Acko in talks to raise $200 million, may become India’s next unicorn  

Mumbai: Acko is in talks to raise $200 million in a new round of funding that could value the online general insurance startup at $1 billion, according to people aware of the negotiations. A successful deal will propel the startup into a fast-expanding set of newly minted Indian unicorns this year.

People in the know said the Bengaluru-based firm is in advanced talks with private equity majors General Atlantic and Multiples Alternate Asset Management, along with others like Warburg Pincus and TPG, for this latest round of funding. Heightened interest among risk investors in the overall financial technology sector, due to greater digital adoption triggered by the ongoing pandemic, is likely to help boost Acko’s valuation.

"The term sheets are from a couple of funds and the (funding) round will be finalised in a month's time. It will more than double the company's valuation from $400 million in its last round," said one person privy to discussions. Last year, Acko had raised $60 million led by Munich Re Ventures, the strategic corporate venture capital arm of Munich Reinsurance.

Besides the private equity funds, the so-called insurtech firm is also in talks with Israel's FinTLV Ventures, a venture capital fund which primarily invests in insurtech and fintech companies. It is unclear whether existing investors Amazon, Accel, Elevation Capital will also participate in the round.

Emails sent to Acko, General Atlantic, Multiples, and FinTLV didn’t immediately elicit a response. Warburg Pincus and TPG spokespersons declined to comment. Founded in 2016 by Varun Dua and Ruchi Deepak, Acko specialises as a provider of retail motor insurance for drivers and transportation services. In 2020, it also diversified its product mix to include health insurance. Along with its base of retail policyholders, the insurer also offers health covers to Amazon India’s registered sellers on its e-marketplace.

The startup has offerings in product and travel insurance segments where it has tie-ups with the likes of cab aggregator Ola and online retailer Amazon for bite-sized insurance covers available through their respective apps. Acko's premium income expanded to Rs 145 crore in the March quarter of fiscal 2021 as against Rs 94 crore in the year-ago period, according to company estimates.

While business took a hit in the first half of 2020 due to the pandemic, the company’s newly launched health business grew rapidly on the back of increased demand for medical covers amid the spread of Covid-19. The startup is likely to cross $150-175 million in premiums in fiscal 2022, according to sources close to the company who reckon the online insurance provider is unlikely to evaluate any IPO plans in the next two years.

New-age insurance brands

Acko and Digit, along with Flipkart co-founder Sachin Bansal’s Navi General Insurance, are seen as new-age brands in the digital-first insurance industry. These startups are competing with the country's operations-heavy insurance sector which has relied on the offline mode for years to conduct its business.

This January, Digit—backed by Canadian billionaire Prem Watsa— became the first startup unicorn of the year. Unicorns are privately-held companies valued at $1 billion or more. Digit raised Rs 135-crore led by existing private equity investors A91 Partners, Faering Capital and TVS Capital valuing it at $1.9 billion.

Unlike peers such as Policybazaar and Coverfox, Acko, Digit and others manufacture their own insurance policies as general insurance companies. India has a total of 25 general insurance companies, which collectively processed premiums worth Rs 10,822 crore in May.

Acko’s premium income in May was Rs 56 crore, according to latest IRDAI data, whereas Digit processed Rs 260.4 crore. The country’s insurance industry has been subject to intense stress owing to heightened claims burden owing to the pandemic. Companies with a focus on health insurance have taken a hit, insiders in Acko claim that the pandemic's impact on the startup has been muted.

Global buzz

‘Insurtech’, short for technology-led insurance startups, has been a buzzword globally among risk investors. In 2020, the burgeoning sector attracted deals worth over $7 billion globally, according to a BCG report, making it one of the fastest growing sub sectors in fintech. This momentum is expected to grow significantly in 2021.

The one company to have defined the online-only insurance segment is China’s Zhong An, after which similar platforms have emerged in the US, Europe and India. Earlier this month, Berlin-based insurtech startup Wefox raised $650 million in a round valuing the firm at $3 billion. Besides fundraising at high valuations, young insurtech firms are also going public in the US. Last year, SoftBank-backed Lemonade Inc. went public and currently has a market cap of $6.5 billion. Palo Alto-based home insurance tech startup Hippo is planning to list by merging with a special purpose acquisition company (SPAC) at a valuation of $5 billion.

In India, specifically, stakeholders are particularly upbeat about the growth prospects of insurtech firms as the country’s insurance penetration is currently among the lowest in the world—making it an open market for digital-native, challenger entities to take on established firms.

Source: The Economic Times