Flipkart takes a stab at insurance once again

Ten months ago, ecommerce major Flipkart and its decacorn fintech subsidiary PhonePe parted ways.

Thereafter, both entities began to map out ambitious plans to create independent identities for themselves, even if it meant stepping into the other’s territory. 

PhonePe took the lead with major launches this year, including a mega splash into Flipkart’s domain with ONDC-backed ecommerce app Pincode in April.

Two months later, Flipkart—which lost its financial services moat post the hive-off—made an entry into personal loans, in partnership with Axis Bank. It is reportedly eyeing UPI (TPAP - third-party app providers) licence for payments and an NBFC licence for lending. 

Flipkart’s existing financial services portfolio also includes a buy now, pay later (BNPL) option and a co-branded credit card. 

And there’s more to come. 

As Flipkart stitches the pieces together, one finance vertical at a time, it has decided to give a new lease of life to a category it has already dabbled with—insurance—albeit in a brand new avatar. 

This time around, Flipkart, which itself holds a broker’s licence to sell insurance, has decided not to build the service in-house and has instead partnered with Mumbai-based insurtech firm Coverfox Insurance to offer a plug-and-play model to its large base of 200 million monthly active users.

The renewed service, available under the ‘Insurance’ tab on the Flipkart app, was piloted in May, according to a highly-placed source who is close to the development, on conditions of anonymity. 

Through this service, Flipkart now offers a much-diversified range of standalone insurance products, including two-wheeler, four-wheeler and health insurance, from multiple insurers via its new tech partner. 

The service also includes sachet-size low-ticket policies for personal accidents, critical illness, vector-borne diseases like dengue and malaria, and cancer. 

The source quoted earlier revealed that talks are on to bundle insurance with Flipkart merchant categories in the next phase, something which the ecommerce platform already does with its old-time partner Bajaj Allianz General Insurance.

Both the Flipkart and Coverfox teams declined to comment on the development. 

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Not a debut 

This is not Flipkart’s first foray into insurance, but it is its first strong attempt to sell the service as a standalone category on the app, thus marking a full-fledged entry into the insurance space. 

Back in 2018, the company had bagged a corporate (composite) insurance agent licence from the Insurance Regulatory & Development Authority, which allowed it to sell life, three non-life, and three standalone health policies. 

This partnership, however, remained confined to Bajaj Allianz for selling non-life insurance plans like mobile protection, cyber fraud, and, later, motor insurance. 

Bajaj also powered Flipkart’s then subsidiary PhonePe’s motor insurance.  

The company also entered into tie-ups with Aegon Life, ICICI Lombard, and Care for some health and life covers. These partnerships, according to an independent insurtech executive, did not yield strong numbers. 

Now that Flipkart has joined hands with Coverfox, what happens to its existing partnerships with insurers? This remains unclear. 

Flipkart declined to respond to queries from YourStory on the same. 

Build vs Buy: Plug-and-play model advantage

According to analysts, the plug-and-play model comes with the benefits of faster rollout and agility, while partnering with an insurtech firm gives Flipkart the advantage of offering diverse insurer options, instead of being tied down to one to two players.  

In a category like insurance, where customers want to compare multiple options before buying, this makes eminent sense, say experts. 

“Flipkart has been trying to sell insurance for a long time now, but transactions did not happen. A plug-and-play model makes sense as the insurtech has already done the leg work of tying up with multiple companies, which Flipkart may have struggled with,” said the insurtech executive.  

According to Flipkart’s website, Coverfox—an insurance aggregator—has over 40 insurance companies across general, health and life categories on its stack. 

Companies such as ICICI Securities, Vahak, Spinny, and CarTrade have also partnered with Coverfox to offer insurance on their platforms. 

Amazon’s financial services play

Flipkart is not the only ecommerce player that is building a suite of fintech products. Its rival Amazon too runs a dedicated ecosystem via its app—Amazon Pay, which offers recharges, bill payments, peer-to-peer transactions via UPI, and insurance.  

Amazon entered the insurance distribution business back in 2020 by tying up with general insurance startup Acko to sell motor vehicle policies on its Pay platform. Interestingly, Flipkart Co-founder Binny Bansal had invested in Amazon-backed Acko in 2019 as part of its Series C round.

Comparatively, Flipkart’s bouquet of insurance products seems much more diverse.

Apart from insurance, Amazon has collaborated with Bharat BillPay, the billing platform of the National Payments Corporation of India to strengthen its loan repayment facility and electricity and municipal tax payments services.

Flipkart too has a similar arrangement with BillPay. 

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Challenges and opportunities

Selling standalone insurance on an e-commerce platform is a long-term bet for Flipkart, which will gain traction as the trend of buying insurance online grows, point out analysts. 

For now, besides motor insurance, Flipkart has introduced a bunch of sachet-sized ‘pocket-friendly’ insurance for vector-borne diseases, personal accidents, normal and ICU hospitalisation expenses, named ‘Hospicash’, starting at Rs 177 per year.  

However, the e-commerce company may face challenges in distributing complex life and health insurance, as a  significant portion of the population still prefers traditional banks and agents when seeking assistance with their purchases, says Vishal Bhave, Practice Leader, Insurance, at Praxis Global Alliance.

For an e-commerce player to win in insurance, it needs to go beyond vanilla choices and offer more personalised, tailor-made and targeted insurance. 

“An e-commerce platform has tonnes of customer data. Leveraging AI, if it is able to offer simple and relevant products and move towards content-based engagement rather than a product push approach, it will work,” suggests Bhave. 

“Sachet and benefit products can be a good starting point to engage customers for insurance and then cross-sell further for health indemnity and term insurance,” he adds. 

Bhave cautions that the engagement with customers needs to be meaningful; otherwise it will end up being just another company urging people to buy insurance. 

The partnership with Coverfox comes with a revenue-sharing arrangement, adding another top line revenue channel for Flipkart, besides lending and ecommerce. But it must be managed well for the company to accrue the desired benefits. 

“But if not managed well, this can be counterproductive and adversely impact the main e-commerce brand,” he warns.

Flipkart may incur some expenses as it offers exclusive discounts to members. But these are short-term costs, which can be offset in the long run. 

“Insurance distribution is a volume game with good margins. But this will depend on how competitive the insurance product is, the underwriting, and claim settlement,” says Ramkumar Subramanian, Executive Director, Financial Services Risk Advisory, Grant Thornton Bharat. 

“Flipkart needs to be smart on what they pick and choose for their platform to sell more,” he adds. 

According to a report by Mordor Intelligence, the online insurance market in India by gross written premiums value is expected to grow from $92.60 billion in 2023 to $120.05 billion by 2028, at a CAGR of 5.33%. 

As internet penetration continues to grow in India, more and more people are becoming increasingly comfortable with making transactions online, and a surge is evident in the ecommerce space in the country, the report adds. 

SuperMoney ambitions

Apart from insurance, Flipkart’s grand plan to build its own suite of financial solutions includes what is being touted as its trump card—SuperMoney app. 

The fintech marketplace is spearheaded by Senior VP Prakash Sikaria, who also leads Flipkart’s social commerce platform Shopsy, and former Coverfox and Paytm Insurance CEO Premanshu Singh. 

Former Fampay senior executives Rahul Khanna and Bhavesh Khandelwal have also joined in. 

According to a report in The Economic Times report, Flipkart is earmarking around $15 million to $20 million for the in-house fintech marketplace that will function as a separate entity within Flipkart, and it is expected to be ready by the end of this year.

“Flipkart is building a credit marketplace with SuperMoney.

The team has been working in stealth to revolutionise the $500 billion fintech landscape with an exciting digital lending play. We are all set to take off now and have our eyes set to become the largest lending platform in the next 24 months,” says a post by the firm on LinkedIn. 

The Walmart-owned ecommerce retailer reported a widening of consolidated loss to Rs 4,890.6 crore in FY23, compared to Rs 3,371.2 crore in FY22. 

During the fiscal year, its net total income, including income from other sources, increased by 9.4% to Rs 56,012.8 crore from Rs 51,176 crore in FY22.

As Flipkart takes a bigger bite into the financial services pie, it will be hoping to add additional revenue streams leveraging its vast user base, thereby narrowing its losses and boosting revenue significantly. 

(The story was updated to correct a quote)