With the merger of Bharti AXA’s non-life business complete, ICICI Lombard General Insurance is excited about the business opportunities it has brought. In an interview with BusinessLine, Bhargav Dasgupta, Managing Director and CEO, ICICI Lombard outlines plans for the company post the second wave of the pandemic. Excerpts:
What is the strategy for the second half of the fiscal, especially with the merger of Bharti AXA’s non-life business?
We remain optimistic. For us the focus was in terms of getting the integration done. We got the approval and we had three working days to make it effective. It has gone smoothly. We are now working as a team. The reorganisation also has happened. Apart from that, there are a lot of business opportunities that we remain confident about. We believe health will be a big opportunity, we think motor will come back, and our corporate lines are doing well.
What’s the roadmap going forward post the Bharti AXA transaction?
Bharti AXA’s non-life business is around 20 per cent of our size as a company. As part of the transaction, we diluted about 7.3 per cent of our company. There are two things that we are looking at in terms of business, apart from people integration. One is the operational synergies. Over the last 12 months since we announced the deal, we’ve done a lot of preparatory work. Next three-to-six months we want to implement some of those things. The second is the revenue synergy and that is visible in terms of our quarterly numbers. We believe there is an even bigger opportunity with their distributors to give them new products. Some of these partners can sell more products in more markets. There is a scope for growth.
Are you re-entering the crop insurance segment?
We are already back in crop insurance because Bharti AXA was writing crop insurance. We will have the crop business, but as a percentage of our overall business, it may be relatively low. For the whole year, it will be about five per cent of our business. We want to stay invested and see how it goes for a couple of years before we take a decision on it.
We had a concern in crop insurance at two levels — one the reinsurance terms became very unfavourable. The underwriting aggression was also a bit high. And some of the challenges were in terms of the ground level implementation of the scheme on the crop cutting. Now, improvements has happened on all of these, so we’ll have to observe it.
As an industry, we are paying 18 per cent GST for health insurance, which is extremely high compared to global standards. The GST rate could be reduced to 5 or 12 per cent Bhargav Dasgupta MD and CEO ICICI Lombard
Motor segment continues to be very weak right now. Is that a concern?
There is an interesting dichotomy in motor, which has three components – private car, two-wheeler and commercial vehicles. In private cars, there is demand but there are supply-side constraints in terms of chip shortage.
On the two-wheeler, there is no supply-side issue but there seems to be a demand constraint at this point in time. It’s very unusual. We are hopeful that this festival season, the two-wheeler demand will pick up.
Motor third-party insurance rates have not increased. Is that another concern?
That is of course a concern because typically, the regulator would look at the actuarial data and give a price increase every year. It had issued an exposure draft in February-March of 2020, which had talked about a price increase about 7-8 per cent on a portfolio basis. That did not take place because of the pandemic-induced lockdown. This year, again, we had the second wave, so there was no price increase. In the meantime, there have been some judgments from the Supreme Court, which has increased the cost of claims. It’s an area of concern. We as an industry, need a price increase.
Any wish list for the Budget?
One wish list is for the budget, the other is for the GST Council. As an industry, we are paying 18 per cent GST for health insurance, which is extremely high compared to global standards. The GST rate could be reduced to 5 or 12 per cent. It’s been reduced to 12 per cent for commercial motor policy. Something similar on the health will be one ask that the industry has had for a long time. And a linked issue is the input credit for corporates as when they buy health insurance, they also don’t get that benefit.
On the Budget, we respect the fact that there are a lot of fiscal constraints and that the Finance Minister wants to streamline the personal benefits. But within the benefit pool that is there, if there could be some increase for health insurance and something for home insurance, in terms of tax breaks. It won’t be very expensive for the exchequer, but it will be a good nudge for people to buy insurance.