Insuretech startups outperform traditional players in premium growth

Narayan Murthy and Accel backed Acko, which received a general insurance licenses from IRDAI in 2017, underwrote premium worth ₹41.56 crore in the month of September 2019. This is a 6x growth compared ₹6.53 crore worth of premium underwritten by Acko in the same month last year, according to IRDAI data.

Similarly, Fairfax-backed Digit insurance which also received IRDAI license in 2017, underwrote premiums worth ₹233.2 crore in September 2019, which is a 4X growth compared to ₹58.77 crore premiums underwritten in the same month last year.

Both digital insurers, however, have minor market shares in the general insurance category which has around 25 licensed players. Acko currently holds a 0.17% market share while Digit has a 1.04% market share in the general insurance category. Overall, the 25 general insurers underwrote gross premiums worth ₹20,145.46 crore in September 2019, which is an increase of 16% year-on-year.

Even with minor market shares, Acko and Digit have been posting steady growth this year in terms of premiums underwritten. In the month August and July 2019, Acko and Digit respectively posted at least a 6X and 3X growth. According to company representatives from Acko and Digit, most of the growth is being generated from renewals in the auto insurance category, especially after the Indian government introduced hefty fines for motorists under the new amended Motor Vehicles Act.

According to data shared by Acko, in the first half of the financial year 2018-19 (H1 FY19), the company had a gross written premium (GWP) of just ₹10 crore in the auto insurance category. However, during H1 FY20, that number increased by 10X to around ₹100.9 crore.

“The motor vehicles act the parliament amended recently mandating steep fines for not carrying valid insurance, has led to a spike in auto insurance awareness and people purchasing motor insurance online," said Janani Viswanathan, head of strategy at Acko General Insurance.

Acko currently offers insurance products across categories like motor, smartphone insurance, and travel insurance through partnerships with cab-hailing startup Ola and other online travel aggregator platforms such as RedBus and Goibibo. It currently has around 45 million registered customers, and around 20 digital partners travel platforms, cab-hailing platforms, and e-commerce platforms.

According to Vivek Chaturvedi, Head of Marketing and Direct (online) sales at Digit Insurance, Digit has crossed around 50 lakh registered customers. “We have also closed around 1 lakh claims on travel, smartphone, and motor insurance categories to date," he added.

Acko and Digit have built a vast partnership base with consumer Internet platforms across e-commerce and travel categories, and even directly with auto manufacturers. For example, Acko directly taps on the customer base on Amazon, by selling smartphone insurance at the checkout page, offering phone damage insurance starting at ₹399 for a year up to ₹1,250 depending on the price of the smartphone.

Since e-commerce platforms have recently picked up geographic penetration in smaller tier cities, digital insurers are also witnessing demand for gadget insurance from smaller markets as well. “For us, e-commerce led insurance purchases are growing at a faster pace in tier-2 and maker markets…States like Gujarat, Punjab, and smaller cities in Maharashtra have posted highest traction across both motor and e-commerce led insurance products," added Chaturvedi during an interview.