The Hindu Business Line : ICICI Lombard keen to take insurance to the masses

ICICI Lombard General Insurance Company is examining ways to distribute low cost policies to the masses, according to Mr Sandeep Bakhshi, Managing Director and CEO.

Mr Bakhshi says the company might even consider setting up independent companies for its various lines of business.

ICICI Lombard is a joint venture between ICICI Bank Ltd and Fairfax Financial Holdings, US.The company's business portfolio is divided between fire and engineering (25 per cent), motor (20 per cent), health (12-15 per cent) and personal accident insurance (10 per cent).

Excerpts from an interview:

Do you think health insurance is a viable business, given that many companies report losses?

In the case of health insurance, there should be complete transparency between the customer and the insurance company. The clause of not covering `pre-existing illness' is a big issue and there should be defined norms regarding this. In terms of losses, due to cross-subsidisation of group health insurance policy with lucrative covers like fire insurance, it should be understood that retail should not be penalised for the performance of wholesale products.

We plan to introduce a product that covers pre-existing illness by early next financial year. We are still figuring out the contouring of this product.

Would you consider setting up stand-alone companies for different lines of business?

The requirements and the dynamics of our various lines of business are different. We have created specialised pockets and verticals for different lines of business.

If we have the critical mass and the regulation permits we would consider having independent business or companies. ICICI Lombard could then be the company that manages risk and capital requirements of the overall entity.

What do you think about the new micro-insurance regulations that allow cross selling between life and non-life companies and give more powers to agents?

The new regulations with respect to micro-insurance are extremely progressive and understand the dynamics of distribution. This represents an opportunity for insurance companies to fan out in the market. Even with increasing agent commission to 20 per cent it will be a big challenge since the size of the policies is smaller and hence the agent earns very little. Additionally, in the case of micro-insurance, one has to also sell the concept of insurance. Our rural business at 7.5-10 per cent is above the mandatory five per cent. With respect to rural business, we are trying to have the right alliances, distribution and the right product with risk profiling. We are trying to create customer confidence.

What are the challenges that still lie ahead in terms of micro-insurance?

One of the biggest challenges in micro-insurance is distribution.

If the cost of the policy is Rs 300-400, the cost of distribution in rural areas would work out to Rs 600. There is a need for awareness. Besides, it is not just about distribution, one also has to be able to serve the claim.

How are your programmes to provide health insurance, personal accident covers in Assam and Jammu & Kashmir doing?

In the case of covers designed for State governments, our loss has been more than 100 per cent.

We are operating on wafer-thin margins but this is an investment that we are making for the long term. We have made losses because we have had to set up infrastructure in these areas.

We even went in for pricing that is below the actuarial estimates because in such covers we have the advantage of the law of large numbers and in addition there is no anti-selection.

By pricing it lower, we have tried to interpret the policy conditions in favour of the customer.

What do you think of insurance as part of the risk management practices of corporates?

In the past five years, corporates have been sprucing their risk management practices and insurance is an integral part of this. Insurance is now occupying the mind share of CEOs and CFOs.

General insurance companies have been seeing good growth rates. What do you see in the future?

Until 2007, private insurance companies will see growth rates of about 15 per cent. Companies will eventually set up laboratories to study corporate, health, householders and rural retail - these are the four core products that will drive growth in the general insurance business.

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