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Why Amazon has invested $12 million in Indian startup Acko

BusinessToday.In     May 28, 2018

Amazon has just made its first investment in the Indian insurance sector. On Sunday, online-only insurance policy provider Acko announced that it has received a funding of $12 million (about Rs 81.2 crore), led by the e-commerce giant. The buzz is that Amazon will not only distribute Acko's financial products but will also be involved in the creation stage. The latest funding round also saw participation from Chrys Capital founder Ashish Dhawan and existing investor Catamaran Ventures, which is Infosys co-founder NR Narayana Murthy's private investment firm.

Wondering why Amazon is interested in Acko and the insurance sector in general? "Acko is a young and nimble start-up bringing technology and data-led innovation to the insurance sector to deliver a better insurance experience for customers. We are excited to back companies that are focused on using technology for enhanced customer experience and are led by missionary founders and management teams," said Amit Agarwal, SVP and Country Manager, Amazon India, in a statement. What is left unsaid is the sheer potential of the insurtech field Amazon wants to tap - innovative, customised insurance policies in the country reportedly spell a Rs 9,000 crore opportunity. In any case, one does not even need to get particularly inventive with financial products since India is so grossly underinsured.

Just look at the success of Chinese online insurer ZhongAn to understand the significance of the Amazon-Acko tie up. Founded in 2013 by the respective heads of Ant Financial, Tencent and Ping An, the company has a market cap of over $10 billion on the Hong Kong Stock Exchange and boasts 490 million customers to whom it has sold over 7 billion policies. In fact, according to an ISEAD blog, by the end of 2017, ZhongAn had close to 300 insurance products that could be customised into thousands of insurance solutions.

The reason it is so successful is that it uses the anonymized data shared by Alibaba and the other internet giants it is backed by to create new and interesting insurance products for participants in ecommerce marketplace. Like it noticed that a significant concern/ pain point for Chinese buyers was the quality of their online purchases. So it introduced a policy that covers return shipping costs for buyers at a cost of under $2.

Similarly, Acko can possibly leverage on the shopping patterns of a consumer on Amazon and accordingly suggest insurance products. So, for instance, buyers regularly buying baby products may be peddled health insurance or child plans while pet insurance could be cross-sold to those buying pet products. Perhaps, in the near future, you'll even be able to murmur "Alexa, I need to file a claim" to get started.

"We will use the funds to strengthen our technology teams to deliver data analytics and towards brand building activities," Acko founder Varun Dua told PTI. Though he declined to comment on the valuation of the company post the transaction, media reports said that the deal pegs Acko's valuation at about $100 million.

That's pretty neat for a start-up founded in 2016. For the record, Acko is one of the country's newest general insurance companies and leverages data and analytics to provide personalised insurance products through its digital platform. The company currently offers car and bike insurance as well as mobile protection. It has also partnered with cab aggregator Ola to offer in-ride insurance to riders. According to Dua, the company is now looking at offering products in the travel insurance and healthcare space in the coming months.

So far, Acko has raised a total equity funding of nearly $42 million. This includes the $30 million seed money raked in last May from venture capital firms as well as angel investors. As per media reports, Catamaran Ventures, Infosys co-founder Kris Gopalakrishnan, Hemendra Kothari, Chairman, DSP BlackRock - or rather the soon to be DSP Investment Managers since the recent buyout - Hexaware Technologies Chairman Atul Nishar, Arpwood Capital's founder Rajeev Gupta, Accel Partners and SAIF Partners have reportedly participated in that round. Acko's other investors include Swiss Re Reinsurance Holding Company Ltd, Transamerica Ventures Fund as well as Venk Krishnan and Subba Rao from NuVentures.

(With PTI inputs)


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