Digit Insurance is raising $200 million at a valuation of $3.5 billion

Digit Insurance, a Fairfax-backed digital insurance company, is raising up to $200 million in a new funding round from existing investor Faering Capital and new investors Sequoia Capital India, IIFL Alternate Asset Managers, and a few others which are subject to approval from the Insurance Regulatory and Development Authority (Irdai).

The new funding round could value the company $3.5 billion, up from $1.9 billion previously, according to founder and chairman Kamesh Goyal. In January, the company had raised $18.5 million from existing investors such as Faering, A91 Partners, and TVS Capital and entered the unicorn status this year.

Digit's funding round, one of the largest in India's general insurance industry, will catapult the startup into the ranks of South Asia's most valuable insurtech ventures.

The financial support comes at a time when risk investors are striving for a piece of India's burgeoning online insurance industry, which is benefiting from the country's transition to a digital economy.

The company is now the third most valuable fintech in India, surpassing payments provider Razorpay and Pine Labs, both of which were valued at $3 billion earlier this year.

According to Goyal, Digit will continue to focus on increasing insurance penetration and streamlining processes through technology. The capital will be used to meet the regulators' mandated solvency requirement of 150 percent insurer liability. It will also assist in maintaining the company's growth trajectory and resolving claims in the event of a potential third wave of Covid-19 in the country.

“(Since) October 2020 we’ve seen good growth, which continued in the March quarter as well, both in premiums and customers. In April we saw an 80% growth in premium compared to the previous year, looking at the numbers we thought we may need some additional capital for solvency,” Goyal said.

Digit was founded in 2017 in Bengaluru by Goyal, an insurance veteran with more than 30 years of experience in the industry. It has a portfolio of products across motor, travel, fire and Ever since its inception, the platform has insured over 20 million customers and processed over 400,000 claims.

The platform's total policy renewal rates are 60 percent for private car insurance, 75 percent for retail health insurance, and 90 percent for corporate insurance covers. Furthermore, corporate clients purchase 20% of the insurance covers sold on the platform for their employees.

Digit's solvency margin was 201 percent as of March 31, 2021. Given the rate of growth, Goyal stated that there was a need for funding to maintain solvency from October to December 2021 onwards.

"It was a difficult year for economies the world over but I am glad to see Digit continuing to stick to its mission of simplicity and growing ahead of the industry. We will continue to focus on increasing insurance penetration and simplifying processes through technology," added Goyal.

TVS Capital Funds, A91 Partners, Indian cricket captain Virat Kohli, and Digit employees have all made investments in the company.

According to company financials, Digit's premium income increased by 44 percent to Rs 3,243 crore in Fiscal 2021. The startup claims to have more than two crore customers and to have processed over four lakh claims. TVS Capital Funds, A91 Partners, India cricket captain Virat Kohli, and Digit employees are among the company's investors.

The company currently has an offline distribution network of approximately 5,000 on-ground insurance agents and dealers.

This figure is expected to rise in the coming months, according to the company. Almost 37% of its customers live in tier 2 and tier 3 cities.

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