‘Detariffing will increase insurance penetration’

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: ICICI Lombard General Insurance has consistently maintained a profitable record for the last few years. Apart from becoming the numero uno private sector general insurance company, the insurer, in terms of the annual premium figure, has moved closer to some of the state-owned general insurers which have a track record running into three decades and more. Sandeep Bakhshi, CEO & MD, ICICI Lombard, speaks to FE’s Sitanshu Swain, outlining his strategies to grow further. Excerpts:

What are the broad changes in the general insurance market post-detariffing? Has it been healthy?

The initial response to detariffing has been positive. It is the responsibility of insurers to take a robust approach to underwriting with pricing of covers aligned to the risk exposure. We have seen rationalisation of pricing in fire and engineering insurance with corporate customers re-evaluating their portfolios to optimise risk coverage. As the market stabilises, we will see a distinct positioning emerging for insurance companies based on their strategic response to detariffing. One of the outcomes of detariffing has been the formation of an industry pool for third party liability for commercial vehicles which will streamline the claims process and benefit the industry and customers.

To retain customers in a competitive scenario, insurers will focus on customer service and product innovation as key differentiators. The increase in width and depth of insurance penetration will trigger the spread of customer service networks along with standardisation of processes to ensure quality and uniform service delivery over a wider geography. There will be an increase in the use of virtual channels to reach out to and service customers in order to reduce operational costs and pass on these benefits to the end customer. At the industry level, detariffing will eventually result in an increase in insurance penetration, enhancement of risk assessment skills, product innovation, improvement in customer service and an increase in operational efficiencies. Customers will have a wider choice with better risk covers and will also see merit in maintaining a quality profile for a positive risk rating.

Which segment has seen a price realignment?

Prices are now aligned to risk and have seen a downward shift vis-à-vis tariff rates in fire and engineering. Flexible pricing has reduced cross-subsidisation and group health insurance premiums are more aligned to the claims history. Risk-based pricing of motor insurance has begun and insurers will continually refine their rating engines based on ongoing claims experience.