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I was afraid that Digit Insurance would turn out to be another, boring insurance company
I'm so happy that I was wrong.
While other insurance companies are focused on profits, Digit is focused on customers.
The result? A unicorn startup that has a trust score higher than any other insurance company.
I was curious to know how they did it. So this article is a deep dive into Digit and the strategies behind their blockbuster success.
Have you seen the movie OMG? Then you probably understand why insurance companies get so much hate.
Insurance companies provide a valuable service to all of us, no doubt about that. But their way of providing this service is so bad, so so bad. This is the main reason why insurance companies have such a bad image. EY found out that people trust insurance companies less than banks, supermarkets, and car companies.
From start to the end, the process of insurance is designed to be pure torture😭😭
To create a new insurance policy, first, you have to fill lengthy forms filled with complex terms you never understand😴😴
Then, every month, you have to pay a certain amount to the insurance company(this amount is called the premium). And you need to be diligent in paying these premiums; missing out on a single premium means you can kiss your insurance policy goodbye!
The insurance companies tell us to pay these premiums so that when the worst happens, we can have peace of mind knowing that we have insurance.
But people never have this peace of mind. Why? Because insurance companies will fight with you tooth and nail to make sure they don't have to cover the damages when the worst happens. Their contracts have all sorts of hidden clauses and phrases that allow them to wiggle out of paying the insurance(when insurance companies pay the damages, the technical term is 'claims'. We 'claim' damages, and the insurance company pays out our 'claim'.)
I remember this scene from the movie OMG when Paresh Rawal's shop is damaged because of the earthquake, he goes to the insurance company to claim damages. But they tell him earthquake is an "Act of God", and the insurance policy didn't cover that, so they couldn't pay out the claim.
This is a good example of the extent to which insurance companies go to deny claims.
But we can't blame them- denying claims is their business model.
Their main source of revenue is the monthly premium we pay. Their main expense is the insurance claims they have to pay. Revenue minus expenses equal to profits. To increase profits, they pay fewer claims. That's why they don't want to pay claims. And that's why they come up with all sorts of weird reasons and hidden clauses when it’s time to pay claims.
Digit saw this was a problem for people, and decided to solve it.
Remember my Lenskart article where I identified 3 strategies used by them to become successful? I've identified 3 strategies in case of Digit too. Let's take a look at them.
🕹Insurance process is complex. Digit made it simple.
This was strategy no.1
People didn't understand the insurance process. And the problem started with the insurance docs. The docs were written in complex, legal language. So Step 1 for Digit was to simplify the insurance docs. They made it their mission- "Make Insurance Simple".
From Digit's annual report-
This introspection led to Digit’s mission to ‘Make Insurance Simple’. For a lot of people in India, this sounded like an oxymoron, ‘Simple and insurance? Nahhh’ . Well, for Digit, that’s where the opportunity lied. If there is one thing that would truly make a difference to people in the insurance context, it is busting complexity and bringing in the simpler insurance.
They claim that they rewrote all their insurance docs in plain English language with no jargon. They also have a 2-page summary of the lengthy insurance docs that clearly explains ‘What’s covered’ and ‘What’s not covered in the insurance policy.
(Fun fact: they invited 15-year-old kids in the office and asked them to read their documents. Whatever the kids couldn't understand, they simplified it. They called this concept ELI15 to explain like I'm 15. looks like they took their mission a bit too seriously😂)
🕹Going full-on tech mode:
This was strategy no.2
Technology is really a foreign word for traditional insurance companies. They heavily depend on salespeople. Most of them have an army of insurance agents going door to door pitching insurance.
Digit threw away this traditional approach. They hired very few agents.
(Just so that you understand the scale here, LIC has ~23 lakh insurance agents and Digit has 5000 agents)
Instead, they went full-on tech mode.
They are 100% on cloud, and they use AI, ML, image analytics, tracking technologies, Python, BI tools such as IBM Cognos, visualization tools such as Power BI, databases such as Postgres, and Datalakes such as Hortonworks.
The biggest benefit of using this much tech is convenience to customers.
Normally, when you get your car or bike damaged, the insurance company will take a lot of time to inspect the damages and then pay the claim. But Digit came up with a self-inspection feature: you inspect the damages, you click the photo, upload it on the Digit app, their AI thingy will analyze it and decide whether to pay the claim or not.
(They almost always pay the claim: this is another surprising thing about this startup. I'll discuss it in the next section)
Here are some examples from an interview of CEO Kamlesh Goyal-
in the case of bike insurance, AI-based technology solutions recognise basic checks like bike registration number, the colour of the bike, etc, which not only speeds up the process of inspection but also of policy issuance.
Travel insurance policies make use of real-time flight tracking to proactively register a claim in case of a delay. We provide a three-step, 100 per cent automated claims process for our flight-delay product.
The company also offers an audio claim feature. The customer calls to register a claim, which is taped and transcribed to extract and store details for processing the claim.
Here is another example from an interview of Vishal Shah, the company's Head of Data Sciences:
We use image analytics to decipher the damages to say, a car [...] This helps us and the customer in reducing the time required for the inspection process from days to minutes. The customers scan their vehicle to share images that detect any damage or loss at the time of claims
Using technology is beneficial for the company as well. They are able to reduce costs compared to traditional insurance companies(digitization can reduce around 20–30% of the cost of non-life insurance products and 15–20% of the cost of life insurance). And it helps them compete with big players:
We are operating 100% on cloud. Being on the cloud enables us to scale up quickly. Especially for a new company like us who are competing with entrenched players, handling increasing volumes could have been challenging but with being 100% on cloud, we overcome this and are able to meet the demand immediately instead of waiting for months for the infrastructure or hardware.
🕹How to build Trust?
Till now, Digit had 1) simplified the insurance process and insurance docs and 2) used technology to make it convenient for people. But none of this would work if people didn't trust their insurance.
This was the 3rd strategy- trust.
And building trust started from Strategy No.1 itself. If an insurance company explains its policy so clearly, it builds a lot of trust.
And Strategy No.2 plays a big role as well. Remember the smartphone self-inspection process? If the insurance company trusts the person to inspect the claim, people will also trust the company.
Several other small steps also solidified their image as a "trusted" insurance company.
This is one such example-
In the travel insurance industry, there are claims terms that include six-hour flight delay and six-hour checked-in baggage delay. These claim terms are rarely met because the flight is typically cancelled before then.
We launched a starting from 75-minute flight delay benefit and a two-hour checked-in baggage delay benefit, and these occur much more often.
If a flight is delayed beyond a stipulated time, an SMS is auto-triggered for a claim and people only need to send their boarding pass to receive the payment.
If this isn't an indicator of trust, I don't know what is.
Another way to gain people's trust- partner with an already trusted brand. Digit partnered with Tanishq to provide jewelry insurance. They partnered with Amazon and Paytm Mall to provide mobile insurance.
And the biggest trust factor of all-the 93% claim settlement rate!! This means out of 100 people who claimed insurance, Digit paid 93 of them.
Remember this move was against the company's short-term profits- if they paid out more claims, they would get fewer profits. But they gain the long-term trust of people. What better way to make people trust you than genuinely helping them and sacrificing your short-term gains? This move portrayed Digit as an insurance company that genuinely wants to help people. And this is a big trust builder.
🕹The Future: Small challenges and huge opportunities
To summarize, these 3 strategies, simplicity+technology+trust, have transformed Digit into a super-growing insurance company. And we aren't being abstract, the numbers back it up!
Last year, when other insurance companies grew 2-3%, Digit grew 44%!!
They had premiums(meaning: revenue) of Rs 3,243 crore between April 2020 and March 2021.
Digit has achieved gross written premium (premium without accounting for the commission to agents and other expenses) growth of 70% versus 17% for the general insurance industry in that time period.
Furthermore, since its inception, it has provided insurance to more than 2 crore customers and has processed over 4 lakh claims.
They have the highest NPS(a number used to measure insurance companies' trustworthiness, the higher the NPS, the more trustworthy the insurance company).
Digit's success has attracted competitors- both traditional and new competitors.
Traditional insurance companies like LIC and Allianz are more dangerous for the company right now. These companies have understood the need for technology, and are also slowly shifting towards the digital processes for insurance. But they have a long way to go. Remember that Digit is successful because of 3 factors. And these companies have only copied one. They still have to work on the remaining 2 factors- simplicity and trust. But hey, these giant companies are already established and have a huge customer base, so they can take their time and have the means to do this. It is Digit that has to endeavor to stay one step ahead.
There's also a lot of new startups competing with Digit, but the one that seems most interesting is Acko. This insurance startup's main customer is companies. They partner with companies to create insurance products for that company's customers. For example. they partner with Ola to launch the Ola Trip Insurance. They partner with Amazon for electronics insurance. They partner with Oyo to create hotel-stay insurance.
Apart from competitors, another problem for Digit is insurance regulations in India. They are required to be "150% solvent at all times". 150% solvent basically means they have to keep a lot of money ready, in case they have to pay out a lot of claims without going bankrupt.
But these challenges look small when you see the size of the insurance industry. Right now, Digit is only providing non-life insurance(car and bike and flight-delay and jewelry insurance). They haven't yet gone into the life insurance market, which is absolutely huge! With its 3 smart strategies, Digit can easily disrupt the traditional insurance companies and become an insurance giant🚀🚀🚀
If you’re looking for some quick-reads, here are some awesome Twitter threads-
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This wraps up today’s article. I hope you found it informative!
PS: There is an interesting company in America called Lemonade. They are very similar to Digit: simplifying insurance, using technology, and building trust. But to build trust, they have gone an extra step. If people buy insurance but their car or bike doesn’t get damaged, that person’s premiums will be pure profit for any traditional insurance company. Lemonade does something interesting- if you don’t claim your insurance policy, then Lemonade will donate your premiums to a charity of your choice. This has generated a lot of goodwill for the company. Nice idea, isn’t it?