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Nikhil Singh    


NOIDA, India

I am a versatile professional known for my expertise as a technical analyst, insightful contributions as a part-time investor, and creative talents as a content writer. With a strong background in finance, I seamlessly combine technical know-how and fundamental analysis in my role as a part-time investor.

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The Rise of Digit Insurance and Its Journey

Mr. Kamesh Goyal founded Digit Auto Insurance in 2016. The company, Digit Insurance, focuses on streamlining insurance procedures and providing quick claim settlements. It is India's first digital general insurance provider.


Overview

Mr. Kamesh Goyal founded Digit Auto Insurance in 2016. The company, Digit Insurance, focuses on streamlining insurance procedures and providing quick claim settlements. It is India's first digital general insurance provider. With over two million subscribers and a 94% claims payout rate, Digit Insurance has garnered substantial traction despite only being in existence for 16 months. The company offers a range of insurance products, including auto insurance, with features including personal accident coverage, cashless garages, and an easy-to-use system for settling claims. Mr. Goyal has worked in finance and insurance throughout his entire career. He has held multiple C-suite positions in companies that are owned by the massive German insurance company Allianz.

He worked for six and a half years at Bajaj Allianz, an insurance joint venture between Allianz and Bajaj Finserv, an Indian financial services company.

He began in 2001 as the COO and then the CEO in 2004. He held this role until 2007.

He most recently served as the Allianz Group's head of strategy planning. His extensive expertise provided him with valuable insights into the intricate and technical insurance sector, but he had a pivotal moment when he neglected to teach his adolescent son the fundamentals of insurance. He made the decision to leave Allianz in order to carry out his quick and easy insurance idea. In July of last year, Go Digit Infoworks partner FairFax Holdings increased its overall investment amount to $94 million (£72 million) by investing $45 million (£35 million) in Digit Insurance. Prem Watsa, the chairman of FairFax, is an Indo-Canadian billionaire who is referred to as "the Canadian Warren Buffet" due to his similar investing philosophy to that of the well-known US billionaire. He highlighted the significance of a company's management team to its long-term performance when he made his investment in Digit Insurance, noting this as a primary motivator.

In an interview with the Economic Times of India, he stated: "Digit is really distinct. Kamesh is launching a business that will specialise in insurance in the digital sphere.

Business Model of Digit Insurance

Cloud-Based Operations: Digit Insurance greatly lowers infrastructure and operating expenses by utilising a cloud-based business strategy.

Partnerships: In order to connect insurance offerings with products and create additional revenue streams, the company enters into advantageous relationships with a variety of businesses, including global e-commerce behemoths like Amazon and Flipkart.

Income Generation: Digit Insurance's main source of income is the selling of insurance products, with a focus on affordable rates to draw in a broad clientele.

Market Segments of Digit

Digital-First Approach: By adopting a digital-first approach, Digit Insurance may improve accessibility and cost-effectiveness, which helps to increase income.

Insurance Products: Digit Insurance provides a variety of insurance products, such as commercial vehicle, health, auto, bike, and travel insurance.

Customer-Centric Approach: In order to build customer loyalty, the company uses input from its clientele to produce new products and services.

Technology-Driven Operations: Digit Insurance uses technology such as artificial intelligence (AI) and machine learning in business operations to optimise workflows, cut expenses, and provide clients with speedier services.

In order to meet different demands, Digit Insurance provides a wide variety of insurance products. The following are the many insurance products that Digit Insurance provides:

Insurance for Two Wheelers:

coverage for third parties in insurance Separate own-damage insurance policy.

Health Insurance:

Comprehensive health insurance plans for individuals and families No room rent restrictions and rewards for claim-free years.

Car Insurance:

Car insurance provides protection for vehicles against theft, damage, and accidents.

Travel Insurance: 

Travel insurance shields passengers from unanticipated circumstances while they are away.

Commercial vehicle insurance :

Provides protection for vehicles used for business purposes, such as buses, trucks, and taxis.

Home insurance: safeguards against hazards such as fires and natural disasters.

Industry Research

The insurance sector has been growing, and this increase can be linked to rising earnings and greater industry understanding. With an annual growth rate of 32–34%, India ranks sixth among emerging insurance markets globally for life insurance. The industry has seen intense peer competition in recent years, which has prompted the development of fresh, cutting-edge items. Under the automatic system, up to 26% of foreign direct investment (FDI) is permitted in the business. The Insurance Regulatory and Development Authority of India (IRDAI), the industry's licencing authority, oversees licences.

The insurance industry in India is dominated by 57 insurance firms, of whom 24 specialise in life insurance and the remaining 34 in non-life insurance. Life Insurance Corporation (LIC) is the only additional public sector life insurer.

Within the non-life insurance business, there are six public sector insurers. Apart from these, General Insurance Corporation of India (GIC Re) is the only national re-insurer. Brokers, surveyors, individual and corporate agents, and third-party administrators handling health insurance claims are some of the other players in the Indian insurance sector.

The insurance sector has experienced a great deal of change in terms of new innovations, updated laws, proposed changes, and expansion in 2022. These advancements guarantee that insurers remain current with the most recent technological upheavals and have created new growth opportunities for the sector.

Over the past 20 years, the insurance market in India has grown at an exceptional rate, fueled by more private sector participation, improved distribution capacities, and significant increases in operational efficiency.

Due to the high demand for health and auto insurance, non-life players' premium income increased by 14.86% year over year to Rs. 1,43,802 crore (US$ 17.29 billion) in FY24 (till September 2023) as a result.

In the first half of FY24, the non-life insurance sector in India grew by 14.86%, compared to 15.30% during the same time the year before. Crop insurance, car insurance, and health (particularly the group sector) drove the company growth in the first half of FY24.

Based on data from the Life Insurance Council, life insurers' new business premiums increased to Rs. 211,690.65 crore (US$ 25.38 billion) between April and November of 2023.

The private life insurance market saw a solid 35% year-over-year growth in premiums in March 2023 and 20% growth in premiums for FY23.

In terms of premium collection among private companies, SBI Life, HDFC Life, and ICICI Prudential Life lead the market. While HDFC Life and ICICI Prudential Life earned Rs. 28,900 crore (US$ 3.49 billion) and Rs. 17,000 crore (US$ 2.05 billion) in premiums, respectively, SBI Life received Rs. 29,600 crore (US$ 3.58 billion).

The Insurance Regulatory and Development Authority of India, the insurance regulator, recently revealed data showing that as of October, LIC increased its market share by 447 basis points (bps), or 67.72%. By the conclusion of 2021–2022, LIC held a 63.25% stake of the life insurance market, while private companies held a 36.75% share.

Some government Initiatives

  • Mooted as part of an emphasis on better targeting of tax concessions and exemptions, the proposal means that income from life insurance policies with an aggregate premium up to Rs. 5 lakh (US$ 6,075) will be exempt from taxation.

  • The Pradhan Mantri Fasal Bima Yojana (PMFBY), the government's flagship crop insurance programme, has significantly increased crop insurance premium revenue.

  • Ayushman Bharat (Pradhan Mantri Jan Arogya Yojana) (AB PMJAY) aims at providing a health cover of Rs. 5 lakh (US$ 6,075) per family per year for secondary and tertiary care hospitalization.

  • Insurance cover for 44.6 crore persons under PM Suraksha Bima and PM Jeevan Jyoti Yojana was provided during FY23.

  • In 2022, the Indian government plans to sell a 7% stake in LIC for Rs. 50,000 crore (US$ 6.62 billion). This is the largest initial public offering (IPO) in India.

Promoters of the company

The company's creator and chairman, Kamesh Goyal, Go Digit Infoworks Services Private Limited, Oben Ventures LLP, and FAL Corporation, a division of Fairfax Holdings, are among the promoters of Digit Insurance. As part of the IPO, these promoters would jointly sell close to 11 crore equity shares.

Shareholding Pattern of Digit Insurance

 

Fundings of Digit Insurance

 

Date

Round

Amount

Investors

Valuation

4/24/2023

Unattributed

 

HDFC Bank

 

5/4/2022

Series F

$54.69M

 

$4,000M

12/22/2021

Series E - III

$0.67M

 

$639.3M

8/26/2021

Series E - II

     

7/2/2021

Series E

     

8/26/2021

Series E

     

7/2/2021

Series E

     



Peer comparison

Company Name

Description

Location

Funding

Stage

ACKO

Multi-category digital insurance and claim management solutions for individuals and businesses

Bengaluru

$489M

Series E

Navi

App-based personal finance solution

Bengaluru

$427M

Series A

Care Health Insurance

Provider of health and travel insurance services

Gurgaon

$44.3M

Series A

Toffee

Online platform for health and P&C insurances

Gurgaon

$12.5M

Series B

PBPartners

Web-based platform for multiple insurance products

Gurgaon

Unfunded

Unfunded

Agarwal Money

Platform for online investment and financial planning

Jhansi

Unfunded

Unfunded

Online Policy House

Insurance web aggregator to provide insurance services

Jaipur

Unfunded

Unfunded

CoverSure

AI-enabled insurance platform for businesses and individuals

Mumbai

Unfunded

Unfunded

Aashar

Online insurance comparison platform for individuals

Surat

Deadpooled

Deadpoo



Based on the information provided, ACKO appears to be dominating the market, given its substantial funding of $489M and its advanced stage of Series E. ACKO offers multi-category digital insurance and claim management solutions, catering to both individuals and businesses. With its comprehensive range of insurance offerings and robust platform, ACKO likely holds a significant market share in the digital insurance space.

Following ACKO, Navi emerges as a prominent player with a funding of $427M and being at Series A stage. Navi provides app-based personal finance solutions, including smart investments, loans, and insurance coverage. Despite being relatively newer compared to ACKO, Navi's substantial funding and innovative approach position it as a key competitor in the market.

Both ACKO and Navi exemplify the evolving landscape of digital insurance and finance solutions in India, leveraging technology to provide convenient and accessible services to users. As the market continues to grow, these companies are poised to play a crucial role in shaping the future of the insurance industry in the region.

Financials of Digit

Metric

FY23-24

Revenue

₹5,164 crore

Net Profit

₹338 crore

Premium Earned

₹8,23,48,140

Interest from Investments

₹726 crore

Claims Settled

₹3,190 crore

Branding Cost

₹1,807 crore

Employee Benefits

₹1,807 crore

Information Technology

₹5,445 crore

Rent

₹1,807 crore

Legal Professional

₹1,807 crore

Other Overheads

₹5,445 crore

Operating Expenses

₹10,955 crore

EBITDA Margin

8%

ROCE Margin

13%

EPS (Basic & Diluted)

₹2.41

 

Through 11 rounds, Digit Insurance has raised $478.85 million.

The most recent investment round for Digit Insurance ended on April 24, 2023, with no credit given.

As of May 2022, Digit Insurance was valued at $4,000 million.

The most recent post-money valuation for Digit Insurance is dated May 2022.

Conclusion

In conclusion, investors and the firm itself have a lot to gain from Digit Insurance's future prospects and impending IPO. With the support of well-known investors like Fairfax Group, the business hopes to become the first unicorn startup in 2021 and reach an IPO price of $4.5 billion to $5 billion. Given Digit Insurance's position in an industry dominated by well-established companies, the IPO is expected to be fascinating; nevertheless, given that the company has recently announced losses, there are questions about its viability. The company's commitment to continue making large expenditures for business development and expansion is highlighted in the IPO filing, which also emphasises caution over the company's road to profitability.

Despite these obstacles, Digit Insurance is well-positioned for growth and success in the changing insurance market thanks to its creative strategy, smart alliances, and digital-first business model.

Disclosure:

I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure:

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Stocx Research Club). I have no business relationship with any company whose stock is mentioned in this article.

Disclosure legality:

I am not a SEBI Registered individual/entity and the above research article is only for educational purpose and is never intended as trading/investment advice.

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