Acko’s Varun Dua on disrupting the insurance market with technology and innovation

In the last 15-odd months, Mumbai-based online insurer Acko General Insurance Ltd has raised more than $100 million over three funding rounds. The latest was last month when it raised $65 million from existing and new investors including Flipkart co-founder Binny Bansal and RPS Investment Fund, former SoftBank Group Corp executive Kabir Misra’s venture capital firm.

Earlier investors in Acko include Seattle-based e-commerce giant Amazon, venture capital firms Accel and SAIF Partners, Infosys co-founder NR Narayana Murthy-backed Catamaran Ventures and Infosys co-founder Kris Gopalakrishnan.

Founded in August 2016 by MICA Ahmedabad alumnus Varun Dua, the company operates in two segments -- automobile insurance (cars and two-wheelers) and microinsurance, which includes rider insurance, mobile and appliance protection and ticket cancellations. Some of the companies with which it has partnered for such products include ride-hailing platform Ola, Amazon, bus ticketing platform redBus, food-tech startup Zomato and hyperlocal services provider UrbanClap.

In an interview with TechCircle, Dua said that the company has served about 25 million customers across their multiple insurance products over the last year. He also spoke about Acko’s microinsurance products and expansion plans. Edited excerpts:

What is Acko’s current scale of operations and what is the roadmap ahead?

Between our two verticals (automobile and microinsurance), we intend to consolidate and continue to scale up our offerings and products over the next year in terms of price and value convenience. After that, we will start to look into areas such as health insurance as part of a longer roadmap.

Over the last year, we have acquired about 25 million customers across our multiple insurance products. We are currently touching 100,000 car and two-wheeler policies every month. Likewise, in terms of employee headcount we stand at around 220-230 people currently and hope to add another 100-120 within a year and will scale up largely across verticals of technology and claims.

Do you plan to raise any more capital in the next few months?

We’ve just raised a $65 million round. Being a sector that falls under the purview of FDI (foreign direct investment) restrictions, we might quickly raise some more capital by tapping domestic sources.

How is a new-age insurance product like microinsurance relevant in the Indian context?

Setting aside the insurance part, the consumer behaviour around buying products or availing services over the years has undergone a sea change. This includes buying your mobile phone, the way we travel and purchase travel tickets, book cabs and the way we shop.

This offers an opportunity to cover for small risks and address the smaller pain points that are part of the digital journey, which was not possible until five years ago. Today, online access to these services has allowed for better protection to customers. So, now we can attach small products and seamlessly deliver it to customers. For the platforms that provide these products, it helps in product differentiation and value-added services to their consumers.

Overall, the way I see it, the digital transaction economy is going to be a $100 billion opportunity within the next five years. When you talk about insuring digital transactions, which I would say would be about 1-2%, I easily see a $2-3 billion opportunity.

How have your customers taken to microinsurance products?

We have managed to see some surprising results on the scale. Our microinsurance vertical accounts for nearly 40% of our business. We expect this to continue in the long run as well. That’s chiefly because we offer these products across multiple categories that include travel, gadgets, last-mile cabs and bikes, food delivery and online lending.

Seamless processing of claims is crucial to microinsurance. How are you addressing that challenge?

The two challenges of microinsurance products, which have actually been around for quite a while, is the design of the product and the tedious claims process. While I cannot claim that we have solved that problem entirely, what we have done is taken both these processes to a different level.

For example, we have designed our products in such a way that one does not have to fill in a claim form or talk to a customer care personnel for claims as small as Rs 5,000 or Rs 10,000. Around 50% of our mobile phone insurance claims are settled on the same day and around 48% are settled within the next 48 hours. It’s a zero-paperwork process for our customers.

What about consumer awareness?

Insurance companies, for a long time, have seen microinsurance products as another revenue stream rather than a real service proposition to the end user. Let me give you a specific example. In redBus intercity travel, the insurance policy used to cover baggage loss or accident. However, these are very latent ideas. Hence, the customer does not see a value at the point of purchase.

With Acko, all the coverage is built into the products be it delays in flights and buses or other deficiencies in services. Imagine getting a claim honoured on the same day with the click of a button! Consumer belief in the product goes up.

Are there more developed economies where such products have seen large-scale adoption?

I think we have seen bits and pieces across the world where such products have worked at a large scale. In China, online insurance firm Zhong An has been able to do it across Alibaba and other platforms. In the US, Squaretrade specialises in offering gadget and mobile phone insurance. But, even at a global level, a standardised way of doing microinsurance has not yet evolved. Different kinds of business models are being explored around the world.

Why is insurance-tech being seen as the next big thing in fintech?

From an India perspective, insurance is relatively a newer segment compared to banking. Until 2000-2001, you had only state-owned insurance companies. Second, the insurance sector also lagged other financial services sectors in the use of technology and in offering innovative products.

It’s a younger and at the same time also a very large industry and there’s a lot that needs to be done. In the next few years, the industry is all set to grow to a $200 billion opportunity.

What exactly were the pain points inherent in the insurance sector?

First, customers don’t understand most of the products and hence simplifying them is paramount. Second, the cost of insurance products for the retail customer is generally higher, given the commission and the margin factor associated with the sector. Coming back again to the claims process, I believe there is a lot of scope to expedite this process and minimise paperwork. A one-month processing time for insurance claims is still largely the prevailing benchmark in the industry.

How do you think the market will shape up in terms of traditional players versus new-age players such as Acko?

The industry is very large. The ninth or tenth homegrown player in this sector would still be a billion-dollar entity. If you talk about countries like China or the US, there are about more than 300 insurance companies compared to 25-30 in India.

I think the incumbents still have a large enough market to address while there is a fast-emerging market for new-age and innovative products. So, traditional and new-age players can co-exist without any problems. In fact, the market is large enough to accommodate another 10-15 players with different business models. Having said that, some of the large players will also start doing things more digitally like us.

Is Acko open to being acquired at the right price?

I think our philosophy is very clear here. I don’t think we are building to get acquired. Financial services institutions like banks and insurance companies can last for a long time. Both the company as well as the investors are very much aligned with this thought process.

What are the current penetration levels for insurance products in India? Is there a big demand-supply mismatch?

The insurance penetration levels in India are probably among the lowest in the world. It is visible because it is one of the fastest-growing economies in the world in this segment. The Indian insurance sector is currently seeing a 20% year-on-year growth. Less than 10% of the population has access to health insurance. As consumers become more aware, the unmet demand is also on the rise and pretty large.

What will be the role of technology?

From a technology perspective, it is about coming online and purchasing a product. Across the value chain, be it pricing, use of data for the right pricing technique, automation, fraud detection -- all these areas can be hugely disrupted by technology over the next few years. We will also likely witness the emergence of new products around these areas.

Any room for inorganic growth ?

Not immediately as we are a very young company. However, I do foresee a scope for acquisitions in the near future, where at some point, there might be verticals that could do with providing better consumer experience, pricing or access to distribution. We would be on the lookout for such opportunities. But we are not actively doing it today.

What can you tell us about your newest product Ackodrive? Are you trying to compete with the likes of CarDekho, CarWale and Cars 24?

We are absolutely not trying to do that at all. It is currently a pilot where we are trying to enhance the engagement levels of a car insurance product owner with the company, which is currently quite low.

The customer  buys the product once a year and makes a claim every two years. The interaction between the two players in the interim period is very limited. So what Ackodrive is trying to do here is to create an ecosystem around car ownership where we also travel with the customer from purchase to service to claims. We are trying to see if we can handhold the consumer across the journey. These are very early days to talk about it. Let's see how it shapes up.