GramCover, an insurtech company based in the Mumbai area, has raised $7 million in a Series A funding round to scale its business providing coverage to Indian farmers.
Dhyanesh Bhatt, formerly a technologist at general insurer ICICI Lombard, co-founded the company in 2018 to specialize in serving farmers and other rural people.
Although big companies like ICICI Lombard offer products for the agriculture sector, Bhatt says making the business a success requires focus.
“Big insurance companies always include a plan for serving people at the bottom of the pyramid, but it’s never their focus,” he said. “GramCover was my chance to specialize.”
Tech makes it possible
The company has developed an app and payment tools to create a marketplace.
Indian regulation requires local agents and other “point of sale” actors to identify as either tied to one insurance company, or to one broker. GramCover obtained a brokerage license and built technology to make it easy to onboard many products from multiple insurers. It is pursuing a B2B2C strategy.
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Technology is key for two reasons. First, it makes it easy for agents to get an instant range of products and choice. Second, GramCover built payment systems, so that customers can pay an agent in cash, which GramCover’s wallet converts to a digital payment. The app’s wallet pays the insurer whose product has been sold, in real time, and also pays the agent their commission.
Making things simple and ensuring they work in real time has been an important factor in building trust, both among agents and among customers, Bhatt says. The app can support agents with claims as well.
“Ninety percent of users are first-time buyers of insurance,” said Harsh Gupta, part of the investment team at Flouish Ventures, an impact-investing firm that provided GramCover with seed money. “Insurance is an important tool for financial inclusion. If people don’t have it, they have to rely on informal borrowing when there’s an unexpected disaster.”
Serving the rural population
Bhatt adds that for most of the insurtech’s end consumers, this is the first online transaction they’ve ever made. Over time, the selling process may become more digitized. GramCover is now beginning to sell renewals through the app. But he reckons it will be a few more years before this segment of users is comfortable with buying policies by themselves.
This is in contrast to big-name Indian fintechs like PolicyBazaar, which provides a digital supermarket of insurance and other financial products to urban, educated users. People can compare policies, get quotes, apply, and purchase products through PolicyBazaar’s app.
GramCover’s userbase is poor people living in isolated communities. Nonetheless, the insurtech has been profitable for the past two years, and Bhatt says the company can remain so if it is careful with managing its network.
He is using the proceeds of the new Series A funding to grow the point-of-sale network, improve the app’s UX/UI, and add more payment methods.
Over time he realizes the need to scale the business, and is open to expanding into mutual funds or savings, or adding new insurance categories. The company began with livestock and crop insurance, before expanding to motor, health, and life insurance.
However, the priority is growing the agency force, which he expects to grow from 3,000 people to 30,000 to 60,000 over the next two years. The current end-customer base is now 1.7 million.
That figure represents the tip of the iceberg. Nearly 70 percent of India’s population is rural. That’s about 880 million people, most of whom lack access to insurance. India’s insurance penetration, measured in total premiums sold, is only about 3.7 percent of GDP. That’s low, but common for emerging markets; but in terms of density (total premiums versus a country’s population), India is below even emerging-market peers.
Siana Capital and Inflexor Ventures led the Series A round. Other investors were Stride Ventures and three firms that provided seed funding: Flourish, Omdiyar Network India, and Emphasis Ventures.