Daybreak - How Acko beat Godigit with just 15 health-insurance agents

Episode Date: January 21, 2025

A dialogue from Munnabhai has become the ultimate source of inspiration for Acko, a digital general insurer.  "When someone’s dying, do they necessarily have to fill out forms?" The Ken spoke to multiple Acko executives who said that this line is frequently repeated in meetings of its 21-month-old retail health insurance business. The inspiration seems to be working.  Despite being new to the retail health insurance game,  the company was able to sell health insurance policies worth about Rs 51 crore in the segment. That’s 40 per cent more than Godigit, which is listed and had the advantage of being around longer. Most people who understand this space are  thrown off by the route it has gone down. You see, conventionally, the industry has depended heavily on agents and point of sale personnel to sell policies. But Acko has no interest in this approach. Tune in. Daybreak is now on WhatsApp at [phone]. Text us and tell us what you thought of the episode!Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Ramon Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get alert, as soon as we release our first video. episode, please follow intermission on Spotify and Apple Podcast or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. If you've watched Munabhai MBBS, you may or may not recall this one scene. So Amado waits to fill out a hospital admission form while her son lies unconscious and unattended on a stretcher. He's foaming from the mouth because he's clearly consumed poison.

But the hospital staff refuses to do anything about it until the mom finishes filling out that form. Now, 20 years after that iconic film released, that one scene is often discussed in the meeting rooms and in the marketing plans of ACCO, a digital general insurer. Now, one dialogue from Munabai has actually become the ultimate source of inspiration for the company. I'm going to try and translate it for you. When someone is dying, do they necessarily have to fill out forms? The Ken spoke to multiple ACO executives who said that this one line is frequently repeated in meetings of its 21-month-old retail health insurance business. And that inspiration seems to be working. You see, ACCO is relatively new to the retail health insurance business.

It entered this market in March 2023, just about three years after its fellow VC-funded company Go-digit. But within six months, the company was able to sell health insurance policies worth about 51 crore in this segment. That's 40% more than Go digit, which is listed and also has the advantage

of just having been around longer. Also, it's not just other new age insurance providers. ACCO has also managed to pull higher gross direct premium

income in the retail health segment than some of the older and more traditional general insurers like Liberty General Insurance, Magma HDI general insurance and Zurich Kotak

Mahindra general insurance. For context, GDPI or gross direct premium income is essentially the revenue earned by an insurance business from selling insurance policies. Now, compared with group health, retail health policies rake in at least 50 to 60 percent higher margins for the insurer. So it does make sense why ACO would want to enter the space and make its mark so aggressively. But in terms of premium income, it is still nowhere close to the old guard, the legacy players

like HDFCERGO, ICICI-Lombard or Star Health. And yet, industry executives are often surprised by how quickly ACO has managed to grow. Most people who understand the space are also completely thrown off by the route it has gone down. You see, conventionally, the industry has depended heavily on agents and point-of-sale personnel to sell policies. But ACO has absolutely no interest in this approach. It wants to directly pitch to potential buyers. But that means swimming against the tide in an industry where insurance, still needs to be pushed to customers.

Even among those who buy health covers, trust is the biggest differentiator. And according to a bunch of industry execs, ACO is still too young to compete on trust. But ACO has some big plans. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Rahil Filippos, and I'll be joining my colleague,

Nikda Sharma, every day of the week, to bring you one business story that is worth understanding and worth your time. Today is Wednesday, the 22nd of January. Who has always planned to get into health insurance? In fact, the company launched a group health insurance policy as early as 2020. But it was only in December 2020 that it started putting together a team for retail health insurance. So they brought in Rupindaljid Singh, a 39-year-old IIT Delhi graduate with over 12 years of experience in the industry, to lead that team.

He had previously led the D2C business at Care Health Insurance and I don't know. also been a product manager at ICICI-Lombard. Now, there were three triggers behind ACCO's leap into the retail health business. The first reason is COVID, of course. By the end of 2022, people had already seen the perils of the pandemic and health insurance had become a major topic of discussion, particularly in urban areas. Now, added to this, the realization of rising disposable income. The company saw the emergence of a more well-off and health-conscious class, residing mainly in Tier 1 and Tier 2 cities. But it was actually the third reason that really encouraged ACCO.

It's motor insurance customers. You see, by the time the company forayed into retail health, it had been making about 700 crore worth of gross direct premium income annually in this particular segment. With nearly 1% market share, ACCO's motor insurance business is about one-fourth of go digits. But what ended up happening was that this relatively relevant, relatively smaller group of ACCO's motor insurance buyers wanted to experience the insurer's health cover too.

Multiple former employees told the Ken that they were receiving inquiries every single day from satisfied motor customers about when they would launch retail health insurance too. So much so that today at least three in every five of ACCO's retail health buyers are originally its motor insurance customers. But all of that doesn't take away from the company's biggest challenge. Distribution. Aco is going against the grain in many ways. But perhaps its most unconventional strategy is its decision to go digital first in a majorly offline industry. You see, that's because it spotted a shift in consumer behavior towards digitization, especially among the middle class, who aren't content with traditional broker relationships with companies and products.

We asked Aco what it believed the customer wanted. And the response we got was that they seek personalized, seamless experiences that empower them and line with their lifestyle values. Now, this model does have its advantages. First and foremost, ACCO doesn't have to worry about sky-high agent commissions. It can pack in more features in its policies like a zero-waiting period or higher no-claim bonus instead. But the thing is, health insurance policies are complicated and usually bought for longer periods,

which also means buyers in this category require a little more handholding. There's a fair bit of window shopping that a buyer does. before finally landing on one policy. They talk to a bunch of different agents and check out a bunch of different options before landing on the one they want. So what does ACCO do in the absence of agents? Well, it has to lay out all the caveats

and keep the policy documents super simple. For instance, a particular sum insured can be claimed up to 100% even in the buyer's first year of purchasing an ACO policy. That's pretty unusual. It's also set up a tele-calling assistance team just to help customers, a lot like the insurance marketplace policy bazaar. Another big hurdle that ACO has to address is the trust deficit.

Having no agents kind of makes it worse. But on top of that, ACO is also new. So Singh and his team set out to bridge this gap by bringing something that the insurance industry dropped the ball on in the last 10 to 15 years. More on that in the next segment. Now, when it comes to health insurance, trust comes only when you consistently deliver what was promised, naturally. So buyers and the insurers have to be on the same page regarding the status of the buyer's health.

And that's why ACO brought back the concept of medical underwriting. The process where the applicant's health history is evaluated before giving out a policy. This way, there's no perception or investigation or hunch involved on the insurer's side at the time of claims. The funny thing is, most insurance companies have stopped this. practice because it allows for easier onboarding by agents, but it also ends up leading to claim rejections, partial payouts and other hassles later, all of which add to the trust deficit. But ACCO is clear that they will have a smooth claims process. For that, if they have to underwrite consumers and give them a waiting period for the policy to kick in, they're fine

with it. So, for buyers who turn out to be completely healthy during the medical examination, ACCO's platinum health insurance plan, with a higher premium and a higher insured sum, kicks in without a waiting period. For others, the standard health insurance coverage starts 30 days after the policy is registered. Meanwhile, people with medical conditions like kidney stones or hernia may even end up waiting up to a year for the policy to kick in. But the issue with a digital-only model is that it won't scale fast enough in a country like India. At least that's what two senior go-digit executives told the Ken.

They believe that's also why both companies are miles apart in their financials. Because ACCO is operating in a niche. One of the Go-digit executives said that the cost ACCO saves on agent commissions will end up going towards advertising and marketing. Meanwhile, it's important to note that Go-digits spend nearly $1,900 crore rupees on commissions and brokerages in FY24. But even its traditional model is yielding results. Its GDPI for FY24 was nearly six times that of ACR.

despite both of them starting out at the same year. Its share prices have only risen by nearly 17% in fact since its listing in May. Former employees say that the company is choosing to grow slowly in the retail health front and that is a very deliberate decision. In fact, it's one that a lot of legacy players make as well. Data shows that legacy players generally have a 3-6 to 7 split skewed towards group health cover. Both models are naturally vastly different.

But one thing is clear. Like one senior industry executive pointed out, in the retail health segment, a new player's digital pitch directly to consumers is clearly working. So for now, it seems like ACO's philosophy of simplifying the insurance business is working its charms. Daybreak is produced from the Newsroom of the Ken, India's first subscriber-focused business news platform.

What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories newsletters and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website. Today's episode was hosted by Rahil Filippos and edited by Rajiv Sien.