Insurance@netspeed

BimaBharat is unlikely to attract capital as long as it is a standalone venture. The risk profile of the business is high. It should, therefore, align itself with established internet properties, which have a large number of repeat customers. BimaBharat can then provide offline fulfillment of all insurance transactions. Such an alliance has three advantages: it strengthens the differentiation of the portal; enhances value proposition by providing revenue generation opportunities for the partner; and, more importantly, acquires customers for its dedicated services at a lower cost.

Selling insurance products on the internet has still a long way to go in India. Not just because of low pc penetration. A third-party intermediary creates value only by virtue of its neutrality. It succeeds only in those areas where anonymity is valued. Equally, a third party intermediary should be clear about areas where transaction savings can best be realised through integrating its services with the processes of both the buyer and the seller. It must pick industries that are 'early' targets for an electronic marketplace. It should avoid industries where sellers or buyers are particularly powerful.

The speed with which an electronic market develops for any product depends on two factors: the inefficiency of current transactions and the sophistication of buyers. Transaction inefficiencies can arise from poor information flow, complex or multi-tiered distribution channels, and fragmented supplier and customer bases. Product categories with inefficient transaction processes and sophisticated customers, such as travel services, will probably move quickly to an electronic marketplace.

BimaBharat should start as an 'infomediary', offering a comprehensive analysis of the products available in the market. The analysis-and the recommendations-should take into account the demographic profile of the person and the potential tax benefits, thereby customising the product offering to individual needs. After getting a critical mass of viewership, BimaBharat could then transform itself into a routing exchange for insurance products and thereby earn transactional/referral revenues.

But building a critical mass of subscribers would be a difficult task especially for a product that would be bought only four-to-five times in a person's lifetime. The National Council for Applied Economic Research (NCAER) has estimated the total insurable population at 300 million. Out of this, 50 million have a capacity to pay an annual premium of Rs 10,000; 100 million of Rs 7,000 per annum and 150 million of Rs 3,500 per annum. As the average cost of acquiring an online customer would be much higher than the expected lifecycle revenue per customer, a pure online-sourcing play would not be a sustainable proposition. Using print as a medium to acquire customers would not help either. The monthly frequency may not be right too, because the investment patterns in the insurance industry are skewed towards the financial-year closing. The print magazine would only give a revenue stream. It will not address the issue of customer acquisition.

Treating a new venture as a moonlighting opportunity indicates the absence of passion and commitment, which rank high in the attributes that a VC would look for on the part of the promoters. The business model per se is flawed. The site is envisioned to become a B2C medium whereas the offline publication, targeted to the insurance companies, is on the lines of a B2B model. Besides, there is little evidence of sustainable advantages that could interest even an angel investor who, compared to a VC, is fascinated as much by the power of an idea as by the ROI.

Domain knowledge is the only advantage I see here. But unless complemented by technology, customer service, marketing, and operations, it has no value. I am also not sure if insurance, as a service, is amenable to the internet because the volume of transactions would be limited. Even if the penetration levels of pc and insurance were to go up, which itself is a matter of time, the frequency of transactions on an insurance portal would be confined to one or two per annum per account. True, the insurance sector has opened up in India. But deregulation does not automatically ensure a 'space' for it in the internet world. The important thing is to ascertain the value proposition of the site. BimaBharat should find out who logs on to its site, why, what are their specific needs, and whether those needs can be addressed.

A major learning of the last two years of experience with the internet is that it is not enough for a site to increase the satisfaction levels of the consumer. It should, as we say, 'kill the pain'. It should reduce the suffering of the consumer. That is what gives it, among others, a sustainable advantage. That is why a travel site, for example, which can eliminate all the hassles associated with personal travel, is assured of its own space in the internet. I am not so sure about insurance.

In any case, a pure play in B2C will never work because the cost of customer acquisition is high. Khanna and his team should examine the possibility of a B2B exchange wherein BimaBharat.com could serve the needs of various constituents of the insurance business-agents, surveyors, brokers, risk managers, loss assessors, and so on. But whether it can address the specific needs of all these segments is a moot point.

What are the options now before the promoters of BimaBharat.com? Frankly, if they find something better to do, they should change course. Otherwise, they could continue with piecemeal funding on their own and wait for a time when they could work out, based on the strength of their content, some kind of strategic alliance with an established portal. Or move beyond insurance into a wider range of personal financial service products-including perhaps stockbroking-which can ensure higher frequencies of site usage. The offline publication can, at best, be a supplementary source of income for Tech-Media.

Insurance, the world over, is a service industry driven by knowledge, skill, and technology. Information is a key success factor because insurance operations are volatile and subject to constant fluctuation. This is particularly true of a competitive scenario like the one that is unfolding in India. It is noteworthy that the deregulation of Indian insurance has spawned a number of new players-not just insurers, but a whole host of intermediaries and providers of support services. It can hardly be said that the audience pool is limited. The timing of the launch of BimaBharat.com is, in my view, appropriate. The existing insurance database in the country being inadequate, the vortal can fill a vital need. And once it offers focused content as a value proposition, it will attract a number of hits even if the revenues take time to materialise.

There are, however, some issues that the promoters should address upfront. Will BimaBharat.com become a mere source of information-a content-driven site? Or will it have interactive mechanisms in place so that different segments of insurance industry can relate to one another through the vortal? Will it facilitate e-commerce? Will online advertising support the site? Should the users be registered or free to view? Once these basics are resolved, one can look at ways to enhance the value of the vortal.

The offline publication can be positioned as a premium insurance business magazine. The quality of the content should be paramount. Tie-ups with major domestic and inter- national conferences and established professional associations help develop brand equity. Reinsurance firms, intermediaries, and training institutes need the medium of a professional magazine to reach their target audience.

The fact that insurance is always sold and never bought will work favorably to get advertisement support for the magazine. Several attractive advertisement packages can be worked out so that the online and offline channels complement each other.

Just consider the numbers from the business and market expansion point of view: Over the next five-seven years, the current annual growth of insurance premium of 18 per cent will touch 30 per cent; there will be about 100 insurers as opposed to about half-a-dozen prior to liberalisation; the number of intermediaries will hit 20 lakh; the insurance it market itself would be worth about Rs 10,000 crore. Staggering numbers. The prospects for a dedicated portal are indeed bright.

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