Bhargav Dasgupta, MD & CEO, ICICI Lombard General Insurance, joined the company in May 2009. Prior to joining ICICI Lombard, Mr Dasgupta was the executive director of ICICI Prudential Life Insurance. He was responsible for sales, distribution, product development and marketing for the retail and group businesses of the company. He began his stint with ICICI in 1992 in the projects and corporate finance division. Since then he has held key leadership positions in diverse business areas of the Group. Mr Dasgupta completed his post graduation in management from the Indian Institute of Management, Bangalore and bachelor of engineering (mechanical) from the Jadavpur University. After completing his engineering course, he had worked for Tata Motors from 1988-90.
ICICI Lombard GIC Ltd is a joint venture between ICICI Bank, India's second largest bank with consolidated total assets of over $91 billion at March 31, 2012 and Fairfax Financial Holdings, a Canada- based $30 billion diversified financial services company engaged in general insurance, reinsurance, insurance claims management and investment management. ICICI Lombard is the largest private sector general insurer in India with a GWP (gross written premium) of Rs. 53.58 billion for FY12. The company issued over 7.6 million policies and settled over 4.4 million claims and has a claim disposal ratio of 99% (percentage of claims settled against claims reported) as on March 31, 2012.
Speaking to Dolly Mirchandani of IIFL, Bhargav Dasgupta says, “The key ingredient in the mix of customer satisfaction is to maintain a robust claim settlement mechanism and ensuring timely & hassle-free processing of claims.”
What potential do you see for the general insurance industry broadly and ICICI Lombard in particular? Give us an idea of the penetration levels in India compared to other countries.
The general insurance industry appears to be coming out of the impact of de-tariffing, with pricing beginning to slowly correct. This is a healthy sign for the overall sustainable growth of the industry. The industry grew at 23% over the previous year, underwriting a total premium of Rs. 547.62 billion in FY11-12. We expect a 15%-20% growth this year for the industry if the pricing remains at the same levels. If the premium rates are based on risk, we will see higher growth. Over a five-year period, we expect the industry to grow at an average rate of 20%-25% per year.
The total non-life insurance penetration in India is at 0.7% of GDP (gross domestic product) in 2010-11, compared to China which stands at 1.3% and Russia which is at 2.5% of GDP. This reflects tremendous potential for growth of the non-life industry in India as we are at significantly lower levels of penetration.
ICICI Lombard has been ahead of the curve in terms of growth. We are the first private insurer to cross Rs. 50 billion of GWP (gross written premium) in FY12, an increase of 22% over last year. We are preparing the foundation for a completely different trajectory. We would use service and customer satisfaction as a differentiator. We are investing heavily in technology and actuarial areas. We believe that this will help us expand our business profitably as industry grows.
What trends are you seeing as far as pricing is concerned. How do you see it moving in each of the segments you operate?
As far as retail business is concerned, under motor insurance, we see stabilisation of premiums for private cars from the drop that we had observed post de-tariffing. We foresee development of enhanced pricing model in the future to further move towards risk-based pricing for customers, based on additional factors linked to the insured, such as demographics. Also, post-dismantling of the commercial vehicle third party (TP) pool, we are not yet seeing adequate corrections happening in the commercial vehicle industry. TP corrections are required for certain large segments in the commercial vehicle space.
Under health insurance, increasing inflation in health care has led to increased losses in the health space. We foresee a premium correction in retail health space in view of the rising health care cost. With regard to overseas travel insurance, price corrections/adjustments may be required in view of currency depreciation or fluctuations.
Comment on your financials. What is the outlook?
In FY11-12, ICICI Lombard achieved robust growth and sustained its market leadership amongst the private general insurers with a market share of 22.9% in the private sector, and an overall market share of 9.4%. Our GWP for FY12 was Rs. 53.58 billion, a growth of 22% over the previous year. We have built significant scale, covering 27.9 million lives and settling 4.3 million claims during the year. The company had taken a conscious decision to focus on profitable growth and have seen a significant improvement in its underwriting performance, prior to the motor pool impact.
We had a profit before tax of Rs. 2.9 billion in FY12 (without taking into account additional impact of the motor pool), an increase of 53% over FY11. We had to make a provision for Rs. 6.85 billion on account of the motor third party pool, resulting in an overall loss for FY12. IRDA (Insurance Regulatory and Development Authority) allowed general insurers to recognise the additional liabilities of the pool in its entirety in FY12, or amortise the liability over three years. We decided to absorb the entire liability in the current year itself.
We continue to capitalise on the growth opportunities in the insurance sector, with a focus on product innovation, transparency and process efficiency to deliver value to the customers. As an organisation, we would want to create value for all our stakeholders by continuous focus on service delivery, quality of business, productivity and profitability.
What is a critical illness cover? Does it make sense to buy critical illness cover in addition to a health insurance policy?
Critical illness cover is a comprehensive policy covering critical illnesses. Such policies provide for lump sum payment in the event of diagnosis of critical illnesses like cancer, heart attack and renal failure (among others) and provide comprehensive security to one’s health needs.
In an analysis of claims settled by ICICI Lombard in the three-year period between April 2009 and February 2012, it was found that 66% of the claimants had gone through the trauma of a critical illness. Each of these afflictions is life threatening, but the silver lining is that top-end treatment is available, though at a steep cost. This is where the financial security brought by a general insurance health cover plays a crucial role. The patient and his attendants can focus better on the immediate task of fighting the illness.
ICICI Lombard’s Critical Care Insurance policy provides cover for nine major medical illness and procedures. It also covers death and permanent total disability due to accidents. In this policy, the sum insured is paid as a single lump sum. While normal health insurance policies do cover the costs of treatment of critical illness, a separate critical illness policy provides additional benefits like OPD (outpatient department) and claim payment on the diagnosis of the illness which is not provided by normal health insurance products. Hence, it is advisable to opt for a critical illness cover in addition to a health insurance policy.
Please tell us more about your process of developing no-frill health insurance plans. Is the constant depreciation in rupee affecting your margins in case of travel insurance products?
Today, health insurance is a critical requirement for all. Keeping this need in mind and adapting an inclusive approach, we at ICICI Lombard have developed no-frill health insurance plans. Such vanilla plans will ensure that the basic health needs are addressed and people from diverse strata of the society can avail health cover seamlessly. We aim to provide an option that will empower consumers to tailor their plans according to their budget and requirement.
Any business which is linked with foreign currency is affected by the ongoing fluctuations. The international travel insurance products—which includes cost of medical treatment during overseas travel, involves a lot of foreign currency transactions—is surely observing pressure on its margins due to the depreciation of the rupee.
You have increased deductibles on motor insurance policy by 50%. Any reasons?
One of the objectives of having deductibles is to avoid small value claims as it becomes uneconomical to service such small claims, considering the administrative cost involved. Prevalent deductible structure was fixed in tariff regime about 10 years back. Since then, average claims payout has increased significantly owing to increase in input cost, inflation, usage of superior technology & sophisticated parts. Increase in inflation and frequency of claims had nullified the impact of prevalent deductibles. Considering this, IRDA has increased the compulsory deductible for the industry a few months back.
What are the future plans of ICICI Lombard General? What are the other products in the pipeline?
New product development is a key focus area for us. Committed to the health needs of our consumers, we recently undertook a health study along with NCAER (National Council of Applied Economic Research) where we reached out to half-a-million households across the country, capturing information on health and health insurance related facts and perceptions across a country-wide spectrum. The findings will help in determining a roadmap for product design across the health insurance space in the near future. Penetrating India's diverse market requires innovative insurance products at multiple price points.
In line with the study and as a part of our future initiative, we are also launching a broad spectrum new health insurance product to meet the diverse requirements of our prospective customer base. This product offers a wide range of sum insured (Rs. 1 lakh to Rs. 50 lakh) and lifelong entry into the plan, along with a variety of additional covers such as maternity, critical illness, outpatient treatment, new born baby cover, wellness & preventive healthcare, hospital daily cash, nursing at home cover, road emergency ambulance, etc.
Most players speak about service and customer satisfaction as a differentiator. What are the key initiatives being taken by ICICI Lombard here?
Since our inception, we have focused on providing quality service and customer satisfaction. To deliver superior customer experience, we went about restructuring all our business processes, from the way we educate our policyholders and potential buyers, to the way our executives engage with clients to find appropriate solutions, to after sales service and finally settling claims.
ICICI Lombard has set a benchmark in policy issuance through our e-commerce website. The online portal can issue both retail and corporate customers a real-time policy with increased self service, including instant quote generation and issuance of endorsed policies. We went one step ahead in our goal of achieving customer experience transformation through the launch of the mobile application for enhanced accessibility. With an aim to service customers even better, the company reaches out to them through its call centre. A welcome call is made to all our health and private car customers, where product features and the claim procedure are explained for the customer’s complete understanding. We also measure satisfaction of our customers on the claims experience through a tele-survey every month and arrive at our net promoter score (NPS), which is a widely accepted measure for customer satisfaction.
The key ingredient—in the mix of customer satisfaction—is to maintain a robust claim settlement mechanism and ensuring timely & hassle-free processing of claims. We built the claim settlement process in-house ensuring uniformity in consumer experience. ICICI Lombard has given this process utmost importance. The company, through its mobile application, has now made the process of intimating and tracking a claim much easier. We have further differentiated ourselves through our Android-based tablet application which has improved the efficiency and productivity of surveys for motor claims. The application’s feature of real-time upload of vehicle’s photo, along with the surveyor’s observation into the system, has helped the company send real-time claim status to the customer. Thus, the company keeps taking several key initiatives towards service excellence and customer satisfaction from time to time.