Groww Insurance Case Study

Assumptions:
 The case is based on Groww only being only interested in distribution as an insurance broker and not as
an insurance company as mentioned.
 The revenue considered will be considered for the insurance broker sector and not the insurance
industry totally. Also, the market size of the broking industry would depend on the total revenue of the
insurance industry since both have direct correlation to each other.
 Major part of the insurance distribution is most likely to be done through online means since Groww
serves its customers through online means. An average of 8% brokerage is assumed throughout the
analysis.

Product Analysis:
 Life Insurance:
This type of insurance has many plans like Endowment Plans, Whole Life insurance ,Term life insurance,
Retirement plans etc. These plans cover different aspects of life in case something happens to the policy
holder these plans provide coverage on debts, mortgages or pay a premium amount to the family.
 Health Insurance:
Health insurance covers the medical expenses of the policy holder and the family (depending on the
policy) in case sickness, Disease, accidents etc.
 Motor Insurance:
Motor insurance is of two types Third party cover (TP) or own damage cover(OD). Some insurance
products combine both of. One essential piece of information is that the TP cover is mandated by law
for every vehicle in India.

Most of the products above need to be renewed periodically. Hence, consumer could provide continuous
value if retained.

Market Analysis:
 Current market scenario:

The total Insurance industry revenue in INR for the three insurances is as follows:

Motor insurance = 75163 Cr Health insurance= 65363 Cr life insurance = 269190 Cr

It is estimated that for general insurance i.e., motor and health 30% of the revenue is through insurance
broking industry. For life insurance only about 1.6% of revenue is trough insurance broking industry. As
per the report by IBAI in 2016. Assuming this information is still relevant.

The Market size of the insurance broking/distribution industry for each of the insurances is we assume
about 7% of brokerage is collected which is multiplied with the revenue for each of the segments:

Insurance Brokers revenue = Industry sector revenue x broker contribution x avg brokerage

Motor Insurance distribution = 75163 x 30% x 8% = 18039.4 Cr

Health Insurance distribution = 65363 x 30% x 8% = 1568.7 Cr
Life Insurance distribution = 269190 x 1.6% x 8% = 344.5 Cr
 From the above data we can see that life insurance contribution to the Insurance broker industry is
significantly lesser than that of motor and general insurance. Hence, we will eliminate life insurance as
an option from our analysis.

Competition Analysis:-
The Insurance distribution industry is a highly fragmented industry with approximately 600 brokers in
the industry. The major players operate offline in multiple states and sell the products online. ]

 Market split:

Total brokerage revenue = total non-life revenue x broker contribution x avg brokerage
= 212775 x 30% x 8% = 5106 crores

Since the market is heavily segmented, we will check the split for only some of the best players in online
segments since Groww would mainly focus on the online segmented we will consider them as direct
competitors. All the below stats were obtained directly from the reports and statements of these companies
and the revenue was considered hence some of these could also have other incomes.

Policy bazaar = 780 crores , Acko insurance = 400 crores, Insurance Dekho = 150 crores

According to the above numbers the market share of each of these companies are:

Policy bazaar = 15% Acko insurance = 7% Insurance Dekho = 3%

From this we can see that there is no major player in the online market that controls the market. The fact
that there are 600 players in this segment makes it difficult to accurately the market share also many of
them are also involved in other categories like reinsurance etc.

 Competition:
Although the above brokers are competitors more relevant competitors that align with Groww are the
online platforms and apps that provide all the services that Gorww. Major players in this category are
PhonePe, Paytm. These companies although are major players in the payments platform category they
are not known for their insurance distribution yet. As per the financial reports of Paytm insurance
broking has only generated a revenue of 6 crores. From this we can say that there is a lot of potential for
growth since this is not yet captured by any other company.

 How they operate:

One thing all these online distribution companies do is try and make the process of buying as simple as
possible for the customers. Many of them offer help while buying insurance and often through call or a
chat. They also offer discounts and offers on certain policies. They also remind of renewals and try to
follow up when the insurance is about expire. Most of them try to collect minimal information before
selling the product to not overwhelm the customer.

Customer pain points:

 One major concern of customer in the healthcare category is that their claim may get rejected by the
insurer and they expect the broker for their support. Which would make the offline presence of the
 broker or their representative a necessity. Although this is also a concern for motor insurance this would
not constitute as an emergency when compared with health and accident insurance.
 In general customers also find it difficult to trust broking companies and feel like they are selling a
product which is more beneficial to them.
 Awareness and the importance of health insurance is unknown to the customers, but since motor
insurance is mandated by law all the vehicle owners are mostly aware of it. Making this a more
attractive segment than health insurance.

Customer segments analysis:

 Motor Vs Health:
Motor insurance further has 2 categories OD and TP(mandatory). We explore the split between 2
wheelers, 4 wheelers and goods carriers. Obtained from general insurance council (GIC)- year book in
FY[2020-21].

Brokerage = %brokerage x %broker contribution x Gross Segment premium

Motor OD premiums = 26093 crores , Motor TP premiums = 41746 crores

Broker contribution to the premiums: Motor OD = 49% , Motor TP = 27%

Motor OD premiums split: 2 wheelers = 3.2% , 4 wheelers = 21.7% , goods carriers = 49%
Motor OD brokerage assuming 8%: 2-wheeler = 32 Cr, 4-wheeler = 222 Cr , goods carriers = 501 Cr

Motor TP premium split: 2 wheelers = 14.9% , 4 wheelers = 23.6% , goods carriers = 37%
Motor TP brokerage assuming 8%: 2-wheeler = 135 Cr, 4-wheeler = 212 Cr , goods carriers = 333 Cr

For health insurance we explore the split between individual or family health insurances and group
health insurances.
Health insurance premiums = 63717 crores
Broker contribution to health premiums = 23%

Health insurance split: Retail health plans = 26301 crores, Group health plans = 27708 crores
Health insurance brokerage assuming 8%: Retail health = 484 Cr, Group health = 510 Cr

 Customer segments:
In motor insurance although the most attractive category is for the customers who own goods carriers.
Often these carriers are associated with a single company making it a tough segment for grow to be
compatible with. So, the ideal target consumer would be owners of 2-wheelers and 4-wheelers. Which
have a total brokerage potential of 601Cr.
In health insurance between both the Retail health segment and the group health segment , it would
be difficult for Groww to enter the group health insurance segment. Hence the ideal segment would be
Retail health or individual health plans with a brokerage potential of 484Cr.
Entry Strategy:

Based on the above analysis we can say that although both motor and health insurance segments are
attractive based on the achievable brokerage and the customer pain points Groww should choose Motor
insurance. Motor insurance is easier to sell when compared to health insurance which generally requires
agents to convince clients to take up a certain policy.

 Target Segment:
The target segment based on the above analysis for grow should be motor 2-wheeler and 4-wheeler owners
instead of goods carriers’ vehicle owners. Since they are direct customers not any intuitions or company it is
an easier costumer segment and is much more compatible with the current customer segment of Groww
that is the general public. Increase awareness among the segments and providing the best suited insurance
for the customer is also an attractive aspect and could potentially be a differentiator from competitors.

 Required talent and partnerships:

Groww may need to hire new agents for selling their products this could be essential since the expertise of
selling an insurance and building trust with the customer lies with them. Groww would need strong
partnerships with the insurance companies to be effectively be able to communicate consumer grievances
to these companies and to come up with different sales strategies. Since, the insurance is regulated by the
government partnerships with government entities are also useful. Groww could also collaborate with
automobile dealers and sellers to acquire additional customer base by providing incentives to them.

 Initial investments:
The initial investments required in this field are mainly for acquiring new talent and the cost for acquiring
the customers through ads and sales campaigns.

Associated Risks:
 Some risks associated with entering this category is trust from customer. The customer is not likely to
trust a new insurance broker over their previous one.
 Agents selling irrelevant products to the customer because of the incentives associated with them or
not giving complete information about the policy could damage the firm’s overall reputation.
 New regulations being imposed by the government that could negatively impact the distribution of the
insurance.
 Price in the current insurance products and new insurance are not controlled by the brokers but the
insurers this could potentially restrict the ability to sell the product to a customer.

Ways to reduce these risks:

 By acquiring the right talent and ensuring that they sell only relevant products to a particular customer.
Educating the customer about the insurance scheme would also prove helpful in this case.
 Nothing much can be done about the regulations imposed predicting the changes from these
regulations and acting on them to reduce the damage could be a good strategy.
 Maintaining strong relations with the insurers and actively advising them with latest market insights
could potentially prove beneficial to the distribution industry too.