For the 24 life insurers and 34 general insurers in India, insuring life, crop, livestock and assets in rural India is an obligatory business mandated by the Insurance Regulatory and Development Authority of India (IRDAI).
But that isn’t the case for Gramcover. The Noida-headquartered company is a three-year-old insurtech player that has made rural insurance its key business. Registered as a corporate broker with IRDAI, Gramcover sells livestock insurance, health insurance, motor insurance and crop insurance -- purely to rural customers.
World Bank estimates suggest that 65.53 percent people live in rural areas in India, which has a population of 1.3 billion.
“Insurance in rural areas is seen as an obligation in India. But we see it as an opportunity,” Dhyanesh Bhatt, CEO and co-founder, Gramcover, told Moneycontrol during an interaction.
Bhatt has 13 years of work experience in the insurance sector. He has worked at ICICI Lombard General Insurance, the country’s largest private insurer.
Being a corporate broker, Gramcover works with insurance companies across the board – where they are life insurers, general insurers or standalone health insurers.
Low insurance penetration and density has been a concern in India. According to Swiss Re's sigma data, insurance density, or premium per capita, stood at $78 (approximately Rs 5,850) in FY20 compared to $74 (approximately Rs 5,550) in FY19. The global average was $818 (Rs 61,350 approximately).
Insurance penetration (premiums as a percentage of gross domestic product) stood at 3.76 percent in India in FY20 compared to 3.7 percent in the year-ago period.
These numbers are estimated to be half the national average in rural India, nd it throws light on how underinsured these areas would be.
How the journey started
Gramcover was started in late 2017 by Jatin Singh, who had launched Skymet -- a private weather company -- in 2003. Interestingly, Singh has been a journalist by profession, working for companies like Aaj Tak and Associated Press TV. But, he is also a weather enthusiast.
After Skymet, Singh saw an opportunity in rural areas which did not have adequate insurance, especially for weather-related vagaries and allied assets. So, the idea cropped up that there could be a venture that could help cater to the specific needs of rural India. Thus was born Gramcover -- in 2017.
Rural cover in India, generally, is merely a checkbox item that insurers were completing. For life insurers, 7 percent polices written should be from the rural areas in its first year of business and that should gradually increase to 20 percent from the 10th year and thereafter. For general/health insurers, 2 percent of gross premium should come from rural areas in the first year and 7 percent from the 10th year onwards.
Singh, the founder and Director of Gramcover, said that since setting up a formal insurance company would require a high amount of capital (Rs 250 crore as mandated by IRDAI) and also higher risks, insurance broking was more viable.
“Insurance broker is an aggregator while an insurance company is a risk-taker. As a broker, we don’t write any risks on our books. Our first step is to explore and create the pipelines to make adequate products available to the rural public. If we reach a very high scale in the next 4-5 years, we may explore the possibility of setting up an insurance company,” added Singh.
As of FY20, about 1.3 million Indian farmers bought insurance. Singh and Bhatt expect this number to reach 1.8 million in FY21. The company has brokered $13 million insurance premiums till date. It has customers in seven states and has covered more than 8,000 villages.
The company is also backed by investors like Omnivore, EMVC, Flourish, and Omidyar Network India. Singh said that Gramcover is also looking at raising funds since it is in its growth phase right now. But he did not disclose the exact quantum that Gramcover is looking to raise.
Gramcover has not yet started posting profits, but then insurance companies typically take 7-9 years to become profitable.
In rural India, industry estimates suggest that about 55-60 percent of crops and 90 percent cattle are uninsured. Insurance renewal rates for vehicles are also below 30 percent and about 65 percent health expenses are borne out of pocket.
For insurers, rural India hasn’t traditionally been a focus area because of low ticket sizes and challenges related to policy renewals owing to the volatile income of farmers.
Gramcover has products across health, livestock, motor and crop insurance. Livestock like cattle and goats are covered for mortality risks. This means that if the livestock dies during the policy term, the farmer/individual gets the market value of the animal at the time of death.
In February 2021, Gramcover launched ‘Parametric Insurance’ to provide protection for crops against weather vagaries in conjunction with crop insurance companies. The cover has been created for states like Maharashtra, Bihar, Andhra Pradesh, Madhya Pradesh, Rajasthan and a few others.
Bhatt said that, currently, a large part of the gross cropped area -- about 65 percent -- is uninsured, and in general insurance, access is a challenge for non-loanee farmers who don’t have automatic access to government-run insurance programmes (like PM Fasal Bima Yojana).
“Parametric insurance will help identify the weather-based parameters that could have an impact on the crop. Based on pre-agreed values, if there is any deviation in these weather parameters, the claim is paid to the farmer,” he added.
For each crop, the parameters could be different. For instance, paddy could have a parameter related to less rainfall while soyabean crop would have a parameter related to a certain amount of rainfall for a defined period of the year.
The traditional crop insurance programmes like PM Fasal Bima Yojana are based on the assessment of crop yield, making it a time-consuming exercise, leading to claim delays. This parametric insurance facilitates quicker claim settlements.
Gramcover also provides smaller duration covers like one-month insurance for crops (as against traditional six-month covers). That is a differentiator as well, explained Bhatt.
Jatin wants Gramcover to be India’s first rural insurtech player with a formidable size.
The company, which has a presence in seven states for crop insurance, will go up to 11 states in 1-3 years, added Bhatt.
When it comes to products, Bhatt said that areas like life insurance and expansion of asset insurance into shops and allied properties is being looked at.
The company is also working on price insurance for crops. Singh explained that price-related fluctuations of the crops and horticultural produce due to weather-risks will be looked at.
“Currently, crop stands at 90 percent of the business and motor and livestock account for the rest. In 5-6 years, crop will become 30-35 percent of the business while the rest will be non-crop,” said Bhatt.
Where business opportunities end for the rest of the insurance industry, it is just a beginning for Gramcover.