September 30, 2020
Hey, folks! This article is my quarterly round-up of InsurTech activity in India; the Q1 edition was very well received, and the previous editions on LinkedIn have received over 30K views!
With $135.6 million in primary capital entering the ecosystem, this quarter has been rather active on the ‘late’ stage.
Techstars London alumni Inspekt Labs raised a $600K pre-Series A.
Policybazaar ‘raised’ $130 million ($50 million primary infusion & $80 million secondary purchase) from Softbank. Rumour has it that Google is looking to infuse capital into Policybazaar at a valuation of $1.5 billion.
I find it fascinating that Policybazaar’s valuation in private markets today is $1.5 billion; however, it is looking at a NASDAQ IPO valuing the company at $3.5 billion in ~12 months! And, it looks to raise another $250 million at a $2 billion valuation. Putting my strategy hat on, Google x Policybazaar seems to be a perfect fit. The graphic below summarizes my thesis; Policybazaar could act as Google’s ‘insurance protocol’ in the Indian market.
My extended piece on Google x Policybazaar can be found here. Switching gears from fundraising, let’s look at how regulation is ‘giving flight’ to InsurTech in India (in some cases like drone insurance, quite literally so).
If you’re not keen to delve into the regulations, feel free to scroll past the next two images where you’ll find a summary!
PS: Applications for cohort II of IRDAI’s InsurTech sandbox are open!
Summary of key regulations
The wearable guidelines set the tone for exciting ‘payer + provider health ecosystem’ plays—more so in light of iSPRT’s National Health Stack initiatives such as the ‘gamifier health policy.’
The above graphic explains how regulation is helping innovation take flight—it is exciting to see drone insurance take off in India; Digital Sky may just become a reality.
Acko and Digit commenced operations at roughly the same point—as they approach their third-year anniversary, I felt a small section on their performance does justice to their respective growth.
Digit: All Guns Blazing
Fairfax-backed Digit Insurance has written $141 million (₹1046 crore) in premiums for FY 2021 YTD (i.e., ~ 4 months). In FY 2020, Digit wrote $296.73 million in premiums; my FY 2021 estimate for Digit’s premium sits between $400 million and $425 million.
1. Fire and Health insurance are major growth drivers:
2. Diversification away from Motor:
Digit’s projections are astounding for a company that began trading in September 2017—exactly three years ago! Their experienced ex-Allianz management team has a strong mandate—raising $84 million at an $870 million valuation in January; this would imply a forward premium multiple of ~2x, which is hardly generous given its growth potential.
Acko – Pandemic struck?
Acko’s recent raise values the company at ~$400 million to $500 million in this recent funding round. Acko has written $14.98 million (₹1046 crore) in premiums for FY 2021 YTD (i.e., ~ 4 months). In FY 2020, Acko wrote $50.41 million in premiums; I am hesitant to provide an FY 2021 estimate for Acko’s premiums since their business has dipped 10.2% due to COVID-19.
Data from regulatory filings suggest that Acko’s health insurance business has taken a hit. This comes across as a surprise to me, given how the health insurance segment has grown YoY on account of COVID-19.
Assuming Acko is able to deliver $50.41 million in premiums for FY 2021 (its FY 2020 figure)—Acko would be valued at a forward premium multiple of 10x—nearly 5 times that of Digit! It would be unfair to compare both companies quite literally, given Digit’s focus is on offline, commercial, and broker-sourced business, whereas Acko’s focus is on ‘pure’ digital and digital partner-driven business. However, this comparison was a helpful exercise for me.
On July 7, 2020, Paytm announced its move to acquire Raheja QBE Insurance for ₹568 crores (i.e., $76.1 million). This move certainly baffled me—they acquired their insurance brokerage license in March this year!
I have written about ‘Paytm & Insurance’ at length here.
I’ve always marveled at consumer FinTechs treating ‘insurance as a feature, not a product’ by foraying into insurance distribution. However, could buying an insurance company become the ‘next frontier’? Navi did so with DHFL Insurance.
Read and learn about FinTech topics you are interested in.