Analyst Corner: New motor insurance policy positive for ICICI Lombard

By: |
New Delhi | Published: September 1, 2018 12:45:02 AM

We hosted the management of ICICI Lombard to understand the impact of the long-term motor third-party (TP) policy on the insurance sector. Gopal Balachandran (CFO), Sanjay Datta (chief - Underwriting & Claims) and Sarvesh Agarwal – (VP Finance) participated in the call.

New motor insurance policy positive for ICICI Lombard

We hosted the management of ICICI Lombard to understand the impact of the long-term motor third-party (TP) policy on the insurance sector. Gopal Balachandran (CFO), Sanjay Datta (chief – Underwriting & Claims) and Sarvesh Agarwal – (VP Finance) participated in the call.

Significant positive development in terms of increasing persistency, which will help in reducing loss ratios and increase float income. Float income is expected to be ROE accretive. The full impact will be visible only from next year (FY20E). Revised commission rates for long-term 2W own damage (OD) part — 22.5% (1st year), 13% (2nd & 3rd year) and 6.5% (5th year). It’s nil on motor TP portion.

Revised commission rates for long-term private cars (PC) OD part — 19.5% (1st year), 13% (2nd year) and 6.5% (3rd year). It’s nil on motor TP portion. Any benefit on the back of lower commissions will be part of product design.

Motor mix for ILOM is skewed towards more profitable segments, having a motor premium mix of 50% from PC, 33-34% from 2W and balance from CVs v/s industry mix of 40%-PC, 40%-2W and 20%-CVs.

Motor TP forms 18% of the overall mix for ILOM v/s industry average of ~20%. Current renewal rate is 55-60% in PC in the 2nd year, which will now get into the ambit of insurance coverage.

Already having experience of 3 year- 2W product (launched in 2016) – forming 15-20% of 2W sales. They believe that claims experience has been better in the longer term policies.

Majority of the sales in 2W happens in 75-150cc capacity where rates have been revised by 4.6x. In PC, it happens in 1,000-1,500cc where rates have been revised by 3.3x. Claims inflation has been in-built in pricing.

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