Fairfax Financial-promoted online non-life company Digit Insurance expects to break even this fiscal on the back of robust growth across its key verticals despite the pandemic, a senior company official said.
Canadian NRI billionaire Prem Watsa's Fairfax Financial Holdings has pumped $140 million into the nearly-three-year-old non-life insurer. Other investors of the Bengaluru-based firm, which began operations in December 2017, are A91 Partners, Faering Capital, and TVS Capital which together pumped in $84 million.
Kamesh Goyal, chairman of Digit Insurance, said the company had closed the second year of operations (FY20) with a revenue of Rs 2,252 crore, up from Rs 1,205 crore in FY19, clipping at 87 per cent and expects to cross the Rs 3,000-crore revenue mark this fiscal.
The promoters have so far infused Rs 1,650 crore into the company. It does not need any additional growth capital this fiscal, Goyal said.
Further, premium sales have been growing at over 35 per cent so far this fiscal driven by an 87 per cent spike in motor insurance sales in August alone against the industry average of 1 per cent, he added.
“Month-on-month we are doing well. Since August, we have seen robust demand for our flagship motor and health policies. If this sales trend continues, I am hopeful of breaking even this financial year with a small profit. In the first full year of operations, we had a net loss of Rs 425 crore,” Goyal told PTI.
His optimism comes from the continuous improvement in the key profitability metric - the combined ratio which has been steadily improving to 117 in FY20 from 124 in FY19.
His optimism also comes from faster growth as he “expects 33-35 per cent growth in revenue this fiscal over FY20 to Rs 3,000 crore.”
Last fiscal, 85 per cent of its revenue came from motor, which may come down to 70 per cent this fiscal as it is shifting focus to health from which Goyal expects to be 8-10 per cent of premium income this fiscal, up from 2 per cent last fiscal.
From a market share perspective, in motor insurance, it has 2.6 per cent as of Q1 this fiscal, up from 1.3 per cent in FY19, taking its overall market share to 1.54 per cent for the quarter to June 2020.
Asked about the concentration risks from heavy dependence on motor segment, he said balancing portfolio is not a priority now as the focus is topline growth. Fire constitutes 10 per cent of revenue growth.
Describing the pandemic as a watershed event for the insurance industry, Goyal said even before the virus hit the country, Digit was the first to launch policy for the pandemic on February 27 through the sandbox platform.
He said the company has sold over 1.8 million pandemic policies with an assured sum of varying from Rs 25,000 to Rs 5 lakh and has so far received only 2,100 claims, half of which came in the past six weeks alone.
But he fears a sharp increase in the pandemic claims going forward as the daily caseload and daily death rates spike.
On the company's motor policies, he said, having grown 87 per cent last month against the industry growth of 1 per cent, as much as 88 per cent of the pre-inspection cases for motor are processed within two hours, and the time taken for inspection is cut to seven minutes now from 24 hours and he credited this faster service to being 100 per cent on the cloud.
Digit Insurance claims to be the first insurer fully on the cloud.
He also said that since the government wants all insurers to offer crop cover, they too will look at next year.