ONDC - Opportunity for Insurance?

ONDC - Massive opportunity for Insurance

Digital innovation in India is growing at such a rate that it is already much more advanced than in hundreds of other countries. We have all experienced the brilliance of UPI (United Payment Interface) which is now also available in Singapore and France. The Co-win portal that was highly effective in distributing and monitoring the Covid vaccines was phenomenal. Such was the smoothness that many countries asked for its know-how so that they could implement it in their respective areas.

The same is and will be the case with ONDC - Open Network for Digital Commerce, which aims to democratize e-commerce. This eliminates the need of a buyer and seller to be a part of the same network. In a brief, let us see what ONDC is?

What is ONDC?

Today, if you want to purchase anything, you either log on to Flipkart or Amazon or any other provider. The stuff that you want to purchase is only possible if the seller for that item is present on the same platform. But if there is no seller for that product, you cannot buy it or may have to search it on some other provider.

ONDC solves this issue. As a part of the network, all buyers and sellers (irrespective of the platforms they joined) will be able to discover each other.

A point to be noted here is that

ONDC is not a super-aggregator app or a centralized system, it instead is a market led initiative. It is a network that enables the likes of Flipkart, Amazon, Paytm, Zomato and everybody else to exist under the same roof. The process of onboarding sellers or buyers still will lie with the providers, however, they will now have an option to expand and expose their sellers and buyers to a wider market by integrating with the ONDC network.

A diagramettical representation:

Source: ONDC Official Website

What is there for Insurance?

Every business is poised to thrive on ONDC, insurance should not be left behind. It has the potential to showcase its offerings across the value chain - From Sales and Marketing to Claims. Let us see in what ways can the insurance industry reap benefits:

• Sales and Marketing - A very obvious thought would be to have a separate section of Insurance on the ONDC network that would cater to the various offerings by insurers. But it is the same as Policybazaar or any other aggregator, right? Apart from such distribution strategy or marketing campaigns, ONDC could be leveraged for personalized or targeted selling.

Let us say, you are an end consumer and you log on to your Amazon app to buy a 65" OLED television. Amazon helps you connect to the ONDC network where you find sellers from many platforms (Paytm, Flipkart, Jio, etc.). On selecting a product based on the best price offered, you decide to checkout. There is an option to select the delivery partner.

Now every delivery partner has its own offerings. Some provide you the delivery free of cost, some add a cost along with insurance (based on their partnerships) that covers and pays you more than the price if there is any untoward incident, or else you have an option to simply choose your desired delivery partner and insurance.

As we see, here Insurance industry has either tied up with the delivery partner or themselves offer personalized packages to the consumer. Just like how we pay a minuscule amount at the Indian railways or an Ola ride, you now have an option to pay for different kinds of insurance for products. This gives a wider reach of customers to the Insurance company and also an opportunity to have new products for such services.

Apart from such commercial insurance, insurers can also partner with Doctors, Hospitals that are listed on the ONDC (the likes of Practo) to offer Health and Life Insurance products.

• Underwriting - ONDC network means lots of buyers and sellers along with third parties like delivery partners, finance partners, etc. This in turn means data. With advanced data analytics, it is now possible to understand the behaviour, lifestyle, risks and other such factors to accurately estimate an outcome. Insurers can use this data to understand the commerce and price their products accordingly.

For example, if an Insurer knows that delivery to a particular Pin Code is often met with accidents, lootings or frauds, it may charge an additional premium or use exclusive conditions for any claim payout. Additionally, an insurer may gather data from the participating financial institutions on the ONDC network for a granular information like loans and advances, propensity of a customer to purchase more on credit, thereby adding to the risk, etc.

• Claims - ONDC is nothing but a decentralized network with loads of participants. It is not very difficult to analyze in real time the authenticity of a late delivery or a health claim (since the entire transaction from purchase of the product to the insurance has been done in one go). Insurers could gather data in real time and process claims. This will be a Wow factor for the customer.

For example, a customer may not even have to raise a claim for a delayed delivery or missed flight. This would be available to the insurer in real time.

Some other examples that we could think of is:

1. Home Insurance (Theft/Fire/etc.) - If applications like MagicBricks or Housing.com are integrated with ONDC, a buyer could log on to the app-->browse various properties offered by different builders-->select a property-->chooses Home Insurance provided by various insurers for that area , and make all the necessary transactions in one click. This not only gives Insurers to sell their home products effectively, but also act as a value add on for the builders.
2. Travel Insurance - A buyer can log on to an application like Yatra.com and browse for various holiday packages that can be offered by many travel agencies. Along with the same, insurers can provide their customized offerings based on the destinations. This would reduce the need for the customers to specially go to an insurer's website and purchase one. Rather, the ease of buying from ONDC along with plethora of options (since all the Insurers would give their quotation and benefits for the customers to choose) will be a game changer for the industry.
3. Health Insurance - A buyer looking to purchase a gym or yoga membership can see various health insurance products available at discounted rates. At the checkout page, he/she can see products lined up from different insurers, as the insurers would have the information like age, gender, etc. to give a real time quotation. Moreover, there could be consistent data that can be fed to the insurers, like, regularity of going to the gym, that could help them monitor their clients.

The opportunities are plenty. ONDC not only gives a large platform for Insurers to market and sell their products throughout the country, at minium prices and without any expansion of the existing agent network, but also a possibility to innovate new sachet products for day to day use. This highly increases the chances of improving revenue.

The good part is that many of them are already in the process of integrating their services to the ONDC network. Prominent ones are Aarvi Insurance Brokers, Edelweiss General Insurance, ICICI Lombard General Insurance and Kotak Mahindra Genera Insurance.

It is a matter of time when we will see traditional and new age insurers be a part of this massive open network that will revolutionize the way we do our 'e-commerce.