Auto-rickshaw wallahs and insurance – investing in a digital future
Exploring the needs of mobility participants from insurance products!
We love to hate auto rickshaws! More often than not, they evoke a sentiment of refusals, fare haggling and precarious driving. But sitting in an auto zooming past everyday haunts, we know they are a staple of every city in India and we cannot do without them. Personal experiences and human interest stories involving rickshaws aside, autos serve a very important role in supporting the public transit system of a city.
Large investments in public transport infrastructure in the form of metro systems, suburban rails, buses, etc. keep the city moving but auto rickshaws play the crucial role of feeding ridership to these transit networks and corridors. In Mumbai, for instance, a study conducted by the author and some researchers at the World Resources Institute1 revealed that the city has over two lakh auto rickshaws that ferry over 7 million commuters daily! Most of this movement acts as a feeder service to transit stations.
Also, auto rickshaws help riders to trip-chain. Think of a woman in a Tier 2 city, who takes a single auto rickshaw in the early afternoon to club different activities - buying groceries, dropping medicines to an aunt’s house, picking up kids from school, etc. all in one trip. Auto rickshaws lend themselves well to such hyperlocal trips leading to a higher dependence of women on them. At the end of the day, they are efficient, easily available, and generally tend to plug gaps in mobility demand in areas that are not well connected by public transport, especially in tier 2 and tier 3 cities.
In fact, auto rickshaws are so embedded in the transit infrastructure and the daily fabric of life in India across geographies that taxi aggregator services like Ola and Uber saw it fit to introduce these on their platform, taking both their utility and popularity among the youth and millennials to a whole other plane!
Despite their popularity however, running a rickshaw comes with significant challenges. Autos generally have large outflows and the annual costs go up to a little more than a lakh for rickshaws in Mumbai. Like other commercial vehicles, drivers/owners are required to get a permit to drive an auto rickshaw for money. There are other annual requirements like fitness certificates, cylinder integrity test certificate, a meter calibration certificate, etc. And then there is the mandatory vehicle insurance!2 The regulatory decision to make motor vehicle insurance compulsory was aimed at giving a cushion to drivers in the event of an accident.
In the author’s interaction with auto-drivers and their unions, the biggest, one-time annual cost that disrupts their cash management is premiums of vehicular insurance or bima that an auto-wallah has to obtain to continue commercially driving a vehicle. Drivers pay anywhere between INR 6,000 to INR 9,000 annually as premiums.
Well-meaning as it is, compulsory insurance products for such vehicles and their drivers present a host of issues. While drivers understand bima colloquially, few understand the product itself. Limited trust in and knowledge of insurance products, along with complexity of usage make insurance a checkbox item and the annual premiums paid for it, a sunk cost.
Our story begins with Ashraf, an auto rickshaw driver from Mumbai. He works primarily in the Bandra region and ferries people to and from the Bandra station. He is also registered on Ola Auto and works a few hours a day on rides he gets from the app. I spoke to him on the busy streets of Mumbai about his experience with insurance products.
Have you made a claim under your compulsory insurance policy?
I did - I tried to claim the cost to replace the windshield of my auto that was damaged in an accident. The process was very time consuming, and the payout was merely a fraction of the actual cost of repairing my windshield. Anyway, my earnings have taken a beating because of intermittent lockdown restrictions over the last year and a half. I could have used that time to earn more by taking more rides.
This brings to fore a very interesting conundrum. Even though the compulsory insurance requirement has made access to some form of insurance possible, for Ashraf and many like him, insurance fails to provide the promised safety net in case of emergencies and accidents.
That makes you wonder what technological interventions can be designed to fix one or a few of these concerns. We looked into that in some detail in this piece. Read on to know more!
Re-imagining vehicular insurance as a tech solution
From what we know of Ashraf and his counterparts, we already know that technology is integrated into their life. He uses WhatsApp to communicate, Facebook to stay in touch and Google Pay to accept payments. The fact that digital platforms are widely utilized for communication or payments is not a mobility participant specific trend. Significant uptake of technology and digital services in all aspects of life is being seen everywhere.
For starters, India is the fastest growing market for smartphones and increasingly more people are getting online.3 Their fast spreading use has led to change in how Indians consume both information and services. Platforms such as Whatsapp and Facebook have a large user base.4 Even how we consume food and travel from place to place has changed. Ride hailing aggregator services such as Ola and Uber have become household names along with food delivery and hyperlocal delivery services such as Zomato, Swiggy and Dunzo! The new world order is based on the spectacular foundation of India’s most ambitious project on digital inclusion - the IndiaStack! As the world around us changes and becomes more technologically dependent, their existence creates a unique opportunity for financial services and products including insurance.
Foundational as these platforms are, tech companies including Insurtechs can build on and leverage their popularity among Indians to design better, more customized products for them. Any insurtech company that wishes to provide product offerings to mobility participants need to address a variety of issues that are inherent in the insurance product offerings currently available in the market. It is only then that they are likely to see an uptake. So what are these issues?
In the section below, we have identified the key challenges and proposed a way of thinking about digital solutions for them, through Ashraf’s persona, profile and needs from his insurance products and a hypothetical insurtech company called Vahan Bima5.
We know that Ashraf uses the following digital platforms most frequently - WhatsApp, Facebook, Ola and Google Pay. As Ashraf engages with the services of Vahan Bima, we begin to see how each challenge or issue can possibly be addressed with a tech solution.
#1 Information Asymmetry
Drivers of commercial vehicles have little understanding of insurance products. There is a significant distance between the end user and the insurance providers which makes trust building in the product as well as the institution very difficult. Insurance is good as a hedge against future adversity but its value is not always apparent at the outset. To bridge this gap in understanding, merely making this information available cannot suffice. Users need to be empowered with information about regulatory requirements, different kinds of products and how to use them effectively. Even more important is imparting knowledge about the manner in which one can resolve a query, complaint or grievance. This has the potential to help build trust in insurance and shift its perception from being merely a regulatory check-box.
An insurtech company like Vahan Bima can address this through direct and precise messaging communicated to Ashraf through trusted sources. To do so in a scalable manner, forging partnerships with platforms that Ashraf already uses is a possible solution. For instance, we know that Ashraf uses Whatsapp and Ola apps. Vahan Bima can consider curating simplified content in the form of short videos, stories, etc. on the Ola app that disseminates information about insurance products and their value that Ashraf can read at his own discretion. In addition, reliance can be placed on existing networks that auto rickshaw wallas have - WhatsApp groups that the trade union or drivers union has, for instance. The purpose of having this information published through these networks is to expand their reach (through the use of technology) and build trust in the product (by relying on networks and partners that Ashraf already relies on).
#2 Insurance discovery, classification and suitability
The current mechanisms of insurance sales do not do a good job of articulating the differences between a wide range of products and what might suit best for specific requirements. The second step therefore is to demystify insurance options.
There are a range of products that Ashraf can pick from, but he does not understand the nuanced differences between them and is unable to identify one that best suits his needs. He therefore - like his other counterparts - depends on the wisdom of middlemen or RTO agents to decide on an option for him. The incentive of the broker to push a product might not always align with Ashraf’s needs. Technology comes in handy when Ashraf is trying to gauge what his options are, using a simple WhatsApp journey as demonstrated below is just one of the many ways in which that can be done!
#3 Insurance purchase
Premium amounts are a big single expense for drivers as they have little liquidity readily available. Flexibility in payments or discounts to drivers with good claim history can help this cohort manage cash flows better.
The next step in Ashraf’s journey is purchase of products. Like many other financial products and services available through digital modes, purchase of vehicular insurance can also be done the same way. Since the overheads linked with physical verification etc can be reduced, the costing and customisation options available to Ashraf are more favourable. Digital modes of purchase allow for easier customisation of payment options. Ashraf has the ability to choose a premium payment plan and also modify it depending on any change in his financial headwinds. The purchase process can also be aided by the Account Aggregator framework. Unlike health insurance, vehicular insurance requirements are more standard and less subjective. As such, it is possible to obtain consented copies of a government approved ID, driving license, registration certificate and PUC certificate and store in Digi Locker. Payments can be made through UPI interfaces. The policy copy can be made available on WhatsApp after payment along with a receipt and can also be retrieved through WhatsApp on demand.
#4 Claim filing and grievance redressal
The process to claim for damages is currently time consuming. Smaller repairs are generally done by local mechanics because drivers lose time in coordinating with agents and the perceived opportunity cost of utilizing insurance is high. The time spent in claiming insurance eats into their productive hours, directly affecting incomes!
Digitisation of this process solves this singular concern that mobility participants like Ashraf have i.e. the opportunity cost of claiming insurance. As more and more companies through the pandemic have begun to accept documentation in digital forms without requiring that it be followed up with physical submission, the opportunity to apply the same principles to the claims process for vehicular insurance is also very high. A WhatsApp journey, an email submission and a 24 hour helpline to assist in claim filing can make the whole process a lot more palatable, boosting usage of insurance.
The model removes the need for human intervention in the form of physical assessments, solves for lost opportunity cost for smaller repairs by simplifying the process and has the added benefit of serving the purpose that insurance was mandated for i.e. Ashraf not having to bear the cost of smaller incidental damages.
Concluding thoughts
In this blog, we have covered the most fundamental aspects of a mobility participant's journey to purchase and use insurance. Complicated as this problem is, it must be noted that the vehicular insurance segment is primed for a digital makeover. The regulatory intervention has created a market for the product already and the explosion of the platform economy and networking applications has brought millions of commercial drivers and mobility participants online.
The only evident challenge is to bring these participants from their existing island of apps to a more general use of digital technology. Surely that requires a wider conversation on digital literacy and is in itself a much longer endeavour, insurtech companies in the meantime, can partner with existing platforms that this cohort frequents. They can focus their energies on addressing the concerns identified above, most significantly the issue of trust building and product customisation to make these passive insurance holders into active users of insurance products. All this, to safeguard both their present and future as they zoom past the busy streets, not stopping for the customer that frantically tries to flag them down!
Do you have any ideas on how to digitise insurance for mobility participants, let us know in the comments below!
Vishal Ramprasad is the Senior Manager, Sustainable Cities & Transport at World Resources Institute. These are his personal views.
All designs by Prajna Nayak. This article has been edited by Neeti Bhatt
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Report for this research is unpublished.
There are two types of insurance - third party insurance and comprehensive insurance. In simple terms, if there is an accident between two vehicles where the commercial vehicle is deemed at fault, third party insurance pays for damages of the other vehicle and comprehensive insurance on the other hand pays for repairs of both vehicles.
https://economictimes.indiatimes.com/industry/telecom/telecom-news/indian-to-have-820-million-smartphone-users-by-2022/articleshow/76876369.cms
https://www.businessinsider.in/advertising/media/article/whatsapp-is-the-most-frequented-app-followed-by-facebook-and-youtube-report/articleshow/88730365.cms
In our example, Vahan Bima functions in the insurance and tech space and does the following -
(a) Creates content about all things insurance for commercial vehicles to educate its target group using engaging methods like videos, GIFs, short stories, etc.
(b) Aggregates insurance products from all providers using API services to allow for discovery of a range of options.
(c) Partners with insurance companies to simplify processes of insurance purchases and claims and makes them seamless and efficient.
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