India Needs Insurance
High-reward ventures are high-risk. Building mechanisms to better hedge risk opens up a world of new opportunities.
Source: Pixabay
One striking thing about America as an Indian is its seeming obsession with insurance. Health insurance was mandatory to even enroll at Stanford (justifiably so), and a lack of home or fire insurance whips up panic amongst homeowners. The latter barely crosses the mind in India.
A further examination reveals that it is insurance on which American prosperity is built.
The ability to be risk-neutral rather than risk-averse is the ultimate reason we could have houses in the fire-prone Palisades, avocados in the drought-prone Central Valley, or the high-stakes cybersecurity giants in Palo Alto. In essence, California exists because one can hedge risk and be “insured”.
Insurance opens up entirely new, high-risk market segments for entrants. With robust insurance, even seed-stage startups can take on risky bets previously only available to highly solvent, diversified enterprises.
India is a high-entropy economy. It is growing fast, is undergoing various demographic changes, is more influenced by the tides of the global world order, and has less stable and reliable institutions. It is subject to more change. Consequently, the operating risk in India is far higher than in the U.S. More of its bets are “high-risk, high-reward”. More of its bets are California-like. The ability to properly account for risk will do its entrepreneurs, consumers, and existing businesses immense good.
We believe India’s insurance landscape is still primitive and one-dimensional, and its largely restricted to narrow, conventional use cases. Think outside of car, health, life, or travel insurance. Think about other use-cases for insurance: agriculture, forex, real estate, identity, cybersecurity to name a few.
The barriers are lower than ever. India’s capital and financial institutions offer unprecedented depth and flexibility, the amount of data available to model risk has significantly grown, and the opportunities for insurance, as noted earlier, are only increasing.