Acko is an ambitious digital play to disrupt India’s $10B insurance industry

Acko is an under-the-radar startup that wants to disrupt India’s insurance industry through a digital-only model. This week it stuck its head above the parapet and announced that it has raised $30 million to get started on its bold plan.

Founded by Varun Dua, the man behind insurance comparison site Coverfox, Acko is designed as a wholly digital take on insurance in India. The company is an independent general insurance provider that is wholly digital. Beyond operating online and without the expense of a brick and mortar footprint, Acko is aiming to unbundle insurance in India to make it both more affordable and relevant to consumers.

“India is a fairly nascent insurance market [with the same] traditional carriers that we’ve seen for decades,” CEO Dua told TechCrunch in an interview. “Acko will be the first internet-only carrier.”

Taking insurance in India online

Inspired by models such as Lemonade and Oscar Health in the U.S. and Direct Line in the UK, Dua sees a huge opportunity to tap into digital to take a shot at the current market — which is estimated to be worth over $10 billion annually — and reach a new segment of consumers who have been left out to date.

“The system of distribution in India does not provide information on the user at all. There’s not enough data to underwrite accurately on a real-time basis,” Dua said. “Sales are mostly offline and flat pricing, usually [insurance firms] don’t know much about a customer before underwriting him.

The Acko CEO believes his firm can offer a 30-40 percent discount on incumbents by pricing its policies more accurately by gathering information and data online. That’s in addition to cost savings by operating without a physical presence.

“We will probably start off taking away existing [insurance rivals’] customers,” he added. “It’s a relatively easier market because people are moving online year on year. That gives us the early pickings, [but we] will probably be launching smaller and unique products that don’t exist today later.”

In particular, he foresees opportunity around segment-specific insurance policies that can be sold online. That could include, for example, pregnancy insurance, or policies for ride-sharing companies. Beyond selling on the Acko website, the plan is to link arms with partners who already have relationships with consumers — for example an e-commerce store selling baby items, or the ride-sharing firm itself.

In a recent report, EY forecast that India’s insurance market is “poised for a strong growth” despite concerns around reaching new customers:

Despite strong improvement in penetration and density in the last 10 years, India largely remains an under-penetrated market. The market today is primarily dependent on push, tax incentives and mandatory buying for sales. There is very little customer pull, which will come from growing financial awareness and increasing savings and disposable income.

That’s a major focus for Acko.

“We want to make insurance so straightforward that consumers don’t need to talk to multiple people to get advice or fill up forms. Consumers should be able to access low prices in one click based on their risk profile, and be confident that at a press of a button — their claim will get paid in the fastest possible time,” Dua added in a statement.

Big name backers and big plans

To get started, Acko has raised $30 million from a range of top names that include VC firms Accel, SAIF Partners and Catamaran Ventures. Its angel investors include Venk Krishnan and Subba Rao of NuVentures, Infosys co-founder Kris Gopalakrishnan, Hemendra Kothari of DSP Blackrock, founder and chairman of Hexaware Atul Nishar, and ex-investment baker and Arpwood Capital founder Rajeev Gupta.

Beyond that, Dua teased that there are undisclosed “global insurance groups” that own a stake of the business. Their names won’t be revealed for another month or so, but their presence has helped give the startup credibility in an industry that values corporate institutions.

Acko has received an R1 license and is currently awaiting its R2 license which has been applied for with India’s insurance authority. Dua anticipates that the final nod should come within three months, leaving the company ready to open its doors and launch products for consumers before the end of September this year.

The initial plan is to be active in three or four cities until Acko has shown that “the claims pieces is something we able to control and optimize,” according to Dua.

The team, which is currently around 20 people, is likely to grow to 45-50 by the year end, to help Dua hit his ambitious targets.

“We believe we should do close to $40 million in premiums over first year,” Dua said. “On a five-year perspective, we would love to reach anything from $500 million in premiums.”