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How PolicyBazaar.com Changed Its Business Model After IRDA Regulations

“It became uneconomical”, Yashish Dahiya, Founder & CEO of PolicyBazaar told MediaNama, about the impact that the IRDA regulations had on the web aggregator business. “They said that anybody who provides comparison needs to be come a web aggregator. The economics of that were unreasonable. We used to give inquiries to insurance companies, and they used to do transactions. That was the model.”

PolicyBazaar, yesterday, announced a fund raising of $5 million from Inventus Capital, Info Edge and others. As we mentioned in our post, IRDA regulations, which fixed leads atRs 10 each, fixed commissions, among other major changes, had completely disrupted business models being used by web insurance aggregators.

So how did PolicyBazaar’s business model change? “Insurance companies used to give the lead from web aggregators to a call center operation. We pitched to the companies saying that we can run the call center for them. We did better in terms of performance. The two inputs for insurance companies were the lead and the call center. We made that far more productive. That’s the core of the business we run today. 85% of the revenue is from call center for the company. The call center means we don’t need feet on the street. The insurance companies now buy leads, and taking on the call center cost. We’re a distance marketing company, and there’s a distance marketing regulation as well.”

So does that mean that PolicyBazaar’s web aggregator business, which used to do comparison of insurance products, is no more? That is not true. “We have a subsidiary which runs the comparison. That is the aggregator, but it has a limited remit. The insurance company cost is being reduced further. If you give the lead at Rs 10, the insurance company doesn’t have the tracking abiliy, and it wasn’t enough for a genuine business to operate. Insurance company was okay with us running the call center, as long as our cost of acquisition was lower than theirs,” says Dahiya.

On The Fund Raising

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“We did a very small round. We didn’t need the money financially, but we were close to break even. Our platform development might have suffered. It was raised, just in case we do need it, from a working capital and platform development activity point of view.”

How is the business doing?

– Profitability: “We’re doing okay. Four out of the last 12 months, we were in the green. It has a bit of seasonality. We think that it might be six months of losses and six months of profits. In terms of number of transactions, we are increasing. We would do 15000-25000 transactions in a month. The most important thing is the kind of transactions.

– Types of insurance: “30% of our transactions are term insurance. Another 30% are health insurance. 30% is Motor insurance, 10% is investment cum-insurance products. In the industry, 90% is investment-cum-insurance. 1% is term, 6% would be motor, and 3% would be health. This is for the retail industry. What we’re seeing is that it’s a channel that is focused on the consumer. The focus area is the risk based product.

– Segments of focus, going forward: “Disabiltiy is far more riskier than debt, and it’s not something that has been understood. You could get a large disabiltiy cover for a small money, and no one is looking at that. Insurance is for uncertainty, it’s for rare eventualities which can wipe away your dreams That is what our focus is going to be in. It’s not a very profitable product to sell. We have not been large sellers of ULIPs or traditional plans. We will also focus on pension plans. We do believe that people focus less on pension plans. They’re at the wrong end of the spectrum.”

– Business beyond insurance policies: We do loans and credit cards. They account for 7% of last years revenues. We’re trying to focus on. There’s so much one is fighting with in this industry. Insurance is such a vast industry.

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Written By

Founder @ MediaNama. TED Fellow. Asia21 Fellow @ Asia Society. Co-founder SaveTheInternet.in and Internet Freedom Foundation. Advisory board @ CyberBRICS

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.

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