Will Zerodha-backed insurance agent Ditto disrupt the insurance market?

In the insurance market, the founders hope to replicate their success with Finshots, a financial newsletter with a subscription of more than 4 readers launched in August 2019.

Ditto now has a team of 30+ who they call insurance advisors rather than agents. She takes advantage of the large readership to sign up for Finshots newsletter with over 4 lakhs and word of mouth to grow her client base. It also has a USP that the founders say is similar to Zerodha – customer first, not insurance company first. Customers can schedule spam-free calls with Ditto insurance advisors and get an opinion on their current policies. Ditto sells (advises on) life and health insurance. However, in the life category, Ditto also only recommended term insurance rather than high-cost endowment policies.

“We don’t want to follow a solid pay model. We want to grow by referring clients to their friends. Hence our advisors make only 8 calls per day on average compared to the 50-100 calls that salespeople make at other brokerages – companies. In fact, we already have a waiting list of 6-7 days to schedule a call with us.“In the early days, we (the founders) were taking direct calls.” When my dad got sick, I found out that his insurance policy was grossly inadequate. This made me research this area and identify an urgent need for clients,” he added.

The thorny issue for the founders of Ditto is the question of the commissions. Insurance brokers have an incentive to recommend plans with large commissions and these incentives can also be affected. According to Karkera, this market would set Dito to follow this path with negative reviews and angry customers preventing any drift towards high commission policies.

In addition, unlike mutual fund commissions, insurance commissions are opaque – policyholders are simply not informed of the amount being paid. However, Karkera argued that prices remain largely the same for commission-based and “direct” plans, making little difference to customers. This is different from mutual funds that have different costs for money purchased directly versus money purchased from distributors. Commissions in insurance are also higher. Erdai, the sector regulator, set commissions for health insurance at 15% of the premium and life insurance at 20-40% of the premium.

Aside from the commissions, Ditto also faces some growing pains. An online review by a competitor indicated that multiple advisors had been logged into the mystery shopper call causing confusion to the customer on the call. “This was simply because we had a great advisor with the trainee – to correct and guide him,” Karkera explained. Another competitor who wished to remain anonymous added, “There are players who are already posting their top 10-15 products based on research and methodology on their websites and newsletters. The process is not new but the packaging is.”

As previously, it is moving from a company agent license under which a maximum of three insurance companies can be recommended in each category (life, general and health) to a full brokerage license where there will be no such limits. This can help address some of the concerns about commission-driven recommendations or limited coverage.

However, the founders intend to continue to keep it simple with a few insurance companies for each category. The USP may be the determining factor for its success in the insurance market. “This project has been on our list for a long time – how to sell insurance right. So when Finshots came up with the idea we thought was a no-brainer. We saw how passionate they were about Finshots themselves and how well they worked. This is an opportunity to simplify insurance and replicate Zerodha’s model in this market,” said Nithin Kamath, Founder and CEO of Zerodha.