Last week, I visited my village (Dasaut), and out of all the observations, one particular observation - gave me a sense of how the lives of 95% of Bhartiya have improved by 10 to 20X. And that observation also allowed me to imagine - why today is probably the best time to start building India's biggest and first trillion dollars company. I will tell you that particular observation at the last of this essay but first, let's understand why NOW is probably the best time to build India's biggest and first trillion-dollar company.
Frankly, this essay is a combination of two non-published essays, and hence you will see how our mission of making healthcare affordable for 1.2 billion Bhartiya has a lot to do with taking nothing as truth - we question everything. And in that process, I came across an article on one of the new upstarts in the Insurance market, and I instantly disagreed. Because it emphasized the distribution of agents in tier-2 and below-tier cities as the USP. My first reaction - no, this can not be a solution to India’s insurance penetration deficiency. The source of this conviction and confidence is the combination of - first principle thinking + ground reality + scale mindset. Somehow the focus shifted from writing on the original topic - why the agent-based model is not suitable for 90% of Indians - to building India’s biggest and first trillion-dollar company. Also, I am from the old school and hence used the revenue to define the biggest company rather than the market cap.
We all can agree - to build India's biggest company, we must understand the current biggest companies and why a significant percentage from that list is ready to get disrupted. Frankly, it seems inevitable - the disruption of these incumbents by the new-age companies, and I have proved this in the later part of the essay. If any of you remember, I highlighted in one of my essays, most Indians are using products of SBI and LIC because there is a lack of available suitable alternatives. And hence when you look at their NPS, not even one company from the top 10 has above 50%.
Now tell me: would you like to invest in a growth-stage startup whose NPS is below 50 (If you are a growth-stage investor)? I am sure you will agree with the point - low NPS is a sign of poor customer satisfaction and experience, no?
To begin with, we should list India’s top ten companies in terms of revenue - I told you, I am from an old school: 40+ years old wrapped in flash and blood of 28 (lol). Can you see: if a few of the incumbents (companies) from the above list are ready to be replaced by the new companies? Today is probably the best time to disrupt some of these incumbents by using all the available technology and resources.
Now the easiest way to spot, among the above top-10, which incumbent could be replaced first by the new companies - the incumbent with the lowest NPS, no? OMG, what a coincidence: one of the components of our solution to make healthcare affordable for 1.2 billion Bharitya also includes Insurance (Health and Life). We are building more on the intersection of Healthcare and Insurance (I have explained this in detail in the 2nd half of the essay), and we believe that is the only way to build India’s biggest and first trillion-dollar company…
Let me go the extra mile and write here - we believe the world’s biggest company in Healthcare and Insurance will come from India (how?). At present, the world’s biggest Insurance company is United Health Group, a yearly revenue of $342 billion, and India's biggest insurance company is LIC revenue of $92 billion just from Life insurance at an Insurance density (explained this term, below) of just $50. This means just 4X in the growth of Insurance density: LIC’s revenue could potentially be $360+ billion (WoW). If you add Health insurance, Healthcare - we are talking about yearly revenue of $500 billion. Yes, you read it right: $500 billion in revenue from India. And if we consider 70% of the population from developing and poor countries, we even have the potential to generate $1000 billion in revenue ($1 trillion). After all, healthcare is a fundamental need. This would be a hell of a ride to see an Indian company generating $1 trillion yearly revenue (yay).
At this stage of the essay, you have a sense: insurance is the potential route to build India’s biggest and first trillion dollars company. There is another strong signal: if you look at the USA and China, public companies' domination of the insurance market is less than 5%. However, the Indian market is dominated by public companies. This is a different case that there has been a constant decline in the market dominance by public companies. If the trends are the same by 2026: private companies shall dominate India's insurance market. Here is a forecast in the form of a graph to prove the above hypothesis.
But there is no way we can replace an incumbent by following the same old method and processes. And hence the current agent-based insurance selling is no way we can build India’s biggest and first trillion dollars company. Irrespective of the company size, I think starting an insurance firm dominated by agents in the age of AGI is probably not the best strategic decision (I have answered the why in detail in the 2nd half of the essay).
I am certain that only new startups like Jile driven by the first principle approach, deep customer insights, and leveraging all the new/old technology can capture this opportunity and build India’s biggest and first trillion dollars company. :)
I know, at this point, you are confused because you may lack the basics of Insurance and other terminologies. And hence you must read this essay till the end. Just to make things clear, since Jile focuses on Health and term Insurance, we will focus more on these two types. And what could be potentially the best medium to disrupt incumbents - building on the intersection of Healthcare and Insurance?
I am using this essay as a summary of the Insurance market in India, so you will never have to read anything else hence we shall start with the definition.
The vague and general definition of Insurance - a tool to mitigate large/unaffordable financial loss by collecting affordable/small amounts from a large number of individuals. The rest of the available definitions are super complicated to understand, hence we are going to follow the fundamental definition that will allow us to unpack the fabricks of the insurance industry.
Here is the fundamental definition: Insurance is a tool to convert the probability of an event-1 (risk) into certain prevention of another event-2 (large and unaffordable financial loss) originating due to the event-1 (risk) in case event-1 (risk) occurring in the future by paying a certain affordable/small amount in the present.
We can easily define the following points from the above definition:
Insurance as a tool can only get applied to the probability of occurrence of an event.
If the occurrence of event-1 is certain, (Probability equal to one) it fails as a tool.
Of course, we can convert any certain event into probability by defining that into a period (Start to End). For example, the death of a human is a certain event by constraining this into a period (start to end), we can convert this into probability.
The brilliant part of breaking a complex structure into fundamental cells is that we can unpack every component. You won’t believe it: every attribute - pricing, premium, profits, top-line, bottom-line etc. - of the insurance industry evolves around the above definition.
From the above definition, I have listed individual cells of the Insurance
From the above table would you like to agree?
The affordable/small amount in-present (Premium) would be directly proportional to the risk probability. If the probability of occurrence of event-1 is higher, the affordable/small amount paid in-present (premium) would be higher.
Similarly, the small amount in-present (premium) would be directly proportional to the size of future unaffordable financial loss. If the future-financial loss amount is higher, the amount paid in present (premium) would be higher.
The maximum number of deriskers also shapes the premium amount, and to understand: we must take an example. Before that, we must list all the factors that influence the nature of Insurance.
From the above factors, I listed the relationship between “Amount Paid in Present (Premium)” with the other variables.
Premium is directly proportional to OPR and the amount of financial loss in future (claim)
And premium is inversely proportional to the length of the duration (Y) and number of deriskers (N)
From the above relationship between premium and the rest of the factors, we can answer the following questions
Why is the insurance premium of two-wheelers lower compared to 3 and 4-wheelers?
The Insurance premium of one year is always higher compared to the insurance premium of 2+ years
Why should health and term insurance premiums in India be affordable for everyone?
I have always said this, our 1.4 billion people are our strength (Maximum number of deriskers). This means most high-profit-pools businesses will automatically shape into scale-based models. We have proven examples of this - I recently wrote about VISA’s masterpiece story.
Now if you use the above relations of premium with other variables, you can get the answers to almost every decision of insurance design principles. And still, I struggle to find even one suitable insurance product for 90% of Bhartiya. The only reason we see a decent penetration of motor insurance is because it is mandatory by the regulators. The products should be like a magnet that attracts customers like iron, but this is only possible if the utility/benefits of the product cry out loud. And it is only possible if utility/benefits can be understood at almost zero cognitive loads.
Forget about that: you may have seen the recent PolicyBazzar ad during the IPL. It says - claims worth 1 Cr for a monthly premium of X. The advertisement is a self-cry to 95% of Indians - we are not for you. The real question: what percentage of Indians has a future financial loss of one Cr? You remember, if you are a regular reader, I highlighted how a future-financial loss of INR 5 Lakh was enough for that CSC owner, Sunil.
We shall come back to this point in the 2nd half of the essay. For now, let me paint a picture of India’s current insurance market and potential. I am using a table to keep this essay shorter.
Key indications from the above table:
The number of companies has reduced over the year (Not a good sign)
The number of Offices has also reduced (Decline): (Impact of digital penetrations, a good sign)
Insurance penetration has been constant: (worse for a nation such as ours)
Insurance density is up by $13: (Good sign, however, the growth is only in the motor insurance)
The number of new policies is on the rise: (the growth is super low compared to GDP growth)
Total premium and AUM are also on the rise: (the growth is low)
The PSUs market share is on a constant decline: a good sign.
The Private market share is on a constant rise: a good sign.
Commission and Operating expenses are on the rise: this must go down so the premium could be affordable for 1.4 billion Indians.
Claims amount has been on the rise: Good for insurance holders.
Paid-up capital is on the rise: I don’t know how this affects insurance. Can anyone help me to understand this?
Before I compare India’s insurance stats with USA and China, let me tell you the importance of our nation’s households saving on insurance.
Our household’s largest saving is still the deposits (it has been on the decline for sure), and surprisingly insurance fund has been on the decline (why?). The rise in the Provident and Pension Funds is only good news from the above table.
You see lack of suitable insurance products is creating a net negative in our society (a society of 1.4 billion, not 50 or 100 million - just a reminder ;)). And especially when we compared this with the USA and China, the numbers are crying out loud and want to get disrupted. Since Jile focuses on Health and life insurance, I have used one of our internal slides to compare the parameters of Health and life insurance of three nations.
Source: Jile Health
Here is how we define India’s current insurance market: we believe India’s current insurance market is at a similar stage to the USA’s search-engine market before Google. Before Google, even though the search engines were broken, users were still using them in the absence of better alternatives. However, Google changed the fundamentals and hence the experience of search. Of course, the founders also wanted to build a $100 billion revenue company from day-1. But it was possible because of the formation of a great product, not the other way around. We at Jile believe: India’s health and life insurance is at a similar stage, and there is an opportunity to build India's biggest and first trillion dollars company!
Again remember, this is not a search engine - we are talking about Health and life insurance so the approach will be different.
I have always said this (no one cares right now, but a significant % will care in the future (lol)), India’s current available Insurance (Health and Life) is unsuitable, unattractive, and unaffordable for more than 90% of Bhartiya. And believe me, by following fundamentals and making insurance suitable, attractive, and affordable for consumers - we can unlock a trillion-dollar value from the 90% of Bhartiya. Again, there shouldn’t be a discussion around affordability, business models such as Insurance by default follow the model of scale, and we have 1.2 billion Bhartiya, no?
It is a good time to get back to the fundamentals of insurance and connect that with Health and term insurance. If you can recall the factors influencing insurance premiums, there is just one addition to Health and life apart from all the existing factors.
Probability of Hospitalization (POH) in the case of Health Insurance.
The Probability of Death (POD) in the case of Term Insurance.
Rest all the factors are the same. You might be thinking hey, Suman: I purchased health insurance and the premium was based on age, why? Don’t you think age is directly proportional to the Probability of Hospitalization? Technically, when an insurance provider asks your age - they evaluate the POH in the case of Health insurance and POD in the case of Term insurance. There are other factors for sure.
However, as our life span is increasing and our health span is decreasing - just age should not be a factor to calculate premiums of health or term insurance. And just one and half years before, it would have been impossible to solve because building underlying technology that can evaluate POH and POD could have cost hundreds of millions of dollars and a minimum of half a decade of building. But today, tools are available at zero cost and can be integrated into the core product. And believe us, no, not believe us, I know - it will create magic.
On the Grove platform (A forum for climate-related discussion - an initiative by Rainmatter: you should join to understand the magnitude of the Climate problem), the first thing we look into any initiative is incentives for stakeholders, so after a time the initiative could become self-sustainable, and we don’t have to pump resources. Because incentive (visible and short-term) drives individual motivation and self-sustainable means no retention cost and CAC at the time of renewal of insurance. This is the paradigm shift we are talking about in Health and term insurance for 1.2 billion Bhartiya. Now you would also like to agree with me that agent-based insurance selling is not sustainable for 90% of Bhartiya because it is ultimately inflating the premium and demand resource for every renewal, no? And this can be solved by building an incentive-based self-sustainable model.
I know what you are wondering, hey where does Healthcare fit into all these? Okay, let's understand this through an example: how healthcare makes the model self-sustainable by creating incentives for all the stakeholders.
Let’s say, Nithin (Zerodha’s Founder) age 43, has an active lifestyle - exercises daily, takes the right diet, no tobacco, occasional alcohol, no pre-existing diseases etc
And Saurav (XYZ’s founder) age 43, has an inactive lifestyle - no exercise, consumes alcohol 3 or 4 times a week, smokes, no fixed diet, no pre-existing diseases etc
According to the current Health Insurance system, since the age of both - Nithin and Saurav - is the same, they are paying the same premium for the same claim amount. And this is wrong. Don’t you think it is unfair to Nithin because even after all the taking care of his health - he is paying the same premium as Saurav? And is there any chance Saurav would ever change his lifestyle? The answer would be a big NO.
What should be a fair deal for Nithin, and how can we incentivize Saurav so he feels motivated to change his lifestyle?
First, we need a source of truth to validate Nithin’s claims of an active lifestyle and other claims (Trusting Nithin without a source of truth will create subjectivity :)). And based on the validated score - his premium should get calculated (dynamic premium).
Second, offer a dynamic insurance premium to Saurav, and his premium should go up and down based on the validation of an active lifestyle from the source of truth. Now, Saurav has an incentive to be motivated for his active lifestyle. And this will create a data-led society and for individual members, it will function as an asset (Brilliant). And this will be self-sustainable as well, in fact - this is already self-sustainable. :)
You see, Health and term insurance are not just insurance: the fact is insurance and healthcare both overlap each other. And this is what has been missing from the current Indian market and hence super low insurance penetration and density compared to the rest of the world.
This essay is already 3000+ words, and hence I must be super brief in connecting this with Healthcare. Before I go into detail, let me drop a heavy statement. We believe (in fact, we know) - firstly, a decent Healthcare Customer experience (which is super broken for 95% of Bhartiya) and secondly, a source of truth will do the paradigm shift for Indian society
It will convert the entire Health and Term insurance into an incentive and self-sustainable model
It will save us $20 billion in preventive healthcare expenses each year
You won’t believe it, since we have been thinking for 1.2 billion Bhartiya, and the mission is to make it affordable for 1.2 billion Bhartiya from day-0 - I was super terrified by the word: Experience. Let’s face it, almost all the startups that I have come across - of course, focused on the top 5% of Indians - better experiences have ended up inflating final product prices. And hence I was a bit scared because we also know how much our customers can pay us today, tomorrow, and the day after tomorrow. :)
Hence we were only considering the basic of Healthcare Experience so we could keep the price under control. But then I came across this brilliant a16z essay: the biggest company in the world, and we discovered that the basic features that we were considering are actually a good customer experience in Healthcare, can you believe it? I literally punched in the air due to the excitement.
I remember our Day 0: we wanted to build a solution on the top of PMJAY for 700 million Bhartiya, however, our past six months of work guided us towards our life purpose towards a mission on which we are ready to bet our lifetime. And almost all design principles are logical keeping people in the centre. Today, when we are on a mission to make healthcare affordable for 1.2 billion Bhartiya - many of these feel obvious. Of course, there were a few constrained in the past but today those constraints are gone. And there is absolutely no reason not to dream of solving our society's problems and building India’s first trillion-dollar company. Before we wrap up this essay, I will request you to do a visualization exercise that we do every day:
Close your eyes and visualise an inclusive India where every single Indian has Good Food, House, clothes, ability to pay for their health expenses (Affordable Healthcare), and a safety net (Term Insurance) in case the creator is not kind to them. And all these are self-sustainable and data-driven incentives. What a prosperous society of 1.6 billion (We will add 200 million in the next 10 years!) The company that is leading this revolution is Jile generating hundreds of billions of dollars of revenue each year!
Before I wrap up this essay, here is what I observed in my village: I remember just a decade back most of the FMCG companies from categories such as Detergent and Shampoo used to do paint branding of products priced at INR 1 or 2. However, last week, I saw paint branding of those same FMCG companies but with products priced at INR 10 and 20 (In your purchasing power it is nothing, lol). There was not even a single brand painting of INR 1 and 2. If you adjust the inflation, we are still talking about some 1000% growth in purchasing power, no?
I am still tempted to write, but we have already crossed 4000+ words. And hence we must wrap up this long essay.
Thanks for reading, if you find my essay informative - please share this with your network!
I will see you all the next week