We'll focus on retail: ICICI Lombard CMD

ICICI Lombard, the country's largest private sector general insurance company, is no longer offering steep discounts to acquire business.

More than the scale of business, it is focusing on the quality of risk it underwrites. In his first interview since taking over as ICICI Lombard managing director and CEO, Bhargav Dasgupta tells Shilpy Sinha that during the first quarter of 2009-10, the company has seen an increase in profit, while most other players are bleeding. Excerpts:

During the first quarter, non-life private insurers recorded growth of 1.21 per cent in premium income, while ICICI Lombard's business has shrunk 21 per cent. Are you deliberately going slow?

It's a conscious decision that we have taken. The post-detariffing scenario as well as the economic slowdown has led to an unreasonably soft-pricing situation. If you have to look at the group health businesses, the pricing is not sustainable.

The market size has not grown significantly because of the economic environment.

Pricing has been very aggressive in the first quarter and the discounts are as steep as last year. In certain segments, such as the group health insurance business, companies are making losses. This is a pure risk business.

We are focusing on segments where we see pricing is adequate. The approach is more balanced. We have consciously not underwritten certain businesses. Our profit has increased in the quarter as we benefited from investment.

What are your focus areas?

We will continue to focus on our retail segment, especially health. Within corporate business, there are segments that are profitable. 

There are other retail segments like motor. We have been picking up segments that we believe are right priced. Health and motor are one-third each of the business.

The corporate sector is complaining about insurers cancelling group health policies in the middle of the year.

Whenever the situation looks like it is not working, the insurer goes out and has a discussion with the corporate. It is not a one-sided decision that happens. If you look at the loss ratio of the industry in group health, the losses would not be at this level.

Health is one of the focus areas for all insurers. Are you worried over the entry of standalone health insurers?

Health is under penetrated and there is space for everyone to come and participate. The focus has to be on expanding the market together rather than worry about competition at this point in time.

How does the entry of new players such as SBI General affect you?

This is one industry where penetration has not increased. We are still less than 1 per cent at 0.6 per cent of GDP. We still have not built as much retail distribution as is required to increase the penetration level. There are segments such retail health insurance where there is a huge opportunity. Our focus will be on delivering product innovation.

When a set of new companies come in, typically they help expand the market. We will continue to leverage our distribution well and look at increasing penetration to the next level such as in the rural markets. We are working with the government in the rural market. To me, the opportunity is huge.

You have been losing market share for some time. Doesn't it bother you?

We are much more focused on our underwriting policies. These competencies will help us in the future. We do not mind losing market share when we are doing it as a conscious decision. Our focus remains on profitable growth.

How do you look at FY10?

Overall top line growth will be muted. Pricing at this point looks soft, but towards the end of 2009-10 it will show some improvement. Companies seem to be much more focused on writing the right business and in the long term it will help the industry. Last year was a tough one on the investment side.

This year, it should be better. We will see growth coming back in the second half of the year because under penetration in the segment (general insurance) is still an issue. In the first quarter, the industry grew by 5 per cent, but it is difficult to predict how fast it will rebound.

Our strategy will remain consistent and our growth will be a derivative of the strategy rather than the strategy driving growth.

What are your expansion plans?

Over the last two years, we have significantly added to the distribution footprint of the company. Our focus is on utilising our assets better. When you look at expansion, one needs retail expansion. We will continue to expand our distribution based on our business model.

Image: ICICI Lombard CMD Bhargav Dasgupta