ICICI Lombard General Insurance Company Limited (ICICIGI) Earnings Call Transcript & Summary

I'll make an exception this time. But actually let me meet on our group meeting.

Q and A works right. Just want to regulator [indiscernible] which is sort of a very positive progress for us. I mean, so we will wait for regulator, I mean, now we are clear that we would want to take the other option where we will take it beyond 50%-plus and not have to sort of to comply with the other regulation that we've bluffed to growth has to go down to 30%.

Yes.

And usually, this whole regulatory thing [indiscernible] so hardly it will so...

It will take its time. Regulators are regulators. So therefore, obviously, only thing is I think at least for the last few months, I think that's what we have been saying. And I'm sure you would have also heard it from the bank in terms of they being open to exploring all options.

Right, right, right.

Hence, to that extent, I think that's what the Board of the bank has decided. And as to that extent, we'll wait for the -- whatever time period it takes for the regulatory clearance.

Okay. And we have, in the press release, mentioned, price so I mean, is price also a threshold at which it will do it or how do...

Those are things that we will kind of come across, I think. As of now, I think the intent is very clean settled out. How, when, which way, I think, it's a matter of time. So we'll come across that as we go along. But actually it is very clearly indicated that before the deadline of September 24 is when they would -- we want to get this executed. So the time certainty is pretty much there. And now beyond that, I think we'll have to wait and see for subsequent developments on this. First is the regulatory clearance.

The regulated clearance on this?

Yes.

And as mentioned, the maximum time it is, is the [indiscernible] pipeline you have...

So at least the 200% is what they have clearly indicated to kind of get it done by September 24. Intent is very clearly. They have put up 4% [indiscernible] kind of acquire. For that, obviously, they will be [indiscernible]. But 200%, they've very clearly indicated it will happen before September 24.

So continues towards question. I think earlier, we had this space that our bank was not so much in the cross-selling. And they -- even that I can show them such on their feedback along with general insurance. Do you see that changing after a such as a...

Honestly for us, irrespective of the shareholding proportion for -- given the nature of the business that we are in, you always had to have a multichannel approach because your customer touch points are at different places. So hence, to that extent, you had to be always a multi-distribution company. If you look at the irrespective, again, shareholding, what has been, the bank contribution to the overall gross premiums for ICICI loans, but it is generally in a range between 5%, 10%. 5% which could be slightly different from maybe the life form, maybe the numbers could be, I don't have the exact numbers, but I believe the number is relatively higher in the historical past. But for us, it is always range between 5% to 7%. What you are referring to is possibly a decision of the bank to [indiscernible] back on where they had said on retail benefit, which was one of the -- just a benefit offering, which is what the bank was distributing through their mortgage loan customers, that they decided to kind of the possibilities continue. But the good news is it has got substituted with health indemnity, which is what the bank is currently distributing for us. The only difference is health benefit of a slightly high margin business because while it contributed roughly about 5% to 6% of revenues at that point of time. In terms of profit margins, it contributed to almost about 8% to 10%, which is why margins are relatively rich. But the good news, again, when you look at it in the current context, the fact that it has been substituted with retail indemnity. So hence, to that extent, if you look at my current ICICI Bank's contribution to ICICI Lombard, it is pretty much in the same range of 5% to 7% in terms of revenues. Margins definitely had got impacted, but it has been largely compensated by the increase in volumes. So hence, to that extent, I would not say just because they are holding 52 in the past or 48, in the last, let's say, couple of years, ICICI Lombard -- ICICI bank has always distributed ICICI Lombard products in terms of distribution...

From other -- from and benefit of indemnity. That shift is not a function of...

[indiscernible] It's primarily to do with -- I mean, the whole thought process of the bank was a customer should end up getting a claim whenever and when it happens. Now in the case of a health benefit offering, it kind of -- it doesn't say pay for every claim. It pays for a name list of critical illnesses, so to the lung failure, they were -- liver failure et cetera, renal failure etc. etc. So which means maybe a list of let's say 35 illnesses is what it kind of pays for. If as a customer, you unfortunately get deducted in the 36th critical illness, as per my policy terms and additions I will not pay that claim, which the bank did not want, whereas an indemnity offering pays for any hospitalization expenses. So any hospitalization, the policy will pay for it. [indiscernible] for fraud. Fraud, mean, I will not pay even if it's a benefit or even if it is let's say an indemnity. That's the thought process. It's why the bank decided to kind of discontinue health benefit and rather substitute the health indemnity distribution.

Basically, thought process and ICICI Bank of late has been customer centricity. So if we sort of drop panels for both the insurance subsidiaries, Life and GI, there is not too much of sort of issues for say from product perspective, I mean, a few cases you mentioned here. But maybe it is a little bit of a detailed issue at life insurance subsidiary, there are certain products, which are traditional in nature and may not be right from a customer perspective. But at GI itself, I don't think there is any much, too much or sort of any products where you are -- which are not good for customers, but -- and that's why there is the case.

Which is why I said I think it's important for you to have a multi-distribution approach, right, because auto insurance, for example, by far attaches at different customer touch points. And you have to have a presence at those touch points as compared to just only bank contribute, will be very, very, very small proportion.

Sure.

And when I say bank, all of our bank distribution types go together. So hence, you need to have the access for that particular product and those touch points. Health indemnity, while it's also sold through the financial institutions. Predominantly it also gets sourced through agency type distribution. So hence, you have to have an agent distribution. Some of the corporate relationships, which is typically the business that I do want to be on B2B basis. There are -- significantly to work on our B2B types, I mean, in terms of our relationships with corporates. So hence, direct relationships matter a lot. Maybe in some accounts, the bank will facilitate an access to those corporates. Wherever, let's say, they are also part of the lending, then of course, there could be some access that we may be getting into as a part of that. But otherwise, it is predominantly our direct relationship where we work with corporates. So hence, it kind of works slightly differently. And maybe, we're well to inform customers we possibly say that no, I don't want any intermediation. I may be willing to, let's say, get the policies either through my IL Take Care app or maybe, let's say, directly coming on to the website and buying a product offering. And there be able to create a capability, but by which you were able to do that. So hence, maybe a slightly different nuance than maybe the life, our sister company. But for us, as I said, even otherwise, it was roughly contributing to about 5% to 7% of our annual revenues.

And you've got not overly relying into. It was not a big composition...

They were a very important distribution partner for us. But the question for us was to make sure that we are present in the other distribution touch points where typically the customers were getting sourced. It's not to say that the bank was not an important distribution partner. Of course they're a very important distribution partner for us.

No, but they were direct contributing anything which is like disproportionate. My point is that, I mean...

You're contributing 8% to 10% margins on health benefit as an a segment. So for the segment, which was viable for the distribution channel, they were contributing meaningfully is the way I would kind of put it.

So the auto business in the [indiscernible] Is competition remains still in play...?

Competition goes to say it is, you have to be patient. That exactly on...

So they [indiscernible] in this cycle.

I think what you have been hearing us, I think, some of you are hearing us very closely. If you remember, we had affected a price division towards early quarter 4 of a single-digit price change on motor. And that's something we are, as we speak, in the current quarter already seeing some of those being exhibited by other players in the market as well. And there is public information, right? You look at month-on-month in terms of how each of the companies are behaving in terms of growth numbers. You can clearly see over the last, particularly last, I would say, 6 to 9 months, not many companies whether small-size players particularly, even the midsized ones, they are all starting to get reasonable in terms of their growth numbers. In the market, we see maybe a couple of large multiline players who are still very aggressive. Again, you can look at the -- which companies based on public data. That's available every month. There are a couple of companies who are still very aggressive. But there, again, at least what we get to hear, we mean, current month feedback is even those companies are starting to get reasonable. So hopefully, that should also kind of, yes. And so far as we are concerned, I think as what we have communicated, we are continuing to stay invested on creating that distribution reach, investing a lot more on managing the overall cost of claims in motor specialty. And then obviously, kind of looking at waste and aims to create efficiencies for customers in terms of investing in technology capability. So we're doing all of that. We do, obviously, suddenly, things will not reflect in the month's type, right? And finally, of course, the last point which we again, which we had spoken in the large earnings call is the whole guideline on [ expense ] management. So now that will start to play off. I mean, why there is a life part of 3 years given to those companies which are in excellence of the threshold. The regulator is definitely going to push those companies in the very first year. Will that happen in the first month? I am not very sure of it. But definitely, it is likely to pay through the rest of the year. So there are clearly factors which are indicative of things starting to get reasonable. And we are rightly placed to capture this opportunity for growth, which is why, why last 2 years, we have exceeded market growth. This year, we would want to stay, of course, to grow it right in the market, it for good.

And with this, based on this business model, I mean, with this approach, your combined ratios are probably as much or be like at the breakeven level.

The combined ratio is a function of multiple things, right. So I think I can talk at a company level because it's always an element of allocation that happens between different segments of ICICI. So directionally combined is what we have indicated. We are at 104th, roughly thereabout as we speak. Next 2 years, we will certainly getting down to 102. So some of these changes is logically facilitated. There is a market coming back in terms of some bit of sanity. In terms of our investments on retail health, early signs seems to kind of be very, very positive, in line with what we had kind of spoken about. We need to obviously sustain that through the rest of the year as well. And it will be a continuing investment. It was not just a one-off investment that we spoke of [ FY 2022 ]. So that selection, that seems to be doing very well for us. And three, even the commercial lines, which spans across the multiple segments of businesses. They're doing very well for us. So all of which should kind of aid us to get down that combined from 104 to 102.

The industry combined ratio for motor specifically...

So if you see that is public disclosure available until quarter 3. I mean, first half as what we have put out in the April earnings call was about 124. Quarter 3 number was 118 for the industry. Now that number I'm not able to give you for Q4 because some players have still not declared numbers for March '23. Once it gets declared actual, it's public information. But our sense is, but just to kind of, but our sense is, as I said, because we are already seeing signs of players getting reasonable on revenue growth. In all fairness, the number should kind of slightly come off or maybe stay in that similar levels.

Why is that the case in your claim like why are those players will aggressive over last 2 years, suddenly they now...

It starting to hurt them, right? I mean 2, 3 factors. One, 124 combined for motor in our 23 years of existence, we have not seen it. So that's significantly at elevated levels. So therefore, you cannot kind of continue to bleed and it is how that capital is really flowing for any player in the market, at least on the private side. And thankfully, in the last, I would say, 6 to 9 months, not just in insurance, across sectors, all those frenzy valuations on price to sales have come back to the reality check. So hence, to that extent, that again, makes a lot of sense. Finally, even if you look at for some of the players, while, I mean you go and do channel checks, you will find a lot of companies on the block. It will be possible that some companies may not be doing the deal because of possible valuation mismatch between expectations and reality of what they are likely to get a bid for. Or even in those cases where, let's say, a transaction would not have happened, you would have seen, again, there is a change in shareholding. Or the question whenever a new shareholding changes happen, roughly, you want to wait for about 4, 5 years before you can kind of figure out what is the intent in terms of how they want to write the businesses. So all of this are happening. So it's not that we capitalist really flowing. So therefore, companies are compared to look at [indiscernible] crazy, frenzy valuations or price to sales, hopefully, is kind of behind us. Already, we are seeing signs of change in shareholding getting exhibited by at least again some other companies. We will wait and see how things play out for them. And directionally, regulatory is significantly focusing on a lot more on outcome basis of provision, which is combined ratio, solvency, reserving positions of companies, and maybe grievances of policyholders. So they are putting a lot more emphasis on some of these aspects, which again means companies have to get far more reasonable in terms of their -- the way they have kind of operated so far.

So despite of the bandwidth like big groups or something like that, are still they're facing an issue of capital?

Just look at how many players can really -- why do you think otherwise, there should be changed in shareholding. If they are so, like they are coming to, of course, if someone is coming with a deep capital bond model, you can't do anything to that. But we don't think that's the case at least for most of the private franchises which are operating the business.

Are we looking into inorganic opportunities?

There are always inorganic opportunities and that's stated in our DRHP report. But the question is, will we be looking at any of the small-sized companies? Answer is no. Because, and of the day that doesn't [indiscernible]. Not to say that the #2, #3 and #4 in the private space are available for, let's say, a transaction. But smaller size will definitely not make any sense to us. Because it may not really give what we would -- I mean, there's no value that we will end up. This is a little bit clear valuation mismatch between our expectation and what the companies...

Having the cultural business...?

Those are factors that we -- in which ways we look at, right? And when we did the transaction with Bharti AXA those were also factors beyond financial numbers. We also look at exactly to a point on employee culture. We look at governance mechanisms that those players have which executed. We also look at how good or bad, let's say, some of the reserving oversight has been given that in our GI company's balance sheet, a large proportion is claim activities. It's a very, very important event to kind of look at. And in general, what are their accounting practices in terms of what they have followed? So those are things that we kind of largely look at besides financial metrics.

On the health side, can you elaborate a bit more on -- I mean, you have spent a lot, which you had elaborated, are these -- those kind of milestones. From there, how do you -- from here, how do you compare how you...

So the [indiscernible] opportunity is still the same, which is to kind of sustain us growing faster than not just the industry but foster in the stand-alone companies. Size. So that's a stated objective. Now what can change? Again, if you look at the choices from the regulatory standpoint, the regulator is significantly embarking on open architecture across areas, right, which is why they've opened up pretty much everything. One area where there is market discussion is even on individual agency where currently and individual agent is supposed to be tied up with an insurance company, with one life, one general, and one standalone agency. But there is a proposal also to possibly look at expanding that as well. But that as we know it's an Insurance Act change. So but already there are discussions on possibly that to happen, not happen, we will get to know. Either it could get placed in the of the Monsoon Session of the parliament, or if not, then after elections. But the directional trend that the regulator is taking is to significantly open that up. If that gets opened up, that's a really, really positive because in huge ways, we have been looking at expanding distribution on agency. And this will kind of further aid our growth opportunity that we've estimated. Thirdly, on the use of IL Take Care app, which is the app that we've executed about 3 years back, of all doing pilots with employees of corporates, that's doing very well for us, not only in the context of corporate, but even on the retail side as well, on both fronts, right, both fronts. One, it is not only adding in health sourcing and health servicing of claims. But equally, it is also acting at a very, very important tool on cross-sell revenues, which is why if you see last -- I mean, almost the last 3 quarters, every quarter, the market have been asking us. What has been the incremental cross-sell revenues are you -- the revenues out of the use of the app? So again, we are seeing a lot more acceptance on the app, which is what we are very, very excited about. And then the opportunity through the app was also to significantly capture the OPD space, which is out-of-pocket spend, which was not getting covered in a meaningful form in the past. So hence, to that extent, it presents a great set of opportunity for us to significantly increase market penetration on growing the health indemnity book. The large base is the whole thought process for us on the health side also is this is more a hypothesis. We will have to wait and see how it plays out. On corporate, if you recollect, what we have been talking through is to institute a lot of risk management measures, so that we are able to possibly minimize the number of leads. And it is what corporates like those advisories. And in the process, they have seen the benefit of maybe not even a claim happening. And hence, the longevity of the corporate with the insurance company tends to be much longer. The same thought process is what we're trying to do even on the health side, which is significantly push on preventative wellness and similar kind of things. Once this works well, logically in the future, hospitalization should reduce, which is again, better from the cost of claims management stack. So that's the other thing that we're significantly working on and pushing more of preventive and wellness. The last part that I would make is, I think what we're also seeing is, in general, the awareness of health insurance is a significantly kind of [indiscernible] whether it is in terms of new customers coming on board or whether it is in terms of increasing coverage and so on and so forth, even that is kind of aid in growth for us. The other point which we are pushing significantly is, India is possibly one of the very few countries where whether it is a motor or health, customer or maybe the insurance company, there is a large percent to be aware that exactly. Because even when a motor accident happens, logically, the customer takes a vehicle to the garage first, instead of take it to the insurance company. If they actually inform the insurance company, I can control the claim process far better. And I can divert that particular vehicle to a different -- or maybe a preferred network of garages that we have control over. And then I can guarantee both quality of repair as well as the cost of claims, we have seen is definitely far lower. Same thing on health. Nothing wrong, again, about the customer. The customer immediately ends up going to the hospital that he or she is familiar with. There again, we're trying to see if unless and until it's a medical emergency, in which is, of course, that has to be the first code of call. But otherwise, you can actually end up diverting those claims to a preferred network of hospitals, in which, again, you can manage the overall cost of claim because health or the industry inherently subject with a lot of fraud or overbilling, whichever you kind of look at it. So the moment we are able to have control over a list, name list of service providers or hospitals in this case. We are able to do a much better job, both in terms of exhibiting a better quality of care to that patient or the customer concern, and in the process again we're able to manage the average cost of claims. Why is it important? Because claim inflation is a reality. So therefore, you have to work on it. So it's on all parameters. So working on product, we're working on distribution, we're equally looking at trying to manage claims.

In terms of distribution, how many units...?

We will have roughly about 15,000 to 16,000 agents.

15,000 to 16,000. Okay. But that's really far out from what the [indiscernible]

[indiscernible] have got the regulatory advantage as we -- which is what could change. So there are 2 things. One is this change of individual of we did agency distribution pretty open up available. The second is, if you remember, we had also talked about a slightly nuanced guideline that had gained with the point of sale persons, POSPs. POSPs, only thing has got certain some limitations. USPs are there for both motors as well as for health. But there are limits up to which again [ force ] policies there from. In the case of motors, the limit is at INR 50 lakhs. In the case of health, it is INR 5 lakhs. So motor, INR 50 lakhs is pretty okay because pretty much every vehicle segment will come within the limit of INR 50 lakhs. I mean, except for [indiscernible] side, the high-end vehicles, which are...

Up INR 50 lakhs and 90%, right...?

90% to 100% be will be [ lesser ] right? Whereas health at INR 5 lakhs, it's nothing. So hence, we are equally working with the regulator to try and see if we can have that limit enhanced on the current INR 500,000 to whatever it is. So which would be a great positive.

What is the average cover?

Between 5 to 10.

Between 5 to 10.

And we have seen that again go up in the last couple of years.

So back in this kind of agency in health. I think the bank have to -- the bank [indiscernible] will be...

So it will be a combination of all. I will also equally agree, which is what has happened in this case. The bank has started distributing, not just ICICI bank some of the other bank...

[indiscernible] ICICI bank...

Any financial institution. So therefore, that will also aid growth to us. But end of the day, if you look at the market, 90% is agency. So hence, you have to have a reasonable presence on the agency distribution. So hence, some of these changes should obviously kind of further accelerate what we are kind of looking at. And which is why even on the calls we have been saying this is not just a one-off investment that we announced in '21, '22 of adding 1,000 people. Last year, we added, even in this year, we are kind of looking at further additions to headcount. It's just that the process stays anywhere between 12 to 24 months before we are able to get employees onboarded and then the distributor is coming through and then they're starting to become productive and efficient, which is why early signs are aggregating. And as I said, we've to sustain it. I mean, this is just about, I would say 6 to 9 months of success, which the market obviously wanted to see. I think now we have been able to demonstrate that. The question is now we will kind of continue to, suppose, for example, you would have gained some market share. We were at 2.9, maybe would have been at about 3.1, more detailed, here is the limit, which is much, much lower than my company market share, which is 8.2%. So that's a relation that we have to put ours.

So it can help -- around health retail, what's the split between different channels.

Predominantly for us, it will be a mix between agency and bank partners on retail indemnity, almost in equal number...

Equal number?

Almost in equal, because bank has started to also distribute significantly on the health indemnity side. So we will have -- maybe slightly more on agency, I would say, 50-55 on agency, our 40-45 on various financial institution partnerships. And maybe a very, very small proportion of customers coming directly at buy policies on any side.

Through digital, I mean, third-party digital and all that...?

I mean out of those platforms.

Not any...

Which is same call that we have been maybe 13 years back, which is primarily to -- I mean, and most of the larger banks have done that. I'm sure when you see it, you can clearly see what they are completely pulled out or they have pulled out in some of the product lines at least, which is not to lend a brand to a platform which compares only on price. As we keep saying, insurance is not just an e-commerce sale. I mean, where you buy a product and that's say of it. I mean the real testimony is, let's say the claim service capability that we're able to exhibit. So hence, we really going to lend our brand to a platform, which only compares on price.

Now with the gap coming in on the amount that brand could have. I mean, the company, a manufacturer can spend to third party. So what's happening over a period of time [indiscernible] realizes that coming out with [indiscernible] related products.

Yes.

So do you think that gives you would consider it. Okay, that will not be pure price. It will be pricing plus some standardizing issue, pricing will be the...

So what we are, and your point is right. That's what exactly what we keep looking at. We keep looking at what is the relative overall comfort of that business that I go through the platform, viz a viz the same capability that I kind of current and create through icicilombard.com Today, we are finding that we are able to do a much better job for the long life cycle cost standpoint. So hence, and in terms of product innovations, today use and file allows us to do that. You don't have to really go to the regulatory approvals for our product/pricing changes. So any way which we have the flexibility to do that. We will also equally come out with, let's say, a new set of products. We already have a lineup of products, which, hopefully, in the next few months, we will kind of come out with. So hence, what is it that they bring to the table is something that we keep evaluating. At this point of time, plus their own platform could be addressed. Again, if you look at what the regulatory intent is to create a marketplace, if that marketplace have not come through. And again, maybe I strict to their model. We don't know. But the argument could be equally that penetration in India is so low. There is possibly room for players to exist. We will see, but my point is some of these models could be at risk. We started on health, could be at a risk, if the agency distribution opens up or if the POSP opens up. Some of these platform models could be addressed if the marketplace model that the regulator is looking at, if that gets -- not frenzy to become a reality, because if you look at the way the regulator is pushing this agenda or marketplace, very clear that they want to kind of come out with it as quickly as they can. Plus each of us have a stake in the platform, in the marketplace. So therefore, it is in our homegrown vested interest to kind of make it succeed.

I mean this is -- I mean, I have asked this question. It sounds we have clearly, there are issues, but their typical answer is it's a push from here. So marketplace will push it there. So that's, I don't know.

So that will be true with any distribution channel, right? Insurance, inherently, the good news is, the good news is even this room of the same set of equal like [ favored ] us, how many of you want health insurance pre-COVID? Nobody would have put their hands up, possibly. Today, if I ask you the same question, maybe at least I'll find to a head going on at least, if at all. So hence, the realization of the need to have been asked, I think that's, for our push to a deal possibly is happening in health insurance, right. Are we seeing that in motor? Maybe increasingly, yes. Why I say yes? Because in the past, my registration, vehicle registration record, which is a VAHAN database, and my insurance database, which was IIB, they were not talking to each other. So therefore, there was no way is for someone to figure out whether a vehicle that is registered does it continue to have an [indiscernible] or not. Today, when you look at -- if you're -- I don't know how many of you have downloaded mParivahan app. If you download the app and put your registration number, it will also tell you whether your insurance is existing or not. That is exactly what the [indiscernible]. And they try and figure out whether there is an existing insurance or not. And too smartly, they have steeply increased the extent of fines. And thanks to Indian roads, some vehicle, the other sub person loss. Now for the customer, it's a trade-off, whether should I pay out while on continue to pay out of my pocket without taking an insurance or is it far better out to take an insurance coverage. So hence, our sense is, I think, again, we are seeing discipline on players, what, again, customers wanting to take even all motor insurance, plus the change that Supreme Court made, which was in 2018, at least for 5 years, 2-wheeler was predominantly the bulk of the problem, right? When we say, half the rate which is without insurance. A large part of it is contributed by 2-wheeler insurance.

2 and 3, yes.

That has now to come 5 years, third party.

Yes.

The only question to look for, is your question is right, this will be the first year, then that 5 first -- first end and for 5 years ends. So it will be interesting to see what -- how many of the ranges. So that would be initial to look at. So hence, that directionally things seem to be kind of improving. Home insurance, hardly people take insurance for homes? But today, again, climate change, the fact that you see more than one condition of the event happening every year. In our minds, we think twice. Should I take a cover for my homes or not? Since hence there is growing realization for each of these insurances.

One last on health. It think, the government data, so that we want Suraksha or whatever other plan, if you whatever that was a small amount. But there are certain states have approved, Rajasthan has probably have significantly.

You're referring to Ayushman Bharat scheme?

Yes, Ayushman Bharat, sorry, and I think the Rajasthan has talked up significantly. Will you see that...

The main states to keep taking that goal, is like similar to crop insurance, where we are seeing crops states moving out of scheme. My sense is, I think the government on the health agenda is significantly wanting to push across to make sure that a large proportion of the population is covered through health insurance. I think unlike even a crop they would logically want more numbers of crops also getting covered as well. But obviously, the risk dynamics are very, very different. So hence states have taken those calls in and out. As of now, for ICICI Lombard, we have still not, we are very clear, we are not tracking any approvals, mass health programs. Because still we don't believe that the risk, reward in terms of the price that you get bid at vis-à-vis, let's say, the outcome of the claim side, it's not fitting our end part yet. So we are not tracking any of those.

Listen to composite insurance, any breaking update is...

Composite, I mean, update is, I mean, honestly, we would wait for the guidelines [indiscernible] But in all, it looks like it will go through it along with many other insurance act amendment changes.

In Monsoon Session.

Either in Monsoon [indiscernible] elections. It can be only between that I don't think -- otherwise, I don't think that the government will risk after Monsoon Session.

And then if composite goes in, then there is whole regulatory decision on [indiscernible] goes away because...

So honestly, if you ask me how we will you on composite, I mean, again, I'm sure all of you would have seen global example. Globally, also wherever a composite has worked, it has never been a case of, let's say, one single entity that has worked. It has always operated as 2 separate businesses because the capital requirements are very, very different, that where your accounts/recognize those businesses are fundamentally very different. And the outcome profiles are also very different. The only thing what would happen is because it could possibly come under a single level in terms of, I mean, one brand owning both the life and the general business. It could give some synergies to the cost side. I don't think it is such a big differentiation.

But the holding company success [indiscernible]...

Actually what I said, you can still have a holding company, having but life, but then you are running, it is 2 separate businesses, which is it what you're doing even today, you're running it. But rather, I think what we would as the whole noise comes around the fact that should all companies be allowed to manufacture products or not is the fundamental question. I think our view on this has been that if the larger objective is to deliver or let's say, improve penetration. Ideally, those companies should act as distributors of insurance products. We should continue to, let's say, manufacture these products. In the end, in the process, they make a margin and therefore, a fee. And for the customer, it is [ even ] situation because in which ways you are making available [ SMB ] product, which is to their advantage and making it available through the length and breath because of the distribution reads that each of these franchisees may have. And therefore, because it's a branch. But we'll wait and see how the guidelines evolve around. As of now, at a group level, we have not made upon, right.

Sure. Maybe some commercial [indiscernible], I mean, the latest changes in commercial lines from an underwriting perspective, I mean, how does that, I mean does that...?

Any positive for the longer-term perspective again...

Look, but from a shorter term business...

For the shorter term, yes, there is definitely a couple of impacts. Impacts could be positive or adverse. Now one is, of course, adverse, which is basically the -- I mean, as we've mentioned, the regulator has done away with the need to have a floor price as a part of the reinsurance contracts. I mean, 3 years back, we've over, as an industry, there was a floor price that was agreed upon between the reinsurers and primary companies, which the regulatory has say no longer in your reinsurance contracts can there be a floor price. But that way, it should be logically, I mean, cut down in price or reduction in rates. Now can it go down drastically? May not be so because unlike motor or health, commercial lines insurances are significantly higher on exposures. So therefore, you will not be able to significantly see a decline in the rates, consequent to this particular change. And that's the reason why you see for the month of April, obviously, we'll have to wait and see how the development plays out. For the month of April, the fire insurance business has seen a flattish growth because that has been a single-digit possible decline in rates consequent to this doing away of the floor price. The second impact is more a positive impact at aiding growth in fire, which is basically, again, consequent to various catastrophic losses. Reinsurers obviously have not been able to get the same return on their capital. And hence, they have been talking of all the catastrophic protection for which they charge the insurance companies. They have, once they have seen an increase in the range of 40% to 60%. That's for us. But for many players in the market, the rate of change or rate of increase could be higher because they have not been exhibiting a better portfolio outcome. So the -- hence the direction, that's a positive. Now how much of the change or increase in price you were able to hold on, on your rent or how much you're able to transfer, it could be a function of which companies risk-covered rate and their ability to transfer back to the customer. So which is very on balance, it's been a flattish growth that you are seeing for fire. But this is just April 1, which typically forms bulk of the corporate renewals. We will obviously wait for the rest of the year, but more importantly, on January 1 when typically companies which follow calendar year as a cycle of their insurance placements, will come up for renewal. So we'll wait and see. So those are 2 aspects which have already happened. One other change which the regulator has indicated, but for which the firm date has not yet been given is freeing up the terms and conditions. So today, pricing is free for everyone. Between various players, you can choose to price differentially. However, the contract will be a standard terms and conditions contract, which now the regulator is saying even that needs to be relaxed, which works brilliantly for companies which are having a better balance sheet strength, are able to negotiate a better deal with the reinsurer and able to exhibit far better terms with the corporate as compared to someone else, who may possibly be able to offer inferior terms. So again, longer term was very, very positive. In the short run, it could be slightly disruptive because not every corporate will understand why the terms and conditions are being proposed relative to the price. So hence, we have to be mindful of that.

So of rate, a little bit of a heavy lifting in terms of growth, which fire and the commercial lines have been...

Could be subdued.

Could be subdued.

Could be subdued. But for us, we will continue to upgrade market share. Primarily because, again, for the same reasons, you look at the solvency of many players in the market, I think they are further struggling in terms of their existence. And hence, in general, corporates will obviously want to place insurances with companies which are high on their net worth, and solvency combined, et cetera, et cetera. So hence to that action, we will -- our sense is we should continue to upgrade market share in the commercial export lending.

And you actually mentioned that in motor we would grow in line with the industry. So industry trends should be positive, I mean...

Last year, industry grew at 15 despite everything.

Then last year, we had...

[indiscernible] kind of significantly lower in terms of growth.

So this year, if the industry grows at maybe 10% to 12%, we will...

Our sense is as I said, we will want to maintain market growth. That's the expectation.

So in motor, I think in the last couple of years, what we have seen is -- I mean, as a -- historically, Lombard has been known for having a good distribution network and maybe a good connect with the distributors in terms of motor business. Has something changed there? Or maybe they're getting better commissions from other players? Or are we losing somewhere over there? Or what are we doing in order to regain...

Just at a macro level, we have not lose -- I mean, that's something distribution is very cool for us. And if you were to look at it in the context of, let's say, the acquisition that we did with Bharti AXA, where we also got access to some incremental OEMs. But more importantly, we had more number of dealership touch points with which we were able to kind of aggregate the 2 institutions together. But there, post integration, what we lost was funded about OEMs. We launched 8 to 10 contracts, that's it. So these are dealership contracts, which are nothing. So hence, we have been significantly able to hold on to the distribution strength that we have always had inherently as a company, even in the past and even as we kind of look forward. In terms of, is there any shift in terms of some of the players wanting to be an extra cost of distribution. The point that I made on expense management will actually going to facilitate that. The fact that many players in the market are operating in a threshold, which is more than the AUM limit. We'll have to kind of make them to start looking at their numbers far more recently. So hence to that extent...

So in other some which are...

So that is how the nature of the market has been. This is not the first time. Even if you slightly go back to straight 2008, there were about 17 players who entered in the market. And the first segment to go after is motor. And they obviously end up going there because they don't have any inner hand distinct strength. So therefore, they will obviously look at giving some incremental cost of distribution. And that's how a dealer decides to work with an insurance company. When you look at it dealer, private car dealer, for example, they will not work with more than 3, 4, insurance company at best because the size of dealerships will not facility them to work in 15 companies. So they will work with 3 or 4 players. How do they choose? They will choose one company like is ICICI Lombard focused on underwriting the selection, claim service, et cetera, et cetera. So then hence they will prefer one set of companies to give a large part of the risk. Second, they will exactly prefer a new entrant, who is willing to give them an extra cost of distribution. And in the -- they get some fringe market share. And that small player will get that whatever business. And the third, they will relatively possibly prefer a shadow company because the rest of these business also has to be given to someone. So hence, that, that's how they kind of select companies to work with. What we largely kind of work, spend time on is more in terms of how we can create better margins for them through claim servicing capability. And indirectly for us, dealership has been -- I mean, when we started off operations, every company starts with something. For us, dealership has been the core strength in building the motor distributions, and that continues to be so. In fact, the number of dealerships with whom we would have an access today relatively to, let's say, 2 years back or even 5 years back, that number is only gone. So we only increased the number of customers or let's say dealership touch points with whom we work with. I think we will -- where you're coming from possibly is increasingly, we're also trying to create a much more balanced mix between dealership agency and, let's say, what we can do through icicilombard.com it's very important to do that because there are certain businesses which is largely driven through agencies. There are certain businesses which are driven through, let's say, point of origin, which is dealership. And as I said, some informed customers could come to our own website. So we have to create capabilities amongst all the 3. Our proportion of business in the past, the dealership used to be [indiscernible] dealers, agency used to be nothing. And that used to be again a very, very small proportion. Today, that mix of dealership has come down to 80% 85% to maybe about 60%, 65%. Agency is roughly about 20%, 25%, and the rest is let's say 10% to 15% is something that comes to our all website and other alternative channels. But that does not mean that dealership is something not very attractive for us. Yes, as I said, we've actually increased the number of dealership experts [indiscernible]

So we are losing OEM pricing with them.

On private car, predominantly, the competition is on pricing, which is why the mix of private car has come down from 40-ish to be 54%, 55% plus up for motor revenues, down for leasing company. But we have been able to hold on or moving that, which has been in a direct state. We have slightly increased market share in commercial vehicles, given the experimentation that we talked about in the last 4 years. So distribution-wise, claim servicing-wise, technology-wise, we are rightfully which is what I'm saying. Last 2 years, I would have possibly let go market. Today, the way how things are playing out, we would want to grow in line with the market.

So on a profitability point of view versus the other agency or the distribution.

All the segments can be profitable. But the question is the business model is very different. For example, a new vehicle typically comes with a low loss ratio because the vehicle is new. Customer also is kind of trying to get ahead of the vehicle. And therefore, the loss ratios are better, whereas the cost of acquisition is slightly little bit. But on the agency side, because the vehicle is largely old because of the depreciated value, the yield or the premium kind of comes off. And hence, to that extent, the loss experience is slightly higher. So it comes with a high LR but relatively lower cost of distribution. And why are we trying to balance the mix the point that I made because a high LR, low expense model, but from an ROE perspective, is a far more effective model, because you are not spending out a large proportion as initial cost of distribution. Since it makes sense to look of the segment, which is slightly older in vehicle categories, since we are doing that. But to answer your point, the combined ratio or the profile would be very, very similar depending on what segment you are selecting.

Just to answer, now has given that we have had not [indiscernible] lose market share. So we want to now grow in line with the industry and lower the services, we have to sort of take do the trade open growth and content and...

So underwriting source approach to writing business is still the same, which is grow profitably. We are not, now we're saying that we will only push growth, that's very easy for us. If you ask me, in 6 months, I can double...

I think you mentioned in between, we would want to now...

We are seeing signs of the market changing. When the market changes, it's like correcting on price or being moderating on the cost of distribution. These 2 things happen. It kind of rightfully places us to capture market share. Unlike in the past, where let's say the market would have been very, very aggressive on price or very aggressive on the cost of distribution. I would have slightly moderated market share. Now there is no reason for me to continue to moderate market share in the market which is starting to see improvements on pricing and starting to see improvements also in the reduced cost of distribution. Therefore, the focus will be our service, where I will be able to exhibit a much better job relative to let's say some of the competition.

So the competition where these players are, I mean the majority of the model is visited, right? And the [indiscernible] licenses also probably might come.

Competition, I don't know, they are digital or not. But at least what I can say, new licenses is definitely a reality. But the new licenses, we'll have to see what type of players come to the market. Because if you see the set of thought process of giving new licenses is taken largely in the context of banking, because in banks, you have got multiple type of banks, small finance banks, regional, rural banks, co-operative bank, commercial bank, NBFCs, et cetera, et cetera. Each of them catering to different customer segments. Whereas in insurance, there was only just one type of license. The regulators thought is to have a similar type of differentiated licenses being given to players in the market. It could be for a niche product line, niche geography, micro-insurance or some other segment to tap into, in which case, it's not a pan-India competitive dynamics that will play out. So it doesn't impact us so much, except in those geography or in that particular niche segment or in the niche micro-insurance area, yes, there could be some increase competitive environment. But it does not impact my pan-India numbers for certain aggregate since it should be okay. But we'll have to wait and see what type of players join the on it. But yes, that's something we want to look, watch out for.

Because of time again benefit of having lower OpEx...

They have the benefit of lower FX for a 5-year period. The expense of management guideline gives them forbearance for a 5-year period for because logically, because when you're starting out new, you would obviously want to make investments in various expansion, even on OpEx or, let's say, capability buildup and all of that. So hence, even the regulator recognizes that, and they have given a window of 5 years for which is exactly -- if you remember, I don't know whether we spoke of it or not. But generally, what we have been speaking even at the time when we were doing the IPO road shows. Even at that point of time, there were new players who entered the market, which is exactly what we had said. We had said they will get to a particular scale. After which, they will start getting more rated. And you can see the numbers. In terms of some of the places, clearly, either they have not been able to scale as much as what to your pure play digital thought process. Pure play digital there is only one company, D2C. The rest of them is effectively what I still know what he's doing. So hence there are, and this is public information. All numbers, you can see, which is publicly available to reflect their moderation in the market expense in the motor [indiscernible] line.

Recent combined ratio improvement at 2% improvement we are talking about. Are we talking about improvement from non-loss ratio?

It's a combination of all 3 factors.

All 3?

All the 3. It will be driven by aid in revenue, cost, and gains. Because once the moment, all of my investments, which I'm making today, they are already in the cost. The revenues will obviously kind of come through for particularly for retail health as a line of business. Similarly, I've been quite cautious in growing some of the book in the past. But my costs are already there. So let's say, motor as an example. The growth is going to kind of come back. That will be reflected in a higher end claims. Claims, we are spending a lot of time in trying to manage the cost of claims. So that we are able to manage the claims inflation. So that's for the protection, the loss ratio will also be a very, very important period.

And in case loss ratios see an improvement, then there could be a positive surprise to happen...

Which is what we have said. What we have said is this harder time through expectation is assuming the current level of market evolution. If market responds better, we will obviously accelerate the aspiration of getting down to 102...

And investment selling is we are...

We don't give any credit of investments to the underwriting, so therefore, that's completely independent. The investments in businesses is -- of course that will be continuing. It's not an asterisk mark to say that this number is excluding...

No, no. In terms of investments in business, are we more or less done in terms of.

Not at all.

Okay.

There is -- I mean, we are an 8.2% market share company, right? We are not, let's say, 50%-plus market share company. There is enough and more headroom available in every segment of the business, which we...

Just combined ratio, as you're saying 102, expecting by...

[ 25 ].

25...

Next to it.

So one we can expect that is...

We're not necessarily saying how much will repeat next 2 years is what we want to get down to 102.

From a profitability perspective, overall, we believe that you can , I mean certainly there are no negative surprises from an industry perspective, the profitability outlook also assuming how the spend investment book does.

See, absolute profit is a function of many aspects, right? Today, if I end up doing bulk of my investment in second half. My cost wouldn't meet that at point. So which is why we don't generally talk about an absolute profit number because there are multiple elements attached to it. Investments. Interest rate cycle could be completely different. I may not have in a year, maybe any capital gains. So immediately, my ROE, which is -- we are absolutely okay with that because even if you look at it otherwise, our capital gains have never been the same for get quarter-on-quarter, even a year. So hence we are absolutely okay. So that could have an element to it. We also have to see how growth plays out, which can have an effect cost that's an element of fixed cost. My revenue may not play out in line with what I'm expecting. So hence, it could be an effect on -- it's an absolute amount of profits. So hence, very difficult to talk about what could be an absolute change in profit numbers.

So the business model ROE...

The ROE will be, as we have said, I mean, at 104, my ROE is currently between 16% to 18%. Once we get down to 102 maybe a reasonable mix of businesses between 18% to 20%.

18% to 20.

When do you think these new licenses will come? Possibly around...

Over the next couple of years.

Okay. Yes, yes, right.

Yes, yes. I mean, you will see some of them this year. You may see some of them coming in the next year. But over the next 2 years, definitely, even the regulator would want to maybe see a lot more licenses coming through. But for which -- I mean, players also have to be excited. I mean if they find consistently, the industry making losses as a whole, that's a worrying sign. For 2022, I can understand industry making losses as an -- at an aggregate, which is fine, COVID and all of that. But otherwise, you can't have a situation where industry has a goal which writes about INR 2.5 lakh crores of premium, generating less than INR 5,000 crores of profits. That doesn't makes sense.

So as [indiscernible] 2% decline that we are looking at from combined ratio, that would be function because we are keeping the OpEx largely spined off.

Which is a function of all the 3 factors, as I say, an increase in top line, managing the claim cost, and three, efficiency of all the [indiscernible] that we have.

So margin is the playing cost as a preventive or more than that...

Preventive plus, yes. Preventive, and in general kind of price it reasonably well so that you don't get yourself subject to higher loss experience, right? In general, manage the catastrophic losses outcome because if you look at historically, our share of losses consequent to the catastrophic events has been lower than the natural market share. So hence, we need to continue to authorize or select portfolio's carefully.

And currently, we are looking at what segment is attractive for us.

All the 3 segments are very attractive, whether it is motor, whether it is health, whether it is commercial lines. All of them are very attractive.

Agreed on now let's not we're...

Agreed. Both are opportunistic. That's what we have always said because some of the states have changed the controls of the scheme to have accepted the risk tolerance threshold, which is that [indiscernible] model. So hence, I know what is the maximum loss that I would be subject to in the event of an adverse condition. And this year slightly will be more guarded because there's a prediction of an [indiscernible] And hence, to that extent, we will see what type of schemes seems to be on, right? But it is more opportunistic.

How much would be currently the penetration of motor and so on...

Penetration of the vehicle such thing without -- well the number would have been -- the number was 55%, 56%, if you were to looked at 5 years back, that number would have been right now stood at 51%, 52%. Again, anything, I keep saying all of us should look at our own self, right? How many of us the very next year are willing to take, let's say, an insurance for a 2-wheeler? Hardly people will be there to take it. The moment they get caught and they see possibly a damage or an accident happening, that's when you do a trade-off. I mean, for that INR 1000, INR 500 of insurance, should I end up paying a claim worth INR 5000. Then you start thinking about taking insurance company. It's a mindset to say, the point that we made in terms of it being a push product relative to it being a need that those things have to start changing.

Okay. Thank you.

Thank you.

Thank you.