We are looking to expand, believe in build model instead of buy: PolicyBazaar

I basically set up PaisaBazaar and said okay we do insurance and we will also do all the credit cards.

Now whenever you do that there is an investment curve. Even though PaisaBazaar is doing well, it has consumed about Rs 70 crore over the last four years. So, that's a lot of money for any running business.

We usually don't have the appetite to take that risk again and again. Most businesses stick to one thing and you also get advised that solve one problem, don't try to solve too many problems otherwise its an issue.

But I think with them (Softbank) coming on board, you get a bigger chance to try out new things like if you think about it, had SoftBank not come on board, maybe an Oyo Rooms may not have gone to China.

Today, they are getting 30% of their rooms from China, within one year. It is huge (Oyo's 30% rooms in China). But essentially, I think their coming on board gives you the courage to do those kind of things.

Because essentially what they are saying is focus on growth and take your eyes off immediate profitability.

The moment you do that there is an investment curve. Now you have two ways of doing that — you could either acquire something or you could build something. Both have their pros and cons. We are more likely to go the build route because it is very difficult to find something that you acquire which kind of blends in beautifully.

Is that going to be the way forward?

It is going to be the way forward. Otherwise you got a massive capital wastage.

See PolicyBazaar, it has consumed USD 35 million, we have more than USD 300 million lying in the bank. Now that has already been through investment cycles, it's not at an investment stage, its a 10-year-old company. So you can't really spend that on PolicyBazaar, so you have to either keep it in a bank and earn 8% return on it or 7% or you do something to grow out of it. So it is the latter that we are doing.

How strong is the healthcare sector in India and what sort of expansions are lined up at your end?

See our interest by getting into healthcare is all around. We want consumers to be using insurance instead of out-of-pocket. Today, 62 percent of India's entire healthcare spend is out-of-pocket. 62% is very very large compared to almost any other economy of the world.

Is this just hospitalisation or even day care?

Hospitalisation and day care everything included, 62 percent of all healthcare spend is done by individual's out of their pockets.

Even the rest of the 38 percent is spent by the government and corporates. There are a lot of government programs such as CGHS and state government-run programs. Plus, there are corporate insurances for individuals. All of that put together is 38 percent.

If you take away government and corporate, only about 2-3 percent of consumers spend (on insurance).

Our hope is that it should move to more like 60 percent from insurance and 40 percent out-of-pocket for the entire country.

Now, in order to do that, just PolicyBazaar will not be sufficient. So what is PolicyBazaar doing? It is saying if you want to buy health insurance, come and buy. We have got all the options, search and compare. We are also saying that you must buy health insurance because you know one day, people do fall sick or most people fall sick and there is a lot of expense.

Currently, the entire retail health insurance market is Rs 12,000 crore. It is a very small market. How much can we grow out of just Rs 12,000 crores. At some point we will hit a ceiling right. And we are not going to corporate or government. We are just doing retail business. 

So, second thing is how do you grow this Rs 12,000 crores and the way to do that is you just go to consumers and say hey you know what if you fall sick, just take subscription policy and start using insurance from here on. So, you almost give the first experience for free. Because today people's fear is that I don't know this. Insurance is considered something which may not pay right. So let them experience it.

What is the success rate of health insurance claims?

96 percent of all claims are paid by the private companies. And 96 percent of claims are paid within four hours. But fraudulent claims are not paid.

People do it all the time. A consumer comes over and takes the policy and then you figure out that he had lied. The point is it is such a big cost. I can't out of goodwill just pay their claims when we know its clearly a fraudulent case.

But in an OPD situation, the cost is Rs 800-1,000. So you can create a goodwill because of a Rs 800 payment. There I can afford to.

Will PolicyBazaar burn this money?

PolicyBazaar cannot do that in legal terms. But what PolicyBazaar is doing is — taking no commission, etc. Typically, health insurance has commission, etc. right. So we are not taking any of that. But we are taking on the marketing cost. See think about it, if the company has to sell these policies, it has to take out the marketing cost, the sales cost, operational cost. It is not just claims. Claims are only one part of it.

You are not charging the commission but you resting in this marketing cost?

We are taking out the marketing cost, sales cost and there is none of this going to the company. All the company has to do is provide the product and handle the claims. So, to an extent we are taking the risk because initially the marketing costs are high, the sales cost are high. But the companies are having none of that. It's almost like it is getting customers for free. And then having to just take care of the claims part.

Where do you earn money from?

See there is not just one way to make money from the consumer. You are also collecting healthcare data. On the basis of which you can offer IPD services.

Eventually, a brand is being built as PolicyBazaar and there is a cost to that. There is a benefit to that. Plus, there are allied services you might start at some point. You might have same people buying a car insurance. The same people might be buying a life insurance and as long as you control that experience, you would do more and more with the same consumers. But yes, on the first transaction, we get nothing.

Currently, we are not taking commission on the first transaction.

The plan is to launch DocPrime in the next one month. It is essentially a first port of call in case you are sick and if it is a non-emergency we will try to give some advice and connect to somebody in the physical form. So we at least advice you that this is the best doctor to go to, or this is the best place to go to.

Like in the UK what you have is, you have a number 999 emergency number. You call it and they at least try to send you an ambulance or try to tell you go to this hospital.

This is a customer helpline. So that's what we are putting in place. Hopefully these people come in and at that point we are saying the doctors are going to cost you about Rs 600. However, to which you can take a subscription plan today and that Rs 600 you don't have to pay. That is included, subscription that is Rs 300 per month or whatever. That's the idea and that's the whole business.

So this way you will be roping in all the customers who have not been there on the platform?

Absolutely. Expand the number of people who can experience insurance.

How many customers do you plan to sell insurance to before the end of this financial year?

We hope to get about 3,000 a day.

The company reported net sales of around Rs 330 crore?

Our premium last year was Rs 1,600 crores. And this year, FY18-19, our premium is going to be Rs 3,000 crores. Our revenues including PaisaBazaar will be about Rs 800 crores. Last year it was Rs 386 crores.

What sort of a marketing exercises are you lining up overall?

Overall, we are spending about Rs 150 crores a year on media. This is basically television and internet.

How many investors exited during the recent funding round?

Premji Invest sold approximately 4 percent which was bought by some people. They got more than they invested in us. And they still have stake in the company.

Mostly whenever SoftBank enters into a company, it enters for a majority stake. This time it is a little different?

It was impossible. We didn't have the ability. None of our investors were exiting. In fact, to be brutally honest, one of the reasons I believe Premji Invest exited was because SoftBank was coming on board.