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REUTERS/Abhishek N. Chinnappa
Insuring Amazon’s future in India.
PREMIUM BATTLE

Amazon wants to disrupt India’s old-school insurance industry

By Aria Thaker

If clothes and mobile phones weren’t enough, there’s a new battleground in India’s e-commerce war: insurance.

And Amazon is its latest entrant.

The Seattle-based giant’s India unit in filings with the ministry of corporate affairs, described its intent to enter India’s rapidly growing insurance industry, BloombergQuint reported yesterday (Sept. 17). The firm’s digital-payments arm, Amazon Pay, is slated to roll out the specific products, along with other financial products like loans and EMI services.

The world’s largest e-commerce company has for years been locked in a fierce competition with Bengaluru-based Flipkart, the biggest Indian firm in the industry. Besides other categories that the two firms compete in, Amazon has been investing heavily in fintech and financial products for some time now. Just last month, it acquired Sequoia Capital-backed startup Tapzo to help support Amazon Pay. A questionnaire that Quartz e-mailed to Amazon is yet to receive a response.

E-commerce firms whose business model lies in forming a “customer connect” try to “sell everything their customer needs,” including, now, insurance products, said Kalpesh Mehta, partner at auditing firm Deloitte Haskins & Sells.

Yet, this could turn out to be a long-drawn battle considering the insurance industry’s low level of penetration in the country (pdf).

In February this year, payments major Paytm created two separate insurance companies, including a life-insurance firm designed to compete even with state-owned behemoth Life Insurance Corporation of India. The company, already backed by Softbank and Alibaba, got a “game-changer” of an investment from Warren Buffet just two weeks ago.

A year ago, Flipkart, in which Walmart acquired a controlling stake this May, reportedly declared its intent to enter the insurance market. The Bengaluru-based firm is also betting hard on fintech.

Now all eyes are on the issue of regulation. 

Room for growth

Flipkart reportedly sought the Insurance Regulatory and Developmental Authority of India’s (IRDAI) approval months ago, but there’s been no word since. Paytm, on the other hand, received the nod last September, and has incorporated its two insurance companies, Paytm Life Insurance Corporation and Paytm General Insurance Corporation. Amazon, on its part, is yet to even apply, according to sources cited in BloombergQuint’s report.

Among the new, tech-oriented entrants, payment-bank companies are likely to have an edge, Mehta of Deloitte Haskins & Sells said. “Payment banks actually connect with customers for financial needs,” he told Quartz. “When you’re doing your financial transactions—transferring funds, receiving funds, and also looking at all the options of how to use your money—that is the time when you would look at insurance, not when you are looking at buying products.”

Meanhwile, Amazon’s somewhat delayed entry won’t cost it much since overall insurance coverage itself remains quite low in India. Between 2001 and 2017, it rose by just one percentage point, from 2.7% to 3.7%, according to a study by industry body Assocham. The insurance coverage is projected to grow far more quickly in the next few years, with the industry value estimated to rise from the current $72 billion (Rs5 lakh crore) to $280 billion by 2020.

As the rivalry plays out, Indian insurance, dominated for decades now by public players and specialist firms, may soon be disrupted by new-age companies—perhaps even sparking the sector’s take-off after years of sclerotic growth.