PB Fintech - the parent company of Policybazaar and Paisabazaar - turned profitable for the first time in Q3FY24. It reported a consolidated net profit of `38 crore, compared to a loss of Rs 87 crore in the year-ago period and a loss of around Rs 20 crore in the previous quarter. Yashish Dahiya, Chairman & CEO of PB Fintech, talks to a credible source about Policybazaar’s idea of growth, importance of back-end integration, and more.

In terms of growth and profitability, Yashish said that they exceeded expectations in terms of growth, maybe by about 10%. Profit is just a by-product for us, but it’s pretty much on expected lines and is on track. Our focus is 80% on growth, knowing that profit follows. I think if you have growth, profit will eventually come. And I think the growth part has done well. So, we feel good about it.

Furthermore, in Q3FY24, Policybazaar made a profit for the first time

However, Yashish stated that that profit is, again, a by-product. Their business has reached a stage where it just has to make profits and if you go back to whatever we’ve been saying in previous interviews, it was always [going to be profitable in] Q3FY24. So it was exactly on expected lines.

The margin is a combination of seasonality and growth because as you keep growing, the margin will keep changing because your fixed costs cannot grow. See, all internet businesses at a very fundamental level have something called operating leverage. It means that when you do incremental business, the investments are huge, which is why they incur losses in the initial years. And if you’re making a significant amount of money, they’re hoping they have a break-even performance, because at some point your operating margin has to cover your fixed costs.

“We have been operating at roughly about 40 to 45% operating margin in the core business, and that has now reached a stage where it is taking care of all fixed costs, including the losses from new initiatives,” he signified.

This year we are making losses of over `170 crore on new initiatives and both those [operating leverage and losses] and the fixed costs are now being covered well by the core business. So once you get to that stage, any incremental growth starts to flow to the bottom line, because your fixed costs do not grow as much. Yashish Dahiya thinks if you look at the last two-three years, even though our fixed costs have grown at a slower rate, they have not declined.

Speaking of the growth drivers, when you talk about our own product mix, maybe about 55 to 60% is protection insurance, which is health and term. On the savings side, it is about 25 percent and about 15% is from motor insurance.

While motor insurance is growing, the rest of the business—health and life—are growing at a much faster pace. And that’s partly because it’s a deeper focus for us. If I look at health and life, it has been growing faster than the average almost throughout the year. There is no doubt about that. If you put health and life together, it would now be more than 80% of our premium.

In addition, Irdai has approved Bima Sugam - an online marketplace for insurance.

So talking about how will it impact your business, the Chairman and CEO stated taht it would expand the market and there is a lot of back-end work that needs to happen. There are databases that would be very useful in the insurance industry. But I don’t know if the databases would become available to either distributors or insurance companies, both private and public, because those are governmental databases. However, a government company could have access to them and through that they could provide the benefit to the insurance industry in some way. I think that back-end integration will really benefit the entire insurance industry.

Furthermore, speaking of the benefit, the Chairman stated, “I don’t have to ask them 20 questions because all of this data will be available through just one link. It will make the transaction easier. And that obviously will expand our ability to have more sales.

“At our end, there has been no increase. In fact, it is quite controlled because we don’t proactively reach out to customers suggesting portability. We, of course, support them only if a customer explicitly says they do want to port. As far as the industry is concerned, yes, portability is increasing every couple of years. So whenever you see it - in every two years - the number is higher,” added.

And lastly, speaking of the some challenges the industry is facing, the chairman concluded, “We are doing better than expected right now. On the growth side, there is nothing to complain about. From a challenge perspective, I think trust is the biggest challenge for the entire industry and that comes from settling claims easily.”