The market has become a lot more real of late: PB Fintech's Dahiya, Bansal

The initial public offering of PB Fintech – parent company of PolicyBazaar and PaisaBazaar - will open on November 1 at a price band of Rs 940–980. The company is looking to raise Rs 5,700 crore at a Rs 44,000-crore valuation. YASHISH DAHIYA, chairman and chief executive officer, PB Fintech, and ALOK BANSAL, its whole-time director and chief financial officer, spoke to Subrata Panda about the company’s business growth during the pandemic, its future plans, trends in the insurance sector, and profitability. Edited excerpts:

How has business grown during the pandemic?

Dahiya: If you look at the Covid-19 pandemic, it has heightened the requirement for health insurance. We saw greater demand and business for health insurance. It also increased the requirement for life insurance. But issuance was difficult. Companies were worried about covering employees who might have contracted the novel coronavirus. Motor insurance was challenging, simply because many did not insure or take third-party insurance. On the credit side, the supply chain got constricted. But we have enough verticals to absorb the shocks.

There was huge demand for term insurance initially. But there have been rate hikes and stricter underwriting norms. Did demand suffer?

Dahiya: Demand has been steady and growth is back. People understand that prices have gone up from where they were. While prices are not where they were a year ago, they may not be the same a year later. You will still be better off buying the product. We have managed to get past supply-side constraints and are back in growth territory. We should start seeing good growth. I think the market has become a lot more real. If the earlier focus was more on sales and marketing, now the awareness of risk has got heightened - whenever that happens, we tend to benefit.

Bansal: Protection is a huge opportunity, and the market is very under-penetrated. In the next 10 years, this is going to be a big segment for the industry.

Health is another segment that has seen huge growth due to the pandemic. Is growth sustainable?

Dahiya: How long can the middle-class afford a hospital stay without insurance? Insurance is longer an option. While it is a prerequisite, not even 15-20 per cent of the middle class has health insurance. People who have health insurance have mostly Rs 2-3 lakh worth of health cover. The requirement is a lot more now. This area is seeing transformation.

How will PolicyBazaar’s business model change, now that it has got a broking licence?

Dahiya: A broker is allowed to have a physical presence, can get involved in claims management, and claims consultancy. A broker can do point-of-sales presence (PoSP) business and corporate business that an aggregator cannot do. There are advantages a broker has over an aggregator. Insurance is all about pooling risk and covering it. It is important in insurance to be in all segments. Clearly the broking licence will help us. We are expanding our physical presence, corporate lines, and PoSP. We are leveraging all benefits that you get from being a broker.

Insurance companies are now focusing more on online distribution. How much of a challenge will that be to your business model?

Dahiya: The more digital you get, the easier it is for aggregators. The more online products you have, the more powerful the aggregator model becomes.

Can you shed light on the commission model?

Bansal: We are paid like the broker regulation suggests. Every product that is filed with the regulator has a certain amount the intermediary can be paid for services rendered, and we get paid accordingly. We get a fraction of the transaction value.
Dahiya: If partners do not sell with us, they have to pay Google. They will then have to set up a call centre. The amount we charge them for getting traffic and converting it is much lower than what a search engine will charge and the cost they will incur for an outsourced call centre. Moreover, the quality of experience is much better for the consumer.

Your losses have widened year-on-year for the April-June quarter.

Bansal: We are living in Covid times for the past 18 months. We made a conscious decision to reduce the marketing expense. With customers trickling back, we have started to spend on marketing this year. Marketing and servicing - as a percentage of revenue - have been coming down. We expect that to continue.

How did you arrive at a Rs 44,000-crore valuation?

Bansal: We have had plenty of investor meetings and collated feedback in terms of their comfort on a particular value. There was a small transaction on the secondary side that happened in the past six months, which also gave us a sense of what the market is comfortable with.

What are the plans for PolicyBazaar and PaisaBaazar?

Dahiya: We want to grow and drive efficiency in all the core areas, so that they move towards profitability. At the same time, we will also keep experimenting on future wins. We will work with the government platforms, such as the account aggregators, the e-claims platform, to give consumers a better experience.

Bansal: We are very focused on efficiency and growth. Having said that, we will do multiple experiments.