The Policy Exchange : Empowering Policyholders, Rewarding Investors, & Sustaining Insurers
The insurance sector in India is at a crossroads, where there is a possibility of rapid expansion but it also faces severe structural problems. The country’s insurance penetration is low compared to global averages. A significant portion of the population, especially in rural and semi-urban areas, lacks awareness of insurance products and their benefits. Lapsation and surrenders are rampant (over 50 percent of life insurance policies lapse within five years, resulting in huge losses for policy holders, insurers, and agents). Mis-selling, data privacy issues, and the risks of digitization (cyber threats and identity theft) are some of the other challenges the industry is facing.In 2022, BFSI veterans founded The Policy Exchange as a new-age insurtech startup directly addressing the perennial problem of mid-term policy termination in life insurance. The company is neither into policy sales nor claims processing, it rather serves as a bridge between policyholders unable to pay their premiums and investors seeking safe, high returns. Policyholders can assign their policies to investors who pay the surrender value and future premiums in exchange for maturity benefits. “Our model preserves life protection for policyholders, offers attractive investment opportunities for investors, and makes persistency better for insurers and agents, thus forming a win-win ecosystem”, says Tarun Bahri, Co-Founder & CEO, The Policy Exchange.
Digital Marketplace for Policy Assignment
Its most important innovation is a fully digital marketplace for the assignment of life insurance policies. The policy assignment process in India currently is complicated and involves a large amount of paper work, generally limited to private arrangements without any transparency or scalability. The Policy Exchange has digitized the whole workflow, policyholders list their policies on the platform and investors browse, analyse and select policies that meet their investment criteria.
The process is all electronic, from documentation (KYC and legal agreements) to a paperless experience. The user can easily track transactions and manage investments through the real time dashboards. This digital first approach not only strengthens transparency and efficiency, but also opens the market to a larger group of participants including retail investors who usually don’t have access to such products.
Using technology, The Policy Exchange has developed a scalable solution for managing the vast volume of policy lapses (of ?1.5 lakh crore a year and rising to ?4.5 lakh crore by 2027). In such a market where manual processes are the impediment in innovation and customer satisfaction, there is no better option than digital transformation.
Unlocking Value for Policyholders & Investors
One of The Policy Exchange’s core differentiators is that it is able to unlock trapped value for both policyholders and investors. Surrendering a policy usually means loss of value and life cover for policy holders in financial distress. An alternative is offered by the Policy Exchange, where policy holders can assign their policies to investors in return for the surrender value and continue to have life protection.
On the investor side, the platform makes it possible for the purchase of pre-owned life insurance policies at attractive yields. In return for the policy’s maturity benefits, investors pay the surrender value to the policyholder and pledge to make future premium payments. These investments can return anywhere between 8 to 12 percent tax-free, which is higher than the returns on traditional fixed-income instruments like FDs or government bonds. For instance, an investor could invest a total of ?7.5 lakh (including surrender value and future premiums) in a policy that delivers more than ?15 lakh in maturity and annual payouts with an ROI of at least 12 percent.
The platform has AI curation and segmentation of policies for investors to pick from a range of products, some with lump sum maturity payouts, others with regular income. Through this flexibility and transparency, The Policy Exchange provides a compelling alternative investment platform that democratizes access to a previously opaque market.
Strengthening Industry Persistency & Agent Live lihoods
The Policy Exchange’s model addresses a key pain point for insurers and agents, namely persistency. The high lapsation rates erode the profitability of insurance companies and disrupt agents’ renewal income streams which can threaten their livelihoods. The company facilitates assignment rather than surrender, thus enabling the continuation of policies, the flow of premiums to insurers, and agent renewal commissions.
This approach aligns the interests of all the stakeholders. An improved persistency ratio is beneficial for insurers in terms of profitability and regulatory compliance. The platform can be used by agents who often suffer when clients surrender their policies. The platform assists clients in distress in finding investors, thereby preserving agents’ income and improving client relationships. As a bridge between a zero-sum game and an ecosystem of collaboration and value generation, The Policy Exchange is able to do this.
The Policy Exchange operates in a highly regulated sector and places a high value on legal and regulatory compliance. Section 38 of the Insurance Act of 1938 as amended permits the transfer of policy ownership by the assignment of life insurance policies with the insurer’s approval. The company has put in place processes that ensure that every transaction is fully compliant. Standard legal documentation and insurer approvals are mandatory and all parties are protected by transparent contracts.
Before launch, the company’s founders consulted leading law firms to seek legal opinions, and they have formal agreements with big insurers to facilitate assignments. The platform also has digital KYC, secure payment gateways, and adherence to IRDAI guidelines to prevent fraud and maintain data privacy. This robust compliance infrastructure helps The Policy Exchange differentiate itself from less rigorous competitors and builds trust with users, policyholders, investors, agents, and insurers.
Expanding Product Suite & Strategic Partnerships
The Policy Exchange is expanding beyond its core market of policy assignment and providing wider financial needs. Through premium financing, the platform offers short-term loan or overdraft facility to policyholders to enable them to pay premiums and avoid lapsation. In addition, it provides loans against insurance policies, which means that policyholders can get liquidity without surrendering their coverage. Normally, loans can be availed for 50 to 90 percent of the surrender value of a policy, offering a degree of flexibility in case of need.
The company’s growth is significantly reliant on strategic partnerships. The company partners with top insurance providers to secure a continuous supply of assignable policies and with wealth managers and institutional investors to drive demand. The technology stack is designed for scale so it can support the projected fivefold growth of business over the next few years. The Policy Exchange is building a robust ecosystem by integrating with insurers, agents, and financial advisors and has the capability to handle the complexities of India’s insurance market at scale.
With the sector of insurance expanding and digitizing, The Policy Exchange is perfectly placed to lead the way, bridging gaps, unlocking value and ensuring that the benefits of insurance reach every corner of the country. Its model serves as a demonstration of how technology and good design can solve entrenched industry problems and turn challenges into opportunities for millions of Indians.
Strengthening Industry Persistency & Agent Live lihoods
The Policy Exchange’s model addresses a key pain point for insurers and agents, namely persistency. The high lapsation rates erode the profitability of insurance companies and disrupt agents’ renewal income streams which can threaten their livelihoods. The company facilitates assignment rather than surrender, thus enabling the continuation of policies, the flow of premiums to insurers, and agent renewal commissions.
Our Model Preserves Life Protection For Policy holders, Offers Attractive Investment Opportunities For Investors, And Makes Persistency Better For Insurers And Agents, Thus Forming A Win-Win Ecosystem
This approach aligns the interests of all the stakeholders. An improved persistency ratio is beneficial for insurers in terms of profitability and regulatory compliance. The platform can be used by agents who often suffer when clients surrender their policies. The platform assists clients in distress in finding investors, thereby preserving agents’ income and improving client relationships. As a bridge between a zero-sum game and an ecosystem of collaboration and value generation, The Policy Exchange is able to do this.
The Policy Exchange operates in a highly regulated sector and places a high value on legal and regulatory compliance. Section 38 of the Insurance Act of 1938 as amended permits the transfer of policy ownership by the assignment of life insurance policies with the insurer’s approval. The company has put in place processes that ensure that every transaction is fully compliant. Standard legal documentation and insurer approvals are mandatory and all parties are protected by transparent contracts.
Before launch, the company’s founders consulted leading law firms to seek legal opinions, and they have formal agreements with big insurers to facilitate assignments. The platform also has digital KYC, secure payment gateways, and adherence to IRDAI guidelines to prevent fraud and maintain data privacy. This robust compliance infrastructure helps The Policy Exchange differentiate itself from less rigorous competitors and builds trust with users, policyholders, investors, agents, and insurers.
Expanding Product Suite & Strategic Partnerships
The Policy Exchange is expanding beyond its core market of policy assignment and providing wider financial needs. Through premium financing, the platform offers short-term loan or overdraft facility to policyholders to enable them to pay premiums and avoid lapsation. In addition, it provides loans against insurance policies, which means that policyholders can get liquidity without surrendering their coverage. Normally, loans can be availed for 50 to 90 percent of the surrender value of a policy, offering a degree of flexibility in case of need.
The company’s growth is significantly reliant on strategic partnerships. The company partners with top insurance providers to secure a continuous supply of assignable policies and with wealth managers and institutional investors to drive demand. The technology stack is designed for scale so it can support the projected fivefold growth of business over the next few years. The Policy Exchange is building a robust ecosystem by integrating with insurers, agents, and financial advisors and has the capability to handle the complexities of India’s insurance market at scale.
With the sector of insurance expanding and digitizing, The Policy Exchange is perfectly placed to lead the way, bridging gaps, unlocking value and ensuring that the benefits of insurance reach every corner of the country. Its model serves as a demonstration of how technology and good design can solve entrenched industry problems and turn challenges into opportunities for millions of Indians.
