At 11:30AM, the Maruti Suzuki car dealership situated in a plush, central Bengaluru neighbourhood is largely deserted. A salesman follows a lone customer from model to model, switching desperately between persuasion and pleading to end the morning sales drought. Phrases like “great mileage”, “best in class”, and “extra legroom” are all thrown about liberally. It’s a delicate, well-rehearsed dance.

Finally, the customer cracks. The salesman hurries into the manager’s cabin with a yellow file filled with insurance documents. While the customer had signed off on the documents, they hadn’t actually picked an insurer. That part, they left to the manager, with the simple instruction that he pick an insurer who was both easy on the wallet but also reliable.

The manager picked three-year-old general insurance company Digit Insurance. “They are giving us the most commissions for this month compared to other insurers,” he explained, without batting an eyelid. Consequently, he planned to sell Digit’s insurance to 20% of customers over the coming month. He spoke on condition of anonymity as he isn’t authorised to speak to the media.

Digit became the first startup to join India’s unicorn club in 2021, raising raising VC Circle Digit Insurance is India’s newest unicorn, valued at $1.9 bn Read more US$18.4 million at a valuation of US$1.9 billion—double the valuation of its last funding round a year ago. Its numbers back the surge in its valuation. Between April and December 2020, it earned Rs 2,150 crore (US$315 million) in gross premiums—growing over 30% even as the sector grew by 4%. Kamesh Goyal, the company’s founder and chairman, told The Ken that Digit expects to bank around Rs 2,900 crore (US$400 million) in premiums for the year ended March 2021. It has also been profitable over the last three quarters, he adds.

Achieving profitability isn’t the only thing that makes Digit—whose majority shareholders are Goyal and Canadian insurance giant Fairfax—stand out among its loss-making unicorn peers. While most unicorn startups achieve breakneck scale by selling directly to customers online, Digit achieved its growth by leveraging the insurance sector’s traditional offline networks. Agents, brokers, and auto dealers like the one mentioned above, who earn a commission for selling insurance products. Over 80% of Digit’s sales in the ongoing fiscal year come from offline channels.

Its seemingly contrarian approach is predicated on the realities of the insurance business. Digital sales seem like the obvious way forward for a sector that hasn’t managed to penetrate the market the way its peers have in other countries. While the global average of insurance penetration as a percentage of GDP is about 2.8%, India’s insurance penetration is just over a third of that.

Indeed, globally, insurtech startups like Japanese VC SoftBank-backed Lemonade have built their insurance empires by selling online. Lemonade’s IPO in July 2020 was a roaring roaring Financial Times Insurance start-up Lemonade shares double after IPO Read more success, with its shares more than doubling in value within 24 hours of its listing.

AUTHOR

Arundhati Ramanathan

Arundhati is Bengaluru-based. She is interested in how people use money in the digital age and how new economies will take shape based on that interaction. She has spent over 10 years reporting and writing on various subjects. Previous stints were at Mint, Outlook Business and Reuters.

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