Acko shows the Indian Insurtech elephant starting to run

Baby-Elephant-Running-Wallpaper

Acko is the first really new Insurance company in India since forever. It is full stack, totally digital, properly funded and may end up more valuable than all the high profile Insurtech ventures in America and Europe.

It is no secret that this is the Asian Century and that the two engines of that growth are China and India. So we can expect the future of Insurance to be written in China and India.

That is all very good in theory, but in this post written in April 2016 while we found lots happening in China we had to report from India that:

We are not seeing the same level of ambition and innovation in India despite a similar sized market opportunity.

Then Acko caught our attention. This post will describe:

  • 5 reasons why Acko is a game-changer and unusual for India.
  • Why Acko is likely to be more valuable than all the high profile Insurtech ventures in America and Europe.
  • 2 other Insurtech news items that show the Indian elephant starting to run.
  • Why Crop Insurance is a big market opportunity.
  • Intersection with Blockchain for the underbanked/underinsured.

5 reasons why Acko is a game-changer and unusual for India

  1. Local capital formation. Look who funded Acko. Yes you see an American VC (Accel), but much more significant is the funding from Infosys founders (Kris Gopalakrishnan and Narayan Murthy via his Catamaran Ventures vehicle) and other angels in India (such as Venk Krishnan, Subba Rao, Hemendra Kothari, Atul Nicer, and Rajeev Gupta). This is classic capital formation, taking money from an earlier wave (Outsourcing).
  2. Serial Entrepreneur. Acko was founded by Varun Dua, the man behind insurance comparison site Coverfox. We covered them in our April 2016 post as having “a similar comparison model to Policy Bazaar, with a slight edge in mobile UX as per some people.” It is a classic entrepreneurial game plan – first venture is a lower risk play and once you make money from that investors will back a more ambitious play. Little known fact – Reed Hastings built and sold a software tools startup before creating Netflix.
  3. Not drip feed capital. Acko was funded with $30m, not the typical drip feed capital that plagues Indian startups. Akko can focus on executing more than thinking about the next raise.
  4. Ambitious. This is a full stack, take-on-the-incumbents play, not another conservative strategy to create something to sell to the incumbents. Expect more innovation from incumbents in future – competition does that!
  5. India is big enough. In the past any venture raising money was told to look at the Western markets; India was considered a backwater. No longer. It is now First the Rest, then the West. The Indian market for Insurance and so many other products is big enough to sustain the most ambitious plays.

When I first started visiting India around 1994, Western firms were excited by the story of a big Indian middle class that was emerging. When I stayed at the Oberoi Hotel in Mumbai, one whole floor was taken by McKinsey. About 30 years later that promise turned into reality – as usual change takes longer than expected but is bigger than expected when it arrives.

Why Acko is likely to be more valuable than all the high profile Insurtech ventures in America and Europe

It is much, much easier to sell the first insurance to a family than to get them to change insurance providers. This is true in most markets.

Akko can take all the same innovation that is being deployed in the West, such as AI, behavioural economics, reduced settlement latency, and apply it to selling to first time insurance owners.

Varun Dua, with his experience from the Coverfox service, understands that it is possible to get customers to switch and will go after this market as well:

“We will probably start off taking away existing [insurance rivals’] customers” 

However it is the new products for new customers where he sees long term value creation. Examples offered include pregnancy insurance and policies for ride-sharing companies.

The market in India is big enough. According to India Brand Equity Foundation:

“The total market size of the insurance sector in India is projected to touch US$ 350-400 billion by 2020.”

Varun Dua clearly understands the price sensitive Indian market and “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.”

The company looks like they are executing well. A few months after the funding announcement (May), Acko announced that they had received a final license from Insurance Regulator and Development Authority of India (IRDAI) on September 18 and will launch to consumers this month.

India is a market of 1 billion people. About 400 million are what is normally considered middle class (having things like a bank account and insurance). That leaves about 600 million underbanked/underinsured. That is a massive blue ocean market.

So Acko could end up being more valuable than Lemonade for example.

2 other Insurtech news items that show the Indian elephant starting to run

In April we wrote about Religare, which is one of the biggest exits so far in InsurTech (with an exit value over $200m).

In October MoneyOnMobile announced partnerships with Insurance companies to sell two wheeler insurance through their retail partners. (Disclosure: MoneyOnMobile is a client of Daily Fintech Advisers). This is an example of selling to that 600 million underbanked/underinsured market for what is often the first commercial product for a family (a motorcycle or “two wheeler” in Indian parlance).

Why Crop Insurance is a big market opportunity 

Crop insurance is a big deal in India where by some estimates close to half of employed Indians work in agriculture. However, rather than technology innovation (perhaps opening futures and options market on farm commodities) we are seeing old fashioned Government subsidies. This is not a market that you can reach either through traditional banks or traditional web sites, so distribution innovation will be needed as well as product innovation.

Intersection with Blockchain for the underbanked/underinsured

Possibly the biggest poverty trap is not being able to reliably record ownership of an asset – which an immutable, decentralised blockchain network is ideal suited for. Once an asset can be reliably linked to an individual it can be easily insured.

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Bernard Lunn is a Fintech deal-maker, author, adviser and thought-leader.

You can reach out directly to discuss our advisory services by sending an email to julia at dailyfintech dot com

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