Private non-life insurer ICICI Lombard general insurance reported a 23.4 percent rise in profits in FY21 despite a surge in Covid-19 claims in the March quarter.
The general insurance industry has been seeing an onslaught of second wave of Covid claims in Q4 FY21. ICICI Lombard, in line with the general insurance industry, has seen a 10 percent increase in health insurance claims including Covid and non-covid claims (elective surgeries).
The general insurance industry has received 9.8 lakh claims amounting to Rs 14,000 crore, out of which 5 percent of the Covid claims have been intimated to the company, said Bhargav Dasgupta, MD & CEO at ICICI Lombard.
In Q4, the company’s combined ratio (operating expenses plus claims as a percentage of premium) stood higher at 101.8 percent compared to 100.1 percent in the year-ago quarter.
For the full year FY21, the combined ratio stood at 99.8 percent compared to 100.4 percent in FY20.
The insurer posted a 22.6 percent year-on-year (YoY) rise in its March quarter net profit at Rs 345.68 crore. ICICI Lombard’s gross direct premium income stood at Rs 14,003 crore compared to Rs 13,313 crore in the year-ago period.
On increasing health insurance premiums which has been one of the burning issues in the insurance industry, Dasgupta said that if the Covid claims spike stays elevated for some time then the industry will need some kind of price correction based on actual data.
He also said that to make health insurance more sustainable, the industry needs to move to an annual medical inflation-adjusted increase instead of the current age slab wise increase and address underlying healthcare inflation.
Healthcare inflation is estimated around 10 to 12 percent annually.
Dasgupta said that currently, health insurance premium pricing is based on age slabs, unlike globally where there is a medical inflation-adjusted increase annually. So, a person between the age of 41 to 45 years has the same slab and pays the same premium for the 5-year period and on crossing the age of 46 there is an increase and parallelly if the insurer also increases rates for the health insurance portfolio, it can result in a sudden jump in premium.
He said the company went in for a price increase since 2014 in rates last year.
The return on average equity (ROAE) for ICICI Lombard was 21.7 percent in FY21 compared to 20.8 percent in FY20. The solvency ratio (ratio between company assets and liabilities) was 2.90 per cent at March 31, 2021 as against 2.76 per cent at December 31, 2020 and higher than the minimum regulatory requirement of 1.50 per cent. The Company paid an interim dividend of Rs 4.00 per share during the year.
