‘Urgent need to standardise hospital rates’

The lockdown has severely impacted business for non-life insurers and the near future looks bleak with Covid-19 claims rising, albeit at a slow pace, and non-covid claims expected to rise once normalcy returns. BHARGAVA DASGUPTA, managing director & chief executive officer at ICICI Lombard, speaks to Subrata Panda and Shreepad S Aute on a range of issues, including the rise in average claims size, and the firm’s strategy of shying away from the crop insurance segment. Edited excerpts:

What is ICICI Lombard’s strategy, given that business has taken a hit in the past couple of months?

Since there has been a lockdown, business was expected to be hit, and it has. It was on expected lines. The focus for us was largely on using our digital capabilities to ensure that our sales force and distributors could renew policies and reach out to customers. April is important, and a lot of small and medium enterprises (SMES) take policies then. Thanks to our digital capabilities, we could get 89 per cent of those policies digitally. The third thing we focused on was using the time to train agents and distributors in using these tools.

Which segments were heavily impacted due to the lockdown?

We saw the industry contract, we as a company also contracted. However, our contraction was lower than the industry. Further, the B2B (businessto-business) segment, mainly comprising of corporates and enterprises, was protected. In the health segment, we have seen inquiries rise. In fact, we have seen some growth in the health indemnity segment. The contraction

has mainly come from the motor insurance segment. We also witnessed contraction in policies we write as an attachment to loans with non-banking finance companies (NBFCS), housing finance companies (HFCS) and bancassurance partners.

Will non-covid claims see an exponential rise once things normalise?

We sense that there will be a surge. Some medical management cases have gone down, and we feel that they will stay low. Having said that, we are seeing claims inflation. For the same treatment, we are experiencing that the average claims size is increasing probably because of consumables. Also, there is pressure on hospitals to increase treatment costs. So, that might have some impact.

What is your take on standardisation of rates for hospitals?

There is an urgent need to standardise rates at hospitals, and it could be based on daily costs or depending on the different facilities used. The reason we need that is because it will smoothen the process for customers as there won’t be any dispute with hospitals. Also, we have to protect the sum insured of the policyholders. We have seen hospitals charging about ~10 lakh for Covid-19 treatment. Policyholders are using their entire sum insured for one treatment. There should be an agreement on a fair price that satisfies buyers and providers.

The motor segment has been under stress for some time now. What is your assessment?

In April, new vehicle sales were virtually zero, so the segment has contracted by almost 50 per cent and renewals are not happening on time. There is a view that once things open, people will prefer personal vehicles over public transport. If this happens, there is a possibility of a rise in demand for twowheelers, and smaller private cars. Also, the government might come up with initiatives for the industry to spur demand. If that happens, our motor portfolio will also do well. However, the outlook for commercial vehicles seems to be more muted, and that is where a vehicle scrappage policy will come in handy.

How can non-life insurers improve their underwriting returns?

Underwriting is of critical importance for the long-term health of the non-life industry, because unless you make reasonable underwriting returns, the quality of service gets impacted.

“THE OUTLOOK FOR COMMERCIAL VEHICLES SEEMS TO BE MORE MUTED NOW, AND THAT IS WHERE A VEHICLE SCRAPPAGE POLICY WILL COME IN HANDY“