PayPal invests in Indonesia's Qoala to tap insurance market 'ripe with opportunity'

PayPal Ventures’ latest investment is in an Indonesian startup that provides personal insurance products covering a variety of risks, including accidents, phone screen damage, and ticket cancellations to over 5 million customers.

Qoala has secured $47 million in a new round co-led by PayPal Ventures and MassMutual Ventures, the five-year-old startup said Wednesday. MUFG Innovation Partners, Omidyar Network, and existing backers Flourish Ventures, Eurazeo and AppWorks also participated in the Series C funding, which brings Qoala’s total funding to more than $130 million since its inception.

Qoala, headquartered in Jakarta, is an insurtech platform that works with top local insurers and e-commerce firms to offer customers personalized and affordable products. It sells the insurance coverage — ranging from cars, motorcycles, property, personal accidents, travel and health — through its website and app as well as via offline engagements.

Despite being the fourth most populous country in the world, Indonesia has a relatively low insurance penetration rate. According to the Indonesian Financial Services Authority, the insurance penetration rate in Indonesia stands at below 4%, lower than the global average.

This low penetration can be attributed to several factors, including limited awareness about insurance products, low disposable income among a significant portion of the population, and a lack of trust in insurance companies. The Insurance Development Institute additionally says that the insurance industry in Indonesia is highly fragmented, with numerous small players, leading to increased competition and lower profit margins, something that poses risk to the sector’s growth and penetration.

Additionally, half of Indonesia’s population is aged 30 or below, something that Alexandros Bottenbruch, principal at PayPal Ventures, told TechCrunch creates a “favorable socio-demographic profile in the region’s largest country, combined with rapidly accelerating digital adoption and low insurance penetration, [which makes] the market ripe with opportunity.”

The startup simplifies the claims process through image uploads and uses machine learning to detect fraud, benefiting both customers and insurers by expanding access to convenient, cost-effective insurance solutions.

Qoala also relies on a network composed of over 60,000 people who it refers to as “agents” or marketers to sell insurance. “Rather than going direct to consumers, they have worked to leverage entrenched channels like the leading consumer-facing platforms and traditional offline brokers in Indonesia, Malaysia, Vietnam and Thailand,” Bottenbruch told TechCrunch. (PayPal Ventures is no stranger to Indonesia. It also backed Gojek in 2020.)

“By taking this approach, Qoala has successfully positioned itself as the embedded insurance solution of choice to more than 50 consumer-facing platforms and marketplaces, and the top insurance platform solution used by more than 65,000 traditional offline agents. This has resulted in more than 15x growth in gross written premium from 2020 to 2023.”

It processed over 115,000 claims and added 45,000 new users last year, the startup said, which serves a total of over 5 million customers. Qoala, which also counts Peak XV among its backers, operates in Malaysia, Thailand and Vietnam in addition to its home market of Indonesia.

Qoala revealed that its gross written premiums have surged by 2.5x since 2022, and the startup now handles up to 60% of all claims internally, though it did not disclose exact numbers.

Qoala co-founder and chief executive Harshet Lunani said the new funding “demonstrates market confidence” in the startup’s strategy. “Our mission to democratize insurance remains steadfast, and with this new infusion of funds, we are better equipped than ever to drive innovation and impact lives and livelihoods,” he said in a prepared statement.

Qoala plans to deploy the fresh funds to explore strategic acquisitions and partnerships and plans to sprinkle AI across its channels.

The story was updated with additional context from the PayPal executive.