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| Image Credit: acko |
Acko, a general insurance startup founded four years ago, has raised $255 million in a new investment round headed by private equity firms General Atlantic and Multiples Private Equity, valuing the company at $1.1 billion.
The funding round included current investors Intact Ventures and Munich Re Ventures, as well as Canada's largest pension fund, CPPIB, and Lightspeed Growth.
The Bengaluru-based company was in talks with General Atlantic and others for a cash infusion, according to ET on June 29. Last year, Acko, the newest Indian unicorn, was valued at over $400 million. Unicorns are privately held businesses with a market capitalization of $1 billion or more.
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A secondary component is expected to be included in the latest fundraising, bringing the total round size to more than $300 million, according to a source close to the situation. A current shareholder sells their stock to new investment in a secondary transaction.
The new funds will be used to invest in the health insurance sector.
"In India, up to 80% of people who are eligible for health insurance do not have it, indicating that the market is vast and unexplored." It's not a winner-take-all industry, and 10-20 significant insurance manufacturers and brands might easily coexist here, just as they do globally..." ET spoke with Varun Dua, the founder and CEO of Acko. "We're aiming for 100-150 million digitally native Indians to give them with car, health, and other insurance goods..."
Acko was founded in 2016 by Dua after he left the online insurance aggregator Coverfox. It offers products in the car, health, and travel insurance segments, and it has worked with companies such as cab-aggregator Ola and Amazon to give bite-sized insurance coverage through their respective applications.
The money comes at a time when insurtech enterprises around the world are seeing increased client demand as a result of the Covid-19 outbreak, which has raised awareness regarding insurance.
New-age companies in India, such as Digit and Plum, have obtained big capital rounds or are in the midst of doing so. "Unlike places like the United States, private sector insurance is still a young industry here," Dua remarked. "We will see alternative models develop in the next ten years, even as companies like Star Health, PolicyBazaar, and Care Health Insurance (owned by Religare) go public and create shareholder value."
Acko has received $450 million in total capital, including the most recent round.
Amazon, Accel, Elevation Capital, Ascent Capital, Intact Ventures, Munich Re Ventures, and Binny Bansal, co-founder of Flipkart, are among its existing backers.
The firm claims to have over 70 million subscribers and monthly premium revenue of around $150 million.
According to data from the insurance regulator, the general insurer's premium income in the current fiscal year up to September was Rs 414 crore, up from Rs 150 crore in the same period last year.
The company's newly created health division grew quickly as demand for medical coverage soared due to the spread of Covid-19.
In the digital-first insurance sector, Acko and Digit, as well as Flipkart co-founder Sachin Bansal's Navi GI, are viewed as new-age firms.
These businesses are up against the country's operations-heavy insurance industry, which has relied on the offline mode to conduct business for years.
"We expect models to change," Dua added, "but manufacturers who deliver the product, price, claims, and experience will build long-term connections with customers."
Digit, financed by Canadian billionaire Prem Watsa, became the year's first unicorn startup in January. Unicorns are privately held businesses with a market capitalization of $1 billion or more.
Digit was valued at $1.9 billion after raising Rs 135 crore from current private equity investors A91 Partners, Faering Capital, and TVS Capital.
Acko, Digit, and others have built their own insurance policies, unlike competitors such as PolicyBazaar and Coverfox.
These companies are classified as 'Insurtech,' which stands for 'technology-led insurance startups,' and has become a buzzword among risk investors throughout the world.
By 2020, the blossoming sector will have attracted acquisitions totalling more than $7 billion globally, making it one of the startup ecosystem's fastest expanding subsectors.
Zhong Ang in China, Lemonade, Esurance, and Trov in the United States are among the top insurtech companies in the world.
Stakeholders in India are particularly optimistic about these companies' future possibilities, given India's insurance penetration is now among the lowest in the world, creating an open market for digital-native, challenger organisations to compete with established firms.
"We are confident in the Indian insurance industry's long-term growth prospects. "We believe Acko is well-positioned to take advantage of the industry tailwinds and emerge as a market leader, given its sole emphasis on driving innovation across product design, distribution, underwriting, and customer support," said Shantanu Rastogi, managing director, General Atlantic.
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