OpEx Awards 2018: LeapFrog Investments ensures growth for insurance broker

The portfolio company's focus on its poorer customers impressed the judges for the Editors' Award in Asia.

Always be prepared, as the saying goes. LeapFrog Investments took these words to heart in 2009 when it acquired a stake in Mumbai-headquartered Mahindra Insurance Brokers, a subsidiary of Indian finance giant Mahindra Group.

At the time of LeapFrog’s entry, Mahindra Insurance was heavily focused on its traditional motor business. Given that adverse weather conditions can lead to volatility in the tractor insurance market, the company’s new investors saw a need to diversify through India’s 900 million-strong rural population.

Market research identified key areas where the insurance market was failing to meet consumers’ needs adequately: healthcare, weddings savings and education savings.

LeapFrog worked with Mahindra Insurance to develop a $2 per month hospital cover plan that would reach one million emerging consumers and their households by the time of its exit. The firm also helped launch a cashless health insurance solution that was 40 percent cheaper than competitors and had a waiver on pre-existing conditions. There are currently 300,0000 policies accessed via 4,000 hospitals, in a market where formal access to healthcare remains limited.

It was this impressive impact on poorer consumers, many of whom couldn’t afford a conventional health plan, that ensured that LeapFrog picked up the Editors’ Award for Asia-Pacific.

LeapFrog’s tenure as owner was not without its difficulties. A heavy monsoon season in 2014-15 saw motor insurance claims for vehicles such as tractors become a significant operational problem, while the Indian government’s 2016 demonetisation drive voided the vast majority of India’s paper currency, leaving many rural consumers without cash to pay insurance premiums.

These headwinds did not stand in the way of organic growth. Mahindra expanded its distribution network by increasing its branches to 450 from 200, while conducting numerous insurance distribution marketing campaigns to strengthen the brand and add new product lines.

LeapFrog also worked with Mahindra to digitise the company. This included a customer relationship management and call-centre function that improved sales by enabling Mahindra to reach more potential customers and chase insurance renewals, while reducing costs.

The firm exited Mahindra in 2017 through a sale to global reinsurer XL Group. The deal – which valued the business at $200 million – generated a high multiple for LeapFrog, with Mahindra’s top-line revenue and EBIDTA recording a 14 percent and 20 percent CAGR respectively during its ownership.

More importantly, with a “responsible exit” model, the firm ensured Mahindra would continue to make an impact. By exit the company had more than doubled the number of people it reaches to 12 million, of which 7.5 million were low income, and provided jobs for more than 1,000 people – up from approximately 550 at entry.