According to the Economic Times, if the deal – which is rumoured to be around $100m-120m (£94.4m, €106m) – goes ahead it would put Paytm in direct competition with PolicyBazaar, India’s largest insurance marketplace.
Coverfox offers both life and non-life insurance policies and offers products from 45 insurers.
Paytm currently offers payments to 32 different insurance companies including Aegon, Generali and Axa.
The digital payments company was founded by Indian billionaire Vijay Shekhar Sharm, and has already expanded into the financial services sector in 2018 with the creation of a subsidiary called Paytm Money – a firm that offers direct access to mutual fund schemes.
However, SoftBank Vision Fund, which is one of the largest investors in Paytm’s parent company One97, is also a significant shareholder in PolicyBazaar which could make the finalisation of the deal with Coverfox challenging.