When Digit Insurance started operations in November 2017, the general insurance sector was only used to business done physically, via brokers and field agents, and occasionally through web-based sales. So, to become relevant in the market, Digit had to work smartly but differently to ensure traction for its products.
The company was backed by Prem Watsa’s Fairfax Holdings (which had earlier partnered with ICICI Lombard) and founded by insurance veteran Kamesh Goyal. So, how to navigate the market wasn’t a tough question.
When the business was launched, Digit Insurance collected Rs 2.66 crore as gross direct premium in November and December 2017. Three years later, as of December 2020, the insurer ended up with Rs 2,150.89 crore in gross direct premium.
In January 2021, Digit became the first unicorn of the year with a valuation of $1.9 billion. The insurer said it achieved the $1 billion-plus valuation (Rs 14,050 crore to be exact) in three years of operations after existing investors pumped in Rs 135 crore of additional capital in January 2021.
The beginning…
Digit’s founder-Chairman Kamesh Goyal is a veteran of the insurance industry with close to 33 years’ work experience. Starting his career with the country’s largest general insurer, New India Assurance, Goyal was instrumental in setting up global insurer Allianz’s India presence as early as 1999.
Later, he went on to Bajaj Allianz General Insurance as part of its founding team and subsequently served as CEO till September 2007.
After serving as regional CEO (Middle East, North Africa and South Asia) for Allianz, Goyal then went on to lead Bajaj Allianz Life Insurance for three years. Post this, he moved to a global role at Germany headquartered Allianz, where he worked in markets such as Munich and Singapore for close to five years.
Going by his connection to Germany, Goyal had originally christened the brand as Oben, a German word for ahead/at the top. But the team felt that the name wasn’t simple enough to understand and he agreed to change it. It was renamed ‘Digit’ to reflect its digital-first approach.
Having studied the insurance sector inside out, Goyal knew that general insurance products were considered complicated. Added to this was the low insurance penetration of non-life products (0.77 percent in FY17) in India despite there being more than 25 insurance companies. Insurance penetration is measured as a percentage of premiums to gross domestic product (GDP).
That is when the movement to digital-led insurance began. In an interaction with Moneycontrol, Goyal said that what worked was that the company was able to do diversify its business rapidly while keeping expenses low.
The expansion
Digit started off in the non-life insurance space by selling motor insurance, international travel insurance, home insurance and mobile insurance.
It took the partnership route to get a strong foothold in the market. By May 2018, the insurer had crossed 1,50,000 customers and wrote Rs 94 crore of gross direct premium.
How it worked is that Digit would partner with large brands across businesses to ensure that customers get a cover while purchasing products. For instance, it partnered with Tanishq for jewellery insurance.
Similarly, for the travel segment, it partnered with Cleartrip. Their policy covers flight delays, checked-in baggage, missed connections and accidental death. It also tied up with Amazon and Paytm Mall for mobile handset insurance to tap the e-commerce space.
By FY20, the insurer started seeing rapid growth on the back of the partnerships and increased distribution reach.
According to data from the Insurance Regulatory and Development Authority of India (IRDAI), Digit had a gross written premium of Rs 460.03 crore in the June quarter (Q1FY20), which was a 338.83 percent year-on-year (YoY) growth.
Another big milestone came in July 2019 when Digit entered the health insurance segment. The company had then told Moneycontrol that its USP was to simplify the policy document and ensure that even a 15-year-old child could understand what the product features were.
New investors
Since expansion was happening at a rapid pace, Goyal told Moneycontrol there was a need to get funds to improve solvency.
IRDAI rules mandate that an insurer has to maintain 150 percent solvency at all times. This is roughly the amount of assets versus the liabilities.
In January 2020, Digit received IRDAI approval to raise $84 million (approximately Rs 600 crore) from three growth equity investors: A91 Partners, Faering Capital and TVS Capital.
This combined investment brought Digit’s total funding to $224 million, making it one of the largest funding rounds in the Indian general insurance space.
By then, Digit had served more than 5 million customers and achieved close to $300 million (approximately Rs 2,130 crore) of annualised premium. It also had a 1.2 percent market share overall in the general insurance industry in India, which was significant considering that it was only two years old.
What was unique about this fund raising was that in addition to the three institutions investing in the company, 72 Digit employees also invested over $4.34 million as a part of this round.
Coronavirus and product strategyBy March 2020, India started seeing a rapid increase in COVID-19 cases. A nationwide lockdown was announced by March 25 and the country reeled under severe economic stress.
Even before a standard COVID-19 health insurance product was mandated by IRDAI, Digit launched the first product covering the disease, on March 3.
Goyal told Moneycontrol that this worked well for the company and helped it get good traction.
“We had introduced the industry-first COVID plan and covered 2 million people under it. As of December 2020, this product itself contributed 7-8 percent of our total business,” he added.
While segments like motor insurance had seen a slowdown in the initial months of the lockdown, Goyal said that it is now showing signs of growth.
Simultaneously, expenses also came down for the company. As of December, the expense of management as a percentage of gross direct premium stood at 36.74 percent compared to 54.83 percent in the year-ago period.
The company is also now inching closer to profitability, as per IFRS accounting standards. Goyal said that Digit is eyeing breakeven under IFRS by March 2021.
“Overall, the worst is over. We are expecting our growth trajectory to continue and will now look at geographical expansion in Tier 2, 3 cities. Some repricing in segments like motor (third-party) and health are also expected, which would help sustain growth,” he added.
As per IRDAI data for April to December 2020, Digit saw 33.8 percent YoY growth in gross direct premium to Rs 2,150.89 crore. It had a market share of 1.48 percent. In the same period, the general insurance industry grew by 2.53 percent.
For Digit, the journey to the top has only begun. Founder Goyal knows that the competition will be aggressive, but he is prepared with the ammunition.
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