We have transformed into backend operations business: PolicyBazaarCEO

What is your story?

A It was the year 2008 and I was seeing serious problems in the insurance market. The idea actually came from my father investing about Rs 20 lakh from 2003 to 2008 and he did not know he had paid commissions up to Rs 6 lakh to agents. He did not know that and neither did he believe it. It was a typical father-son relationship. So, I called the agent home and he had to believe it when the agent came home and accepted that. I was really upset by the amount of insurance miss-selling that goes on in this country. That time the agent was having a cup of tea. My father said, please keep the cup of tea down and leave my house right now. Unfortunately, 97 per cent of the insurance products sold in India are endowment products. I can promise you cannot buy an endowment product unless you are sold. The insurance is not bought. It is sold. The moment a product becomes good for the consumer, it stops selling because it is not good for the insurer and can lead to his gains being compromised very significantly. The kind of big risks that can change families and can put people back by two generations are death, pension, critical illness health, investment, and child planning. But what I found to be shocking was that these products are not even three per cent of the total insurance market.

Q What is your business model?

A The earlier model on PolicyBazaar was that you could go to PolicyBazaar, compare policies and then a link would guide you to the insurer's website, where you can buy. So we were working as a marketing or advertising agency like Google which would be paid to get a link clicked and for henceforth driving traffic to their site. That started growing because that was leading to more sales for insurance companies. We are, perhaps, the largest aggregator in the country, but the aggregation business is small. Out of around 50 insurance companies, 35 work with us.

Q So, what (has) changed?

A We started in 2008, and reached a scale of Rs 20 crore of revenues, working with 30 insurance companies, until the first set of regulations had come in 2011. Regulation barred us from making advertising revenues which was all the revenue we made…They said you can make Rs 1 lakh per year as the maximum advertising revenue for a product. So now to make Rs 20 crore, I would need 2,000 products. So these conditions made sure we were making about one-tenth of the revenues we were making.

Q So, the business model became unviable? How did you adapt?  

A We had to structure our company in a manner that most of the activities had to move out of the company. We had to move out marketing and call centre because those were the major costs for us and we could no longer afford it. We became more of a sales entity. We started managing the outsourced call centres of companies for which we had to hire about 800 people. So we could create a lead and would also convert the lead. And for the lead conversion we would get paid by the call centre route. So the company became much more complex. Where was the Internet company that I started. The customer had to go through to three websites to buy a product. I have spent 20 per cent of the nights staying awake because of regulation. I thought we were trying to do the right thing.

Q That was a fundamental change?

A Yes, it was becoming a backend operations business when I should have been focusing on building a better technology team to provide a better consumer experience. Those were things we never thought were important for an Internet business, neither did we have the expertise in handling government, regulations. Half of last night I didn't sleep because I still don't know what regulations may be in store. Honestly I have been hoping for Mr (Narendra) Modi's government to come in. Hopefully they will sort out these things. Let the regulation come from those who actually understand the digital business. My business was not understood. This is very far away from what happens globally, and is therefore unbelievable for many companies. In the UK, for instance, 70 per cent of the market is run by aggregators. But look at the length of regulation here. It is 82 pages -- that for a segment which is not even one per cent of the insurance industry.
 
The aggregator guideline is just two pages elsewhere, which is mostly about the transparency and accuracy of information shared on the site, just like it would apply to any media company or Internet business. There are big companies as aggregators. MoneySuperMarket is a public company there.

Q What is happening now?

A Finally, IRDA has come up with a new set of guidelines that are a little better, but are still extremely restrictive.  Nowhere in the world do you have such restrictions. Life became very tough. The next set of regulations that came in last year, say you cannot make money anyway but sales that were being closed at our call centres. We can make a maximum of 30 per cent on the value of the sale. There is also confusion as per the current regulation, which indirectly hints at sales revenues being zero. It says all digital products should sell at zero commission. Now, we only sell digital products. Fifty per cent of our revenue comes from digital term products. If we cannot make any revenue on them, why should we sell them. Advertising revenue is still banned.

Q As an entrepreneur, you never gave up?

A We are not going anywhere. We are very happy to go down, but that has to be with full clarity on why we are going down. We get about a million visitors and about 2,500 people buying through us. On a typical working day, we would have about 1,000 transactions. The worst is behind us. Unless someone says, you cannot make any revenue at all, we should be able to survive and make profits. I have successfully managed Internet businesses before. I was Managing Director of Ebookers, which was Europe's MakeMyTrip.

Q So, what is the scale of business now?

A Now we are making about Rs 60 crore in revenue from sales of about Rs 270 crore. Three years back, my sales were less than Rs 10 crore. Ideally, I should have had to change the business model based only on consumer behaviour and market requirements. The consumer proposition is very powerful. So, we will not only survive but keep growing as well, but we will face challenges all the way.