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Insurers facing double whammy of inflation and higher incidence of claims

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Insurance companies are battling on two fronts – inflation and higher claims seeking by policyholders. Health and motor insurance in particular are witnessing inflationary pressures and a higher incidence of claims.

ICICI Lombard General Insurance MD & CEO Bhargav Dasgupta, however, said it is too early to say whether this is a structural change. “Covid claims had come down, but we are seeing a shift in the non-Covid claims — elective surgeries, medically acute incidents requiring hospitali-sations and non-elective surgeries,” Dasgupta was quoted as saying in a ToI report.

He added that there was a need to watch the data and see the extent to which the cases are a backlog of elective surgeries and elevated practices that the hospitals are following because of new protocols.

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Health insurance claims saw a massive surge in the second wave of the Covid-19 pandemic, resulting in a worsening of the loss ratio in the health business in FY22. With the pandemic situation getting better, Covid claims have declined. However, the increased mobility has increased motor accident claims.

“On the motor side also we’ve seen a frequency increase in the first quarter. Overall, there is an inflation pressure on claims cost,” said Dasgupta.

ICICI Lombard is looking to diversify its business by growing other segments. It has drawn up a strategy for growth is MSME business.

“MSME is a very under-penetrated category, and we feel that with a strong service proposition and a good distribution mode, we can enhance the opportunity,” the report said, citing Dasgupta.

According to him, the segment, which has been growing at 25 percent and is now a Rs 1,000-crore business, can be profitable.

ICICI Lombard has used artificial intelligence and machine learning to create a software engine that can underwrite nearly 90 percent of the policies it issues without human intervention.

It also has the technical expertise, strong balance sheet and reinsurance treaties to support the business, which many others do not have.

The company is expanding its motor business by introducing new lines of products, such as an umbrella policy for all vehicles. “In two-wheelers, there is an under-penetration issue as owners forget to renew the policy. But they do not forget to renew car insurance. By offering it along with the insurance for the car, the continuity can be ensured,” he said.



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