Bengaluru-based insurance startup Digit reported a net profit of Rs 17 crore for the first half of the current fiscal year, compared with a loss of Rs 63 crore a year earlier. In the last financial year ended March 31, 2023, the Fairfax-backed company had reported a net profit of Rs 388 crore, up from a meagre Rs 50 crore the year before.
Digit is in the process of going publicand had applied to the market regulator to make an IPO in March this year, after its first application filed in 2022 was returned.
The claims incurred by the company went up on the back of growing business. In the first half of the current fiscal year, those rose almost 20% to Rs 2,083 crore from Rs 1,740 crore a year back. Digit more than halved its advertising expenses, to Rs 144 crore from Rs 300 crore.
Its city-based rival, Acko, reported a Rs 738 crore loss in FY2023, almost double of Rs 382 crore in FY2022. But in the current fiscal year, the General Atlantic-backed unicorn has reduced the loss. According to filings made by Acko, the startup reported a net loss of Rs 34 crore in the first half of this fiscal year compared with Rs 272 crore a year back.
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Net claims incurred, which is what it needs to pay its customers, rose to Rs 400 crore for the first half from Rs 317 crore a year earlier. It controlled another major cost item: advertising expenses remained flat at Rs 253 crore.
Digit did not respond to ET’s questions, being in the middle of a public market listing. Acko chief executive Varun Dua did not immediately respond to emailed queries.
Despite starting with motor insurance, which is mandatory for vehicle owners in India, as their principal product, both have switched gears to health insurance which is a more long-term product.
Digit almost doubled its health portfolio in the first half of the current fiscal, with Rs 834 crore of premium collected, while Acko reported 25% growth in the segment to Rs 458 crore. For Acko, the motor portfolio has grown 18% while for Digit it has expanded 54%.
ETtech“Given the high competition from traditional players, new age insurance companies need to focus on products which are less penetrated and where opportunities are very high, that is where the focus on health comes in, but it is a long-term game and will need to be built with patience,” said Surya Saha, author of the Digital Choices and an expert on the insurance industry.
SwissRe Institute in a report on the sector this month has predicted that India’s insurance market will expand at a rate of 7% between 2024 and 2028, with non-life business growing at a compound rate of 8.3%. With the right set of products and a better customer experience, the likes of Digit and Acko are in a position to take advantage of this growth, industry insiders feel.