First principle with ACKO
Feat: Varun dua, founder and ex cofounder of Acko Acko for me is an interesting company and so it the founder story. He did worked in insurance and then quit. He later with his friends started a tech company that provided software to insurance company since he knew how the software system of insurance players sucks.
He then found out it’s not that scalable so he then became aggregator of insurance similar to what policy bazar does. But that too didn’t work and then later he thought why not start his own insurance company that gives insurance.
My key take away from acko and the founder
For those who don’t know what acko is. it is an online insurance company that provides insurance without any middle man such as agents etc.
Insurance is a tricky product. A very tricky product. As a product it functions similar to a loan. Just like how in a loan you first take the money and then pay in instalments or EMi. Insurance as a product is something where you first pay in installement and then might take a loan. THe word “might” is used carefully. Insurance is something that is taken out in a very precautious way.
It’s taken for the possibility of something that might go wrong. As a product it has quite a few negative associations. The way the sales pitch is there for most of the insurance product. It is “if something goes wrong. Then you shall have this”
Now as per I know Indians are definitely precautions of future catastographies but they don’t believe in paying upfront for this in a subscription form of way. As a trust deficit society I think Indians are very hard to pay for something where they could reap the benefits after a few months or years.
Moreover Insurance in india have been a quite scam before. Many are scared to pay even for knowns players like hdfc or icic then think on how Hard will it be to convince someone to pay for insurance for a new digital age players.
So that’s the nature of insurance in India.
How is insurance played in India
So basically, insurance has many types
- Health
- Car
- Term
- Business
….. and many more
And the way insurance earns money is by 2 ways
- The funds that are collected before from the buyers are invested and that’s how money is generated
- Charges premium to a few customers
But In india insurance works a bit different. For eg lets say there is ICIC bank car insurance. Now it will have this partnership with a dealer [X] and it’s goals will be to distribute insurance to a fixed target. But the flaw in this is that That guy [X] can distribute to anyone just to complete it’s monthly or quarterly targets. Which might spoil the quality of pool who the ICIC has given insurance too.
Varun was really passionate about startups and tech in general. Though he was a marketing major. After leaving his job and finding out about Flipkart and eBay, he realised what is he doing in life. Soon he started with a software selling company for insurance which made sense since he knew the in’s and out’s of insurance company and knew where were they lacking but this seemed not that scalable idea to something post 40cr.
Later he thought of being an agregator of these insurance like policy bazar but soon he also realised that being a marketplace for insurance is not that great idea. I mean think about this. Marketplace core job is to be a discovery and a selling platform. It is an intersection of buyers and sellers. Just like the Mandi market that sells fruits and veggies.
But think about the product like insurance.
- Sellers are very less.
- Buyers are more but not that much
Think about how in a Mandi market if there are less sellers are more demand. The price adv goes to the sellers since they can determine the prices well. Similarly insurance players have a huge leverage when it comes to pricing.
And the marketplace has to accept to them since marketplace cant afford to loose big insurer like ICIC bank.
Secondly now when it comes the buyer ie the end conumser who wan’t to buy insurance. Insurance has a very low frequency yet high decision product. People take reference from multiple people before finalising which insurance to get. And now in that aspect something like a marketplace needs to have such a high recall and considering something like a policy bazar also existed