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Future X

Episode 

79

Future of Insurance: Learnings from Varun Dua, Founder & CEO Acko

Future of Insurance: Learnings from Varun Dua, Founder & CEO Acko

India's under-penetrated insurance market holds immense potential, and Varun Dua's Acko aims to transform the industry with a direct, digital, and data-driven approach.

India's insurance market potential and challenges:

  • Life insurance premiums reached global averages due to COVID-19 pandemic
  • Non-life premiums (health, motor) lag behind (sub 1% of GDP)
  • Rising GDP and per capita income will increase insurance adoption

The state of insurance in India:

  • Dominated by public sector undertakings (LIC, PSUs)
  • Private insurers face high costs, poor customer experiences, and low retention rates
  • Motor insurance example: intermediated by brokers, slow claims processing, and lack of digital touchpoints

Direct, Digital, and Data: Revolutionizing insurance:

  • Direct-to-customer approach improves retention rates and reduces acquisition costs
  • Digital-first strategy streamlines purchase-to-claims process
  • Data-driven underwriting enables lower premiums and better risk assessment

Acko: Leading the charge for Insurance 2.0 in India:

  • Founded by Varun Dua, Acko offers motor, health, and other insurance products across 16 cities for over 2 million vehicles
  • Superior customer experience, with lower premiums
  • Industry-leading NPS and retention rates, top quartile claims ratios in mature markets

Like in most markets, India is a large but under-penetrated insurance market. While the COVID-19 pandemic led to a sharp uptick in life insurance premiums, bringing it at par with global average of 3.2% of GDP, non-life premiums - health and motor insurance - continue to lag at sub 1% of GDP, compared to 2% for developing Asian countries and 5% for developed economies. In a low income economy, paying up premiums to protect against potential long term downside is not a top priority for people.

However, this will grow. As India’s GDP and per capita income grows, more people will begin insuring themselves and their assets. This has happened globally and India is no different.

Second and more important, the state of insurance in India leaves a lot to be desired, both for the insurer and the insured. Improving this can be key to changing the Indian consumer’s relationship with insurance, and building enduring private companies in the space.

Insurance companies as well as customers have a poor experience today due to intermediation and sub-optimal use of technology

Insurance in India has been dominated by PSUs - today, LIC makes up roughly half of the life insurance market, while four PSUs together make up ~40% of the non-life market.

As the industry matures, private insurers have been increasingly capturing share. However many of these companies are plagued by high costs, poor customer experience, and poor retention.

Take motor insurance as an example, which is mostly intermediated by brokers.

  • Insurers have no direct relationship with the customer, leading to poor retention (<50%)
  • Brokers own the customer relationship, hence they have high negotiating power and commissions remain high
  • Insurers cannot underwrite individual customers or use alternative data to enrich their underwriting; as a result customers pay high premiums to offset high losses
  • Customers have a poor experience due to slow claims processing, lack of easy digital touch points

Direct, Digital, and Data : The trinity for creating value in insurance

Going direct to the customer can create immense value for the insurer. Insurers hold the customer relationship which helps them improve retention rates. If a brand is successfully created, acquisition costs will likely decrease - compare this to the traditional model where broker commissions have only been increasing.

Moreover, embracing a digital-first strategy across the purchase-to-claims process improves customer experience as well as cost for the insurer. Use of individual and market data in underwriting can help deliver lower premiums while maintaining industry standard loss ratios. For example, data can be used to understand hyperlocal loss ratios in auto insurance (based on occurrences for theft and accidents).

This has played out in the US over the last few decades. Progressive and GEICO, two auto focused insurance companies, rapidly gained market share as they invested behind their direct channels which contributes to more than 50% of their business today. The two companies currently account for roughly 13% of the market each, and are #2 and #3 respectively. Leveraging personalized data has also enabled them to offer lower premiums v/s the market.

Both companies have also continuously invested in marketing to build a brand, with highly memorable television commercials and active social media advertising. Geico has a popular ‘save 15% in 15 minutes’ campaign, and Progressive launched Snapshot which rewards good driving behavior with lower premiums.

India’s Progressive moment: Acko is leading the charge for Insurance 2.0

Varun Dua comes from the insurance industry, and Acko is his third startup. Varun earlier founded Coverfox, an insurance marketplace, where he realized that to truly deliver value to the customer, they need to own the entire insurance stack and underwrite their own insurance.

Today Acko offers motor, health and smaller insurance products (smartphone, flights, etc) across 16 cities in India. Motor is the largest vertical, providing insurance to 2M+ vehicles.

Acko delivers a superior experience to the customer - from purchase to claim - at a lower price, and this reflects in its industry leading NPS and retention rates. Across its more mature markets (Bangalore and Hyderabad), claims ratios are among the top quartile in the industry despite charging customers much lower premiums.

We spoke to Varun about his journey building an insurance company, how he approaches building a brand in an industry with established players, and what he sees in the future. He is joined by Abhinav Chaturvedi and Subrata Mitra, investors at Accel who have had a ringside view of Acko and Coverfox.

Key Segments

  • 3:19 - 7:20 - Varun’s journey from Coverfox to Acko
  • 14:13 - 17:43 - Technology’s role in insurance: Underwriting distributor vs underwriting customer
  • 17:44 - 20:11 - Future of insurance: Ancillary services
  • 21:36 - 25:30 - Learnings from the US insurance sector
  • 36:32 - 40:12 - Managing regulations in Insurance
  • 44:31 - 46:31 - What’s next for Acko

The Accel team wishes Varun and Acko all the best in their mission.

Blog authored by Sankalpana Agarwal from Accel

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Jennifer Phan
Co-founder and CEO, Passionfroot

We’re building Passionfroot 1, an operating system for creators to manage their business.

We’re based in Europe and raised our $ 3.4m pre-seed round from Creandum and US angels such as Vlad (Webflow) and creators like Ali Abdaal.As we’re creating a new category and as the creator economy is global and mostly online, we’re building from Day 1 a global company and product that helps creators monetize around the world.

This brings a lot of complexities especially in terms of payments and taxes as our early users are based both in Europe and the US and deal with cross-border transactions.What are Do’s and Dont’s for European startups who have a global ambition and build products for a global customer base from Day 1. Anything you would do differently?

Krish Subramanian
Co-founder, Chargebee

Thanks @pjbouten! Love how you’ve thought about incrementally shaping a category with a focus on product and service, and only then thinking about getting the message out there vs the other way around.

And totally agree on the distinctions and overlaps both self-serve and enterprise motions share.

Community/Editorial, Relay

Thanks, PJ, for taking the time to address questions from the great vantage of shaping Showpad into a global, enterprise SaaS brand!


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