Amazon is in final stages of closing an investment in online-only insurance startup Acko, people familiar with the matter said. The deal will see Amazon co-create financial products with Acko - besides being its distributor - in the first such move by the web retailer. Sources said Flipkart too had held talks with the startup for a potential investment but those discussions fell through.
Acko Technologies is the parent of Acko General Insurance, which received an in-principle regulatory clearance to launch earlier this year. People in the know of the transaction said the Seattle-based e-tailing major is likely to come on board Acko as part of a new financing round of about Rs 100 crore. This, after the company racked up Rs 200 crore in May this year as we reported earlier.
"They were engaged with both Amazon and Flipkart for the past few months for an investment. But with Amazon putting in a term sheet, the deal is likely to close soon with them," a source privy to the talks said. When the investment goes through, Amazon will start selling a slew of financial products on its site here.
The Mumbai-based Acko is backed by the likes of N R Narayan Murthy's Catamaran Ventures, Infosys co-founder Kris Gopalakrishnan, Hemendra Kothari of DSP Blackrock, and venture funds Accel Partners and SAIF Partners.
An Amazon spokesperson said, "The company does not comment on speculative reports on what we may or may not do in future," when asked about its investment in Acko. While Varun Dua, CEO - Acko, did not comment on the development.
Insurtech startups globally are looking to disrupt the age-old insurance industry. This week New York-based Lemonade raised $120 million from SoftBank while players like Chinese online insurer ZhongAn raised $1.5 billion in an IPO last month in Hong Kong. Zhong An is backed by Alibaba and Tencent and SoftBank became an investor as part of the IPO
Amazon's bet on selling financial products in the domestic market is aligned with the online retailer's strategy to diversify its customer base here. With a plethora of data on users readily available to companies like Amazon, they can tailor make products for a fast-growing population of online shoppers in India something Acko will look to leverage. A few months back, Amazon's closest competitor, Flipkart had filed documents with the Registrar of Companies seeking approval from the insurance regulator--Insurance Regulatory and Development Authority-- to become a marketplace for selling insurance products underlining the potential these web retailers see in the segment.
Dua had told TOI earlier this year that Acko will bring out multiple product lines, offer bespoke pricing and products catering to specific segments targeting the internet economy. Internet distribution is important for our success as a model. Also; the internet economy will throw up new kinds of distribution - wallets, e-commerce companies, digital lenders - here the products will need deep tech integration and a customised-products to scale, he had said. Only 3% of insurance is bought online currently in India out of an overall $80 billion market but that share is likely to grow significantly keeping in mind the young demographics accessing services online.
Authored by Samidha Sharma and first published in The Times of India 2nd January 2018 “Amazon close to investing in online insurance startup Acko”