Acko sells affordable insurance online, but needs to build its brand

Sanjay was going on a long road trip and he had only one day to renew his car insurance. With no time to waste for an insurance agent to turn up, he decided to renew his car insurance online and reached a website that offered him a scheme at a surprisingly low premium. After a quick web check on the credibility of the site, he decided to buy the insurance. And with Sanjay's purchase, Mumbai-based fintech start-up Acko General Insurance, a native digital insurer or that sells its own products, had received one more customer. 

Acko breaks the clutter through the traditionally middlemen-driven, commission-loaded insurance business in the country, by offering policies online, which should help it scale faster. It offers passenger car and two-wheeler insurance and innovative products in the tie-up with online companies, such as Amazon, Ola, Zomato, redBus and UrbanClap.

Last week, the company raised $65 million in Series C round from several investors, including Binny Bansal, co-founder and former CEO of Flipkart and Intact Ventures Inc — the corporate venture arm of Canada’s largest property and casualty insurer. Amazon led the company’s Series B round of funding, a $12 million investment, last year. Acko has raised $30 million from investors, including Kris Gopalakrishnan, co-founder of Infosys, and Narayan Murthy’s Catamaran Ventures. 

Bansal said technology-led insurance is likely to play a key role in growth of the insurance sector in India and Acko is positioned well to encash this opportunity.

Concept

Varun Dua, Founder of Acko

Varun Dua, former co-founder of Coverfox.com, is the founder of Acko. The company, registered in November 2016 as an independent general insurance company, received the IRDA’s approval in September 2017.

It offers paperless purchase, cashless claim settlement and pick-up of the damaged car within one hour and end-to-end turnaround time of three days in certain cities. Acko is claimed to be the only digital native insurer, and the competition would be mainly from the established traditional insurance players which are expanding their digital footprint, Dua said

It currently has a physical presence in 12 cities, while it operates pan-India online. Being online gives it an advantage of scaling faster and attract customers in their 30s, especially in tier I and II cities.

The exclusive digital model gives it  better access to data to assess good risks against bad risks, which should help it personalise the product and price accurately. 

It also helps the company bring in new products, especially built target customers.  Apart from automobile insurance, which it offers directly to the customers, the company offers products in collaboration with third parties, like small accident and missed flight insurance schemes. 

“In 75-80 per cent of cases, customers will find us 15-30 per cent cheaper than the other options that are available in the offline world,” said Dua. 

It has, so far, covered around 200,000 cars and has served a total of 20 million customers through its businesses.

Opportunities and challenges

The general insurance industry is estimated to be around $25 billion and it expected to grow by around 15-20 per cent since the penetration is low at around 0.9 per cent of GDP. In the next five years, it is expected to be a $60-billion market. 

Online insurance is around 5-6 per cent of the overall market and the growth is around 40-50 per cent every year. In 2014, it was 1.5 per cent online, said Dua. In the next five years, digital presence could be 10-15 per cent of the total market. The online insurance market could be worth $8-10 billion insurance at that time, he said. 

The challenge could be that there are over 20 established offline players trying to harness technology to bring down their costs and attract more customers. It is a deep capital business and the growth would come with investment.

Road ahead

The fresh funds will be used into brand building and on digital technology by adding more manpower in the technology front.  “We will also be looking at health insurance sometime next year,” he added.

Factbox
 
Launch: November 2016
Area of Business: Digital native insurer
Target: To expand physical presence to 30 cities in two years; serve 100 million customers in 3-4 years

Acko will need to woo more investors
 

Pankaj Naik,xxx Executive Director and Co-head, Digital & Technology Investment Banking, Avendus Capital

Indian general insurance is a large market poised to exceed $25 billion this financial year, yet highly underserved. We expect the general insurance market to cross the $50-billion mark by FY25.
 
General insurers today face structural challenges such as information asymmetry, intermediary dependent distribution, branch-led geographic expansion and physically-intensive operations. Acko’s differentiated go-to-market has inherent advantages over traditional models. The company uses a direct-to-consumer approach for distributing motor and health products, allowing for favourable risk selection and superior underwriting.
 
Acko’s success is representative of the power of technology-driven business models.
 
Insurance is a capital-intensive business, therefore, will continue to require investors who are aligned with Acko’s growth plans. The next one-two years will be critical for the company to build the brand and attract high-quality customers seeking intuitive purchase experience, cheaper prices and stress-free claims experience.