Fairfax-backed digital insurance company Digit Insurance is raising up to $200 million with existing investor Faering Capital and new investors Sequoia Capital India, IIFL Alternate Asset Managers and a few others, in their latest round of funding. This funding round values Digit at $3.5 billion.
This fundraising is subject to the approval of the Insurance Regulatory and Development Authority of India (IRDAI).
In January 2021, Digit became the first unicorn of the year with a valuation of $1.9 billion. The insurer said it achieved the $1 billion-plus valuation (Rs 14,050 crore to be exact) in three years of operations after existing investors pumped in Rs 135 crore of additional capital in January 2021.
In an interaction with Moneycontrol, Digit Insurance Chairman & Founder Kamesh Goyal said that this is one of the biggest funding rounds in the Indian insurance industry bringing the total capital infused into Digit Insurance up to $442 million.
"In insurance, one needs to maintain a certain solvency margin. This is similar to the capital adequacy ratio to banks. As a thumb rule, whatever premium is written, you need to provide 30-35 percent of that as solvency margin," he added.
Solvency margin is the minimum capital requirement for insurers, and it is set at 150 percent by IRDAI for all insurers.
Also Read: How Digit Insurance became a unicorn
Set up in 2017, Digit is headquartered in Bengaluru and was founded by Goyal, an insurance veteran who has over 30 plus years of experience in the sector. It has a portfolio of products across motor, travel, fire and health insurance.
The insurer uses technology to simplify processes for their customers, with methods such as smartphone-enabled self-inspection and audio claims. It is 100 percent on cloud.
Prem Watsa, Chairman, Fairfax Financial Holdings said that Digit's relevant products, technology-enabled, simple processes and customer-centric approach set them apart.
In FY21, Digit saw a 44 percent year-on-year growth in gross written premium to Rs 3,243 crore. The insurer has more than 20 million customers and processed 400,000 claims since its inception.
Once approved by IRDAI, Goyal said that this round of funding would be sufficient for the next 18 months. He added that the company hopes to have the approvals in place by September 2021.
Among Digit’s investors are TVS Capital Funds, A91 Partners, cricketer Virat Kohli and the employees of Digit.
As of March 31, 2021, Digit's solvency margin stood at 201 percent. Goyal said that there was a requirement for funding to maintaining the solvency from the October-December 2021 period onwards, considering the pace of growth.
"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.
Digit has also been a part of the sandbox initiative of IRDAI where products can be tested on a pilot basis for six months. Here, even during the early days of the COVID-19 pandemic in March 2020, Digit had launched
a health insurance product for the disease.