Go Digit May Enter Life Insurance In 6 Months

Go Digit will be the 25th firm in India’s insurance sector, which clocked new business premium of ₹3.7 trillion in 2022-23.

Currently, Watsa’s Fairfax, in a tie up with insurance industry veteran Kamesh Goyal, holds ownership of Go Digit General Insurance Ltd, a general insurance company.

“The new life insurance joint venture being planned may have Fairfax holding a 40% stake in the firm initially," one of the two people said seeking anonymity.

According to the two people, the proposed firm is likely to be named Go Digit Life Insurance Ltd, and will offer a range of life insurance policies.

They said the company will have an initial capital of ₹700-1,000 crore. Go Digit Infoworks Services Pvt. Ltd, the holding company, is expected to hold 80% as the primary promoter of the proposed JV.

Additionally, Goyal and Oben Ventures LLP may collectively hold 40%, mirroring Fairfax’s stake in the company, the first person said. “The balance 20% could be held by banks as non-promoter strategic partners," he added.

In response to a query, a spokesperson for Go Digit said: “Go Digit Life Insurance has submitted an application to the Irdai (Insurance Regulatory and Development Authority of India) to conduct life insurance operations in India. As the application is under consideration by the Irdai, we are unable to comment on matters pertaining to the regulatory approval status, proposed partnerships, or the shareholding structure of the company."

“Following the launch, the company may place minority stakes with certain banks to strengthen its bancassurance network. This may lead to a proportionate reduction in stakes held by the partners, including Fairfax," he added.

Fairfax has been looking to ramp up its investments in India over the past few months. India-born Watsa, while speaking in the India@75 virtual summit had said Fairfax Financial Holdings has invested $7 billion in India and will double it in the next 4-5 years.

Fairfax Financial Holdings’ managed assets worth $81.2 billion for the quarter ended March, down 8.37% from a year earlier. The Toronto-based firm owns Fairfax India, whose investments are managed by Hamblin Watsa Investment Counsel Ltd and Fairbridge.

Apart from Digit Insurance, Fairfax’s investments in India include Bengaluru International Airport, IIFL companies, National Stock Exchange, Sanmar, Fairchem Organics, Catholic Syrian Bank and Thomas Cook India.

Prior to backing Digit Insurance as co-promoter, in 2019, Fairfax had sold its entire stake in ICICI Lombard General Insurance Co. Ltd for ₹2,626.5 crore, ending its 18 -year partnership as an investor.

Go Digit Infoworks Services or Digit Insurance is the only startup bet so far by the Canadian investment behemoth in India. The startup, founded by Goyal, was the first unicorn of 2021, a year that saw an entrepreneurial boom with 44 new unicorns. FAL Corp. owns 45.3% in the holding company, Go Digit Infoworks Services Pvt. Ltd, which in turn owns a 83.47% stake in Go Digit General Insurance.

On the other hand, Goyal and Oben Ventures LLP together hold 14.96% and 39.79% in Go Digit Infoworks Services.

As per regulatory filings, Digit Insurance’s valuation tripled to $3.5 billion after it raised $200 million in July 2021. And now, the company is looking to list its shares on stock exchanges via an IPO.

“The life insurance JV by Fairfax and Goyal may see an equally rapid growth, given the increased demand for insurance in India, post the (Covid-19) pandemic," said the first person.

SBI Life Insurance is the largest private life insurer at present with a new business premium collection of ₹29,587.6 crore in FY2023. State-run Life Insurance Corp. of India (LIC) is the country’s largest life insurer with a first year premium of ₹2.32 trillion and a market share of 62.58%.

Watsa and Goyal’s proposed JV will be entering the business of life insurance at a time when the industry is faced with a new challenge with regards to growth due to changes in taxation rules, especially for the affluent mass. As per the new rules, the proceeds from any life insurance premium over an annual premium of ₹5 lakh would be taxable from with effect from FY2024 that began on 1 April.

However, according to the two persons, initially, Fairfax’s proposed Indian life insurance firm will primarily design small-to-medium ticket size policies, targeting the vast untapped mass of the world’s most populous country.

And to do this, Go Digit’s life insurance company is looking to enter into distribution agreements with multiple Indian banks, according to the two persons.

To be sure, Go Digit has already roped in private lenders Axis Bank Ltd. and HDFC Bank Ltd. as strategic bancassurance partners with a 9.8% stake each in lieu of an investment commitment of around ₹70 crore by each in the proposed privately-held life JV.

Updated: 01 Jun 2023, 11:00 PM IST