Paytm recently announced a deal to acquire 100% stake in Raheja QBE Insurance for Rs.568 crore. This is unique in the way the deal is being done. This is the first case of a digital platform buying into an insurance originator. Normally, it is insurance originators who worry about marketing, but here a digital platform is integrating backward.

Here is how the deal is likely to work out. Raheja QBE Insurance is a joint venture between Prism Johnson (owned by the Raheja Group) and QBE of Australia. While Prism owns 51% in the insurance JV, QBE owns the balance 49%. QBE is an IRDA registered general insurer in India that originates and sells non-life policies to customers.

For FY20, Raheja QBE Insurance had gross written premium of Rs.158 crore and reported a net loss of Rs.62 crore. Post the deal, both Paytm and Vijay Sharma in his individual capacity will have a stake in the business. This is the first deal where a top class and highly accepted digital platform in India is fitting product origination into its portfolio of offerings.

In fact, Paytm sees this as an opportunity to marry insurance origination with its already existing digital front end. The only difference is that Paytm started off with the front end ready and running. This gives Paytm a much larger wallet share of each customer, enhancing the overall ROI in the process. This could be the template for the new insurance model.