Pavi Dhiman, Tobias Grether-Murray, Alexander Yevchenko

<aside> 💡 Home insurance penetration in India is 1% compared to its developed counterparts holding penetration rates above 90%. Traditional insurers are too large and bureaucratic, causing a lack of affordability and trust in the Indian market.

Our proposal is around creating a digital and modular home insurance platform to allow for a streamlined process, meet consumers needs with modular plans and allow for quick payouts, all through AutoGPTs and LLMs; a completely automated process.

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The Problem: Lack of Affordability and Trust

Home insurance penetration in India is just 1%, with only about 3% of houses in India actually being insured, this is compared to 90% in America. However, homes hold 81% of a person’s net worth, meaning losing their homes puts them into cyclic poverty. India has had insurance waves from Life Insurance to Motor Insurance, however, home insurance has been lightly touched due to two main challenges. The current options for offering home insurance offered in India is either for structural support or for valuable items held inside the homes, but each poses a lack of incentive.

Made of very strong concrete/bricks.

1. Structural support is needed to combat damage to the properties done by natural disasters (specifically monsoon season in Maharashtra), however, majority of the houses are made of bricks/concrete as opposed to wood, making them less susceptible to large damages. However, in the case of large damages, governments provide immediate relief which counteracts the need for insurance.

The house is completely empty.

1. There are a low number of average earning households (50k-200k INR) that have extremely valuable items in their homes. Around 30% own TVs and through images, many of the houses are empty, only serving their purpose of providing a roof over one’s head.

The Root Causes

Lack of Trust

The general model of insurance is to protect and make profit, each contradicting the other. So, when the insurance company pays out a claim, its reducing their profit margin creating tension between their obligation to give financial protection and their goal to maximize profits for their shareholders. The more claims that are paid out, the less profit the insurance company makes, but the more protection the company does. The conflict of interest arises in situations where the insurance company tries to deny a claim to minimize their losses even if the customer has a legitimate claim. So, for customers to trust the companies is difficult because they know that ultimately, the goal is to create profit.

Lack of Incentive

Through speaking with people: They don’t believe in giving premiums every month. They feel that it’s a waste of time and waste of money to pay for home insurance. On the natural disasters front, in Western countries, the houses are made of wood so there’s higher chance of impact on natural disaster whereas in India, 95% of houses are made of concrete and bricks so fire and overall damage is lower. Most of the households also have minimum householdings. The middle-class family and poor population is 70% and they have minimum items in their house, reducing the incentive to insure anything (more stats in the Home Insurance section).

Lack of Education/Awareness

Through speaking with people: There is no education about insurance and the number of insurance companies is a lot less. When someone buy’s a new house, the bank aims for sales and try to sell life insurance instead of home insurance, and they make it mandatory when you buy a house.

It’s also very easy for the insurance company to take money since 90% of Indians don’t read the contracts they sign. A lot of the time, it’s difficult for people to claim their insurance since lots lots of investigation goes into it. The insurers will also find regulations in the fine-print, leading to a situation of: “You didn’t follow this rule, so you’re not eligible to claim this.” This ties back into the profit > protection system leading to a lack of trust.

Plus, Rural India houses around 70% of India’s population, awareness of home insurance is only 29.7% and in urban areas its 36.6%. Part of the problem stems from the lack of promotion from institutions: effort has been placed towards creating awareness around insurance being a risk-transfer mechanism but insurers have failed to leverage this network for popularizing home insurance products. This goes down to a lack of canvassing due to a lack of adequate knowledge from a sales agent perspective.

The main reason behind the poor demand for this type of insurance is that people find home insurance products and their clauses complicated and difficult to understand. The survey also showed that most of the respondents were aware of home insurance as a risk management tool. However, they were not well informed about the coverage that different types of home insurance policies offered. Those surveys also said there was too much documentation involved in getting home insurance, such as lists to be submitted for contents of the house.

Complex Processes