhood, so I understand 80% of it. But when you look at legal, so if you look at either government language or legal language or legal language in Hindi, it's not something that will come very naturally to you to understand. There is a journey.
There is a journey in terms of simplifying the entire policy holdings itself in the first place. And then I think the second journey is to say that okay, how do you also ensure that it is out and working.
Akshay Datt: And how do you help your partner to drive more retention, like it's a venture, like people's renewing policy.
What is the kind of churn you see and what are you doing to reduce?
Dhyanesh Bhatt: We send out renewal information to the client. We send out renewal information to the point of sale partner also saying that in the next 30 days, in the next 45 these are the renewals, it's very basic at this point of time.
I think there is a lot more work that we are planning to do on this as we grow. So there's a significant amount of data that actually comes to us. So in terms of being able to suggest to them, this customer that you did crop insurance for he will most probably have a two-wheeler why don't you have a conversation with them about two-wheeler.
Akshay Datt: Cross-selling.
Dhyanesh Bhatt: There has a lot of that will happen in the days to come. Now it's about, it's getting the right there's this policy that you've done coming up for renewal in the next few days. Letting the customer know that there's a renewal.
Letting the partner know that there's a renewal and taking power from there. Also I would say the most important part is that, anything that comes to us on the claims side, we are fairly cognizant of the fact that it's a very important part and we really get into the act and kind help in that process.
Even in terms of crop insurance, where I don't have a role to play in terms of settlement of claims, at least in terms of passing information by connecting with the insurance company and sharing that with the farmers, that is key to letting them know. Because unless you take care of that, the renewals are gonna be extremely difficult.
And a customer lost is lost forever because if it is because of a claim pain point then they will always feel that, insurance companies take premiums, but they don't support in their time of claims and what is the point? And once the trust is lost, then it's very difficult.
So I think the most important part is to ensure that trust does not get lost.
Akshay Datt: What renewal rate do you see generally?
Dhyanesh Bhatt: Generally what we have seen, crop insurance is the one that we have got maximum experience. So there again, depending upon whether a crop is cultivated by that farmer in the season or not, our general experience has been that we see 50 to 60% farmers coming back to us in the subsequent season.
And I would say it's a factor of both the things saying somebody might be working this year, they might not be working in the next season, they might be working in the next season, might not be working this season. I don't think we have completely pushed the market as I am mentioning, crop insurance. Again, maybe cross is what is covered. I think there's significant headroom to benefit more and more farmers onboarded with the programs.
Akshay Datt: What do you think is the hardest part about growing Gramcover? What do you really see as the big problems to solve?
Or the big problems that you already solved? Like the hardest things you did? You could talk of either like past or future.
Dhyanesh Bhatt: Gramcover has a good base from where to really grow . So we've done the first few things right. So starting from getting a good set of investors to obtain the business model, attaining a product market to it, for getting the basic tax stack in place.
So all of those things, I think have been to a certain extent, addressed. Although it is like a work in progress and it'll keep on evolving a bit of time. But the legwork in terms of the first initial three, four years, that is where you have maximum amount of challenges to, I would say overcome in terms of getting the basics right .
That has been done. The learning from here would be about how do you now from here scale it to a 5x, 10x in the next couple of years? That will be the journey. If I look at rural insurance per se as the space. So I think there are three challenges for us, as I was mentioning.
There's challenge of awareness, the challenge of access, and the challenge of serviceability. So those are the three broad challenges that we need to address. Obviously we have our modern in placing partner with POSPs and we can really solve for this.
Akshay Datt: That access is solved through POSP.
Dhyanesh Bhatt: Point of sale partners. Creating that network, so we are around 5,000 partners now. We really want to scale that up. The ideal thought process would be that there are 250 thousand can we have a POSP niche? One is creating the scaling in the network.
The second is the first activation and the engagement saying how do you get them to start participating. And the third thing would be how do you make them more efficient so that it is internal distribution is becoming a mainstream activity for them. So that they're picking enough to say, okay, this is the thing that I want to pursue as something that I want to really take forward because I'm able to sustain myself.
That would be the second part of it, saying, these are the two or three challenges that we need to address and that we need to get, other than that, I think rural is such a vast pace both in terms of the number of people, also in terms of the geographies.
So I think it's about getting those things in certain geographies and then being able to replicate it across multiples. So for example, typically our presence is on crop insurance in six or seven states. Idea will be to go deeper there and numbers there is to think I want to work in 20 states, but at the same time, general insurance as a market where you have motor insurance, where you have health insurance, where you have the lines of businesses there, I would want to get a look more larger geographies.
So balancing that in terms of saying how do you really manage the moving parts of a rural ecosystem. I think that's where it is. Because again with rural that are also nuances, working in Andhra might be completely different from working in the UP. So for a large ecosystem that is there of rural, I think within that doing insurance distribution, that's a large part that we need to get right .
And we'll continue to work on that.
Akshay Datt: Do you wanna expand your product portfolio? I can see your new website right now, you don't offer health. Do you want to get into that also?
Dhyanesh Bhatt: So we are currently working on that as well. We do some amount of health. So for example, we have done benefit health policies.
So whether it is a personal accident policy whether it is for cash policy, the whole idea for us has been we are purposefully, to my mind, coming from insurance background, health insurance is one space where serviceability is of paramount importance. When I look at rural areas, if you are in an urban area, you typically have a hospital network.
There is catalyst available. You go, you present your policy or your thing and you say, now this is the policies. So the insurance company will engage with the hospital and it'll be taken care of. In rural areas, that cashless hospital network is not really that great. There are some states who do (inaudible), there the network might be there, but those that typically for the government programs that network is for government programs.
So the whole idea is that when you do indemnity health products, it'll be back based serviceable. Typically we have done benefit health products, so personal accident over hospi cash, where it is very, very clear if you're hospitalized, if there is an accidental death or disability, there is a fixed pay out that will happen.
There is an agreed value and that gets paid.
Akshay Datt: The serviceability is robust over there.
Dhyanesh Bhatt: The second is hospi cash where if you're hospitalized for more than 24 hours, depending upon the number of days, you will get a fixed amount. And it's a very simple process, it's a small ticket size claim.
The documentation's fairly simple. The process is fairly simple. And the servicing is first. So I think we have started a journey with Benefit Health products as of now, and the idea would be to get into products in certain geographies as we evolve.
Akshay Datt: What about partnerships with the, agritech startups like that might contribute as much as the POSP network do you think that would happen? Or the POSP, because each of these agritech startups are focusing on a different area. There's one which is only on silicon, there's another one, which is their own niches. And so a way to capture that niche would be to just piggyback on what they're doing.
Dhyanesh Bhatt: So we have multiple partnerships ongoing including the silicon that you mentioned.
There is an ongoing discussion of working on a product for them as well. And the whole idea is that with any of these partnerships, the thought process is always to look at embedded insurance funds. They have a business model, they have a product or service proposition that they're making to the farmers.
How do you build insurance as an important value proposition that is adding value to them? So bundling, for example, parametric insurance with the seal of a seed. Or bundling a personal accident product with a seal of a particular value. All of these things is something that we are constantly working on.
There's a separate team that working on these some, as I was mentioning something called strategical answers, where we partner with these analytic startups. But this can only, I think to a large extent be used as an embedded insurance mechanism. Only some of these partnerships could evolve into what you would say a distribution mechanism.
There is obviously scope to make insurance a meaningful part of the ecosystem or the value that the analytic status are creating, but typically a large part of that would work meaningfully if it is embedded. And that's where we are working. I think the distribution part of it, through the POSPs in terms of ticket sizes, in terms of premium sizes, it would always be that the POSP will be a larger part of the network.
The number of policies might be able to do very significantly, even through the analytic startup platform. Also, in terms of the sheer volume of premium that you do, I think probably the POSP team will be a large.
Akshay Datt: So embedded insurance is typically low ticket size because you don't want to have too much cost added on to whatever they're buying.
You said you have a target of 10 x, so making that 250 crore to 2 and half thousand crore help me understand that number with some context. Like how would that compare to other insurance either intermediary platforms or insurance companies?
Like how big would that be?
Dhyanesh Bhatt: So we are a small part of the overall ecosystem of the general insurance industry. The general insurance industry is roughly around 2, 2.2 lakh crores. We are probably around 280 odd crores. So a small part of what we do. For intermediaries, I don't have exact numbers as a ready made number to give, but look at it this way, in terms of the headroom that is available.
So we talked about crop insurance. So crop insurance, we are saying 50% of the gross released in, not though India has one of the largest live stock population in the world, it is the largest population in the world. We are really scratching the surface there.
Maybe 5% of cattle population actually gets insured.
Akshay Datt: So there's a 95%.
Dhyanesh Bhatt: There's huge headroom there.
We look at health insurance as you were mentioning, so most of the health insurance there is the Ayushman Bharath for a certain set of people, and then you come to urban areas where you have high cost, high ticket size health insurance.
But the missing middle is what the government is also trying to solve, there's like a significant part of the population which does not fall in the financially challenged category, but is yet not having health insurance. And you look at any of the statistics that are there on out of pocket health expenses, typically we say 60, 65% of all the health expenses are still out of the pocket.
And we have a significant ability to dent somebody's movement economically. Because these are unplanned expenses. Something will suddenly happen and you have some reserves and surplus and use all of that to take care of the medical expenses and then you suddenly realize that, okay, now we are where we started where we were a couple of years ago. If you look at insurance, home insurance in rural areas, non existent. Even in the urban area, that is fairly not very common, but in rural areas we hardly see that. If you look at shop insurance, there is a large network of shops, but again, hardly any insurance that happens if you look at motor insurance, for example.
So two-wheelers one of the examples that I was giving about renewals, so I think two wheelers, if you look around 50, 60%, two wheelers don't get their renewals. Similar challenges from car insurance. Similarly, you have challenges on commercial vehicle insurance. So one is a challenge of awareness, which I think for people who are existing users, it's not a challenge.
But for the second challenge, challenge of access. If I'm staying in a village, I have a day job where I get paid on a daily basis. You tell me you're to go to the office of any insurance company and then there you will get your insurance. Probably chances are that I might not want to spend the time and go, but if somebody's coming to my home and saying, I will do your insurance are your home you will just spend some half hour on it.
Done, then you might be ready do it. So, I think the headroom there is tremendous and I think that is where I would want to look at it because frankly speaking all efforts would, in rural in charge, we just kept scratching this office, we are just at the beginning of it. So even if I were to say somebody does this or somebody does that overall we know is going to that, that is how I would look.
Akshay Datt: My last question to you, so what do you spend your time on? Like if you were to make a pie chart with things that you are doing, I would love to understand that.
Dhyanesh Bhatt: 3 or 4 broad areas. So one is I would say investor engagement is one part of it. Then on the group business part I spend some amount of time with the team saying, okay, what are we doing?
How are we doing? Because I can draw upon my experience from the past and say, okay, this is something we can structure this way, that way. Obviously also the connecting the industry. So that's another part of it. The third is also on the other lines of businesses, engagement with the team to say, okay what are the numbers looking like?
How are we doing, what are we doing? Any help required on the other lines of businesses. Plus engaging on the technology side because for both the group businesses as well as for the retail businesses side, there is some amount of engagement required on the technology side.
We're trying to get that audit. So I think take business investors and a little bit of regular discussion on compliance and things like that. I think that those are four broad areas where I would invest my time.
Akshay Datt: Do you also travel to rural areas, meet farmers and stuff like that?
Dhyanesh Bhatt: Absolutely. I think a lot of insights are gained by actual field work.
Akshay Datt: And that brings us to the end of this conversation. I wanna ask you for a favor now, did you like listening to this show? I'd love to hear your feedback about it. Do you have your own startup ideas? I'd love to hear them. Do you have questions for any of the guests that you heard about in this show?
I'd love to get your questions and pass them on to the guest. Write to me at AD the podium. That's adt, h e odm in.
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Until the next founder's thesis📕,
Your host, AD