acko profitable: Insurtech startup Acko aims for profitability by FY27

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Insurtech startup Acko aims to achieve profitability by fiscal year 2026-27 (FY27) on the back of its general and health insurance segment tuning earnings positive, founder and chief executive Varun Dua said in an interview with investment bank UBS Global.

According to Dua, Acko is targeting to close FY24 with a premium of Rs 2,000 crore and expects the business to grow 35% year on year. For the nine-month period ended December, Acko has already clocked premiums of Rs 1,360 crore.

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Dua was in a chat with UBS, explaining the dynamics of the business.

“As per the management, 60% of the auto portfolio is already profitable with expectation of becoming fully profitable (auto segment) in the next 18 months. It expects general insurance (GI) business to be fully profitable by FY27, including the health segment, which they have recently started,” read the UBS report.

At present, Acko derives about 43-44% of its premium mix (as of January 2024) from the motor segment, split between motor own damage (OD) at 16% and motor third-party (TP) at 27%. Health contributes to roughly 48% of Acko’s premiums, of which group health accounts for 44% while recently started retail health brings in 2%.

“As per the management, embedded products (micro-insurance) which contributes 8% of the mix is already profitable and is growing at a 50% rate year on year. As per the management, 50% of the retail health insurance has been sold to its motor customers (directly to customer) driving customer acquisition cost (CAC) down for the company,” the report added.

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Acko recently floated its life insurance company focussing on the sale of term plans, which is currently in the beta stage.Further, the company is concentrating on retention rates, and has a retention ratio of 73-74% for the 13th month and roughly 85% for the 25th month in the auto insurance segment.

“The focus of the company is to create a niche in servicing, through partnering with workshops in a seamless manner (about 65% of the claims are reported directly with no dealer intervention). As per the management, garages are now setting up workshops with their capital using the Acko brand, which can help Acko in further reducing costs and bring in higher visibility,” the report added.

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