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The co-founders of Finshots -- Pawan Kumar Rai, Shrehith Karkera, Bhanu Harish Gurram and Lokesh Gurram -- founded insurance advisory platform Ditto in February 2021. The platform raised 4 crore from Zerodha in an initial funding round and the latter has a majority stake in it. 

In the insurance market, the founders hope to replicate their success with Finshots, a financial newsletter with a subscription of over 4 lakh readers launched in August 2019.

Ditto now has a team of 30+ of what it calls insurance advisors rather than agents. It leverages the large readership of the Finshots newsletter subscription of over 4 lakh and word of mouth to grow its customer base. It also has a USP that the founders say is akin to Zerodha - customer first rather than insurer first. Customers can schedule spam-free calls with insurance advisors from the Ditto website and get an opinion on their existing policies. Ditto sells (advises on) life and health insurance. However, in the life category Ditto recommends only term insurance rather than high-cost endowment policies.

“We don’t want to follow an aggressive push model. We want to grow by customers recommending us to their friends. Hence our advisors only do 8 calls per day on average compared to the 50-100 calls that salespersons at other brokerages - companies. In fact, we already have a waiting list of 6-7 days to schedule a call with us. In the initial days, we (co-founders) would directly take calls," said Bhanu. “When my father fell ill, I found out that his insurance policy was grossly inadequate. This made me research this area and identify a pressing customer need," he added. 

A thorny issue for Ditto co-founders is that of commissions. Insurance brokers have an incentive to recommend plans with heavy commissions and Ditto could also be swayed by these incentives. According to Karkera, that market would discipline Ditto against following this path with negative reviews and angry customers preventing any drift towards high commission policies.

In addition, unlike mutual fund commissions, insurance commissions are opaque - policyholders simply aren’t informed how much is being paid out. However, Karkera argued that the pricing largely remains the same for commission-based and ‘direct’ plans, making little difference for customers. This is different from mutual funds who have different costs for funds bought directly versus funds bought from distributors. The commissions in insurance are also higher. Irdai, the sector regulator, caps commissions in health insurance at 15% of the premium and in term life insurance at 20-40% of the premium.

Apart from commissions, Ditto also faces some growing pains. An online review by a competitor pointed out the multiple advisors were logged into its mystery shopper call causing confusion for the customer in the call. “This was simply because we had a senior advisor with the trainee - to correct and guide him," explained Karkera. Another competitor who wished to remain anonymous added, "There are players which are already publishing top 10-15 products based on research and methodology on their websites and newsletters. The process is not new, but the packaging is."

Ditto is transitioning from a corporate agent licence under which it can recommend a maximum of three insurance companies in each category (life, general and health) to a full-fledged broking licence where there will be no such limits. This can help address some of the concerns around commission-driven recommendations or limited coverage. 

However, the founders intend to continue keeping it simple with just a handful of insurers per category. The USP may be the determining factor for their success in the insurance market. "This venture has been on our list for a long time - how to sell insurance correctly. So when Finshots came up with the idea we thought it was a no-brainer. We've seen how passionate they are about Finshots itself and how well it has done. This is an opportunity to simplify insurance and replicate the Zerodha model in this market," said Nithin Kamath, founder and CEO, Zerodha.

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