Last quarter of 2017Mumbai$30 million30Insurance is a subject matter of solicitation. Whether or not one comprehends this staid disclaimer, it is an expression most would have heard endlessly relayed on television commercials. To break it down, insurance offers a financial cushion against a possibly rough future and the above disclaimer seeks to tell customers that irrespective of who sold it to them, the onus of buying an insurance policy lies entirely with them.While-curiously enough-it is difficult to stay interested in a subject that may actually be a matter of life and death, it has attracted the attention of a string of high-profile investors who have collectively put in a massive $30 million seed fund into a startup that promises to push this to another level. This is possibly the highest ever raised by an India startup in its seed round.What is more incredulous is that this startup has yet to launch.Under the leadership of a longtimer in the financial services business, Mumbai-based fintech startup Acko seeks to offer consumers insurance products that are affordable and relevant to them by tapping into its digital potential.Slated for a late-2017 launch, Acko will provide personalised products after measuring customer behaviour using data analytics."Banks and agencies typically sell policies without gathering enough information on customers," says Varun Dua, who heads the digital insurance startup. "Technology-enabled data allows one to know a consumer well and thus draw up more customised solutions and differentiated prices for them," he adds.According to Dua, an insurer should, as a rule, know enough about the customer to understand the risk it is underwriting."Is he a good driver or a bad one? Does he own two cars or three? Does he rely more on cabs? Is he educated? Is he in poor health already? It is important to know the answer to these questions because your profitability is based on how much you know about the risk you are underwriting. Hence, data is key to get the pricing right," he adds.What is more, Acko's digital-only model eliminates the retail expenses of opening physical stores and a parasitic dependence on a distribution network, aspects that dominate rival insurance companies."What is happening in the offline or traditional world is that insurance companies are not getting enough data because distribution controls the market. Generally, these distributors close the sale and have direct access to customers. Cost of insurance products is also sky-high primarily because of the 20-30% commission that is built into the product," says Dua. "But, the larger issue is that with little user data, these companies cannot underwrite their customers accurately and hence not be able to give them a good pricing."According to Dua, insurers are compelled to employ distributors to reach out to customers and pitch their products because essentially they all are offering same or similar products. "Our focus on creating customised solutions will create the demand we are looking for, thus eliminating the need to hard-sell and invest a lot on a distributing network," he adds.Technological interventions also make it possible to bypass routine documents and disburse services faster.On its way to receiving the necessary regulatory clearances, Acko will be running as an independent general insurance company with entire operations offered online. But in a market packed with firms employed in the traditional play, Acko is the first startup in India to build an insurance business solely on a technology platform.The MICA alumnus had previously worked with Tata AIG Life Insurance for nearly five years before he co-founded online insurance brokerage company Coverfox in 2013. According to Dua, one of the primary reasons behind starting Acko was the realization that there lay an open opportunity to look at the Internet to introduce novel ways of pricing insurance products."It dawned on me that the scope in the area of building tech into the area of insurance is massive," says Dua. "This ecosystem allowed one to create new product categories and introduce new ways of pricing them," he adds.Relevant and affordable plans notwithstanding, would customers veer to a new player in the insurance market?Dua's answer is an unequivocal yes."If a customer is buying a product like life insurance, it is very important that he or she trusts the brand. We know this for a fact because despite being privatised in the early 2000s, the life insurance industry is still dominated by LIC, which enjoys a market share of over 70%," he says. "Even within the private players, only the ICICIs and HDFCs have had a strong brand pull," he adds. But, according to Dua, the scenario is starkly different in the non-life and general insurance categories."PSUs have not done well in the general category, that is, insurance for cars, health, gadgets, etc. In fact, ICICI Lombard and other private players are much larger than the PSUs," he says."This is because these are short-term products where customers are willing to explore better prices and products, unlike life insurance, which is roughly a 20-year deal. Also, newer brands like Liberty Videocon and Star Health have done reasonably well on product innovation despite largely unknown to the end customer. Hence, it has been proved that product and pricing in the general insurance market can be taken to the next level."There must be some weight to this hypothesis, considering Acko raised a whopping $30 million seed round. What is more exciting is the fact that this round was led by the creme de la creme of the entrepreneurship ecosystem-Kris Gopalakrishnan and N R Narayana Murthy , to name just two.Estimated to be worth Rs 1,20,000 crore, the Indian insurance market is currently growing at a rate of 15-20% on a yearly basis, according to Dua. With less than 5% of the population insured, it is still at a fairly nascent stage.But if the opportunity is so clear, why are other startups not milking it?"It is a highly regulated market," says Dua. "It involves a deep understanding of the industry and the laws around it, which may be a challenge for small startups," he adds.Both life insurance and general insurance are governed by the IRDAI (Insurance Regulatory and Development Authority of India). IRDAI oversees the entire insurance sector in India and all insurers have to abide by the rules and regulations of this government body."And within the regulatory construct, comes the huge requirement of capital. Insurance companies have minimum capital maintenance criteria," says Dua. "You have to have some reserve capital before you can start off. From that perspective, it is difficult for a typical startup to come and solve the insurance problem."According to him, large companies have a very financial services mindset and are not very tech-focused. "So on the one side, you have people who understand the business but have a relatively lesser understanding of technology; and on the other end of the spectrum, you have startups who find it difficult to get into the business because of the regulatory constraints and the high capital requirement," Dua says.Merging these two worlds has been difficult and explains why a solution like this has not been attempted before."I have been lucky to have had an understanding of both sides given my past experiences. Investors have also opened up to support new-age models in insurance," Dua says. "If somebody wanted to start an insurance company from scratch five years ago, it would not have been easy to get financial backing."Acko has received R1 and R2 licence and is waiting for the final approval of R3 from the insurance authority, leaving the company ready to open its doors and launch products for consumers soon. These products are expected to be segment-specific too, like ecommerce and travel."There is a huge insurance market around mobile handsets sold online," Dua says. "So we will be operating in all these categories from the next two-year perspective," he adds, inspired by global models like Lemonade, Oscar Health, Metromile and Direct Line.Working with a modest team of 30-odd people spread across various functions, Dua hopes to bump it up to 100 once the startup begins selling.(The story has been edited to reflect the correct number of licenses Acko has received till now.)