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GENERAL INSURANCE SECTOR OVERVIEW
In fiscal 2007, the general insurance industry registered the highest
growth since liberalisation growing by over 22% from a Gross Written
Premium (GWP) of Rs. 203.79 billion in the previous year to Rs. 250.02
billion in the year under review. The private sector players continued to
expand their market share and grew from 27% to 35% of the industry.
The industry has achieved an overall growth that compares favourably
with that of many of the emerging markets and is in line with global
benchmarks of two to three times the growth in GDP. The positive
trend in the Indian economy is expected to continue over the next 10
to 15 years and this augurs well for the general insurance sector.
General Insurance is an effective mechanism of pooling and transfering
risk and plays a key role in economic growth. The Indian economy is
on a strong growth path and the capital expenditure planned across
industries is estimated to be above US$ 500 billion over the next four
to five years. In addition, the sustained growth in retail credit and an
upward shift in consumption habits have led to the steady growth of
retail assets. The growth in both the commercial and personal lines
of general insurance business reflects these positive trends, which is
likely to continue.
The Indian general insurance market however is still relatively
underdeveloped if we benchmark per capita insurance premiums of
around US$ 5.5 in India as against US$ 10 in a neighbouring country
such as Sri Lanka. This comparison highlights the challenge as well as
the opportunity that is present for all players. The Insurance Regulatory
Development Authority (IRDA) has played a significant role in this
context, ensuring a balanced approach to liberalisation keeping in
mind the interests of the policy holder against the backdrop of healthy
competition amongst insurers.
On January 1, 2007, the industry took its first major step since
liberalisation towards moving from a controlled environment to a
flexible one - the first phase of detariffing was implemented with the
shift from administered to flexible pricing for Fire, Motor and Engineering
policies which contribute to almost 70% of industry GWP. The regulator
adopted a calibrated approach to detariffing and laid down a clear road
map for the industry to follow. The General Insurance Council formed
as an apex body representing the collective interests of the insurers
played a critical role in supporting the process of detariffing. Insurance
companies have been allowed pricing flexibility for the first fifteen
months starting January 1, 2007 after which from April 2008, the policy
terms will also be open to change. The initial success of this measured
approach as reflected in the mature industry response in the first few
months after detariffing has been lauded by international observers.
At the corporate level, intra-portfolio cross subsidization has been
replaced by product level pricing as a result of which Fire insurance
premiums have seen reduction. Conversely, Group Health insurance
premiums have moved up with companies reviewing their coverage
in order to optimize pricing. Motor Own Damage insurance premiums
gravitated towards risk based pricing. The Motor Third Party Liability
cover plays a vital role in ensuring that the other affected party in an
accident has access to the appropriate compensation. The increase
in Third Party Liability premiums coupled with the formation of the
Motor Pool for all such claims in the commercial vehicle segment has
increased the focus on insurance of commercial vehicles. Detariffing
will also help deepen the understanding of risk and its pricing for
customers and other stakeholders, in turn leading to wider insurance
penetration. At the industry level, successful detariffing is expected
to result in an enhancement of risk assessment skills, improvement
in customer service, increase in operational efficiencies, product
innovation and a heightened focus on profitability.
Detariffing removes the comfort of an anchor tariff and will compel
insurers to reduce dependence on the corporate portfolio that was
hitherto profitable. Future growth and profits lie in a portfolio mix that
also includes a healthy contribution from the retail and rural business.
New product development, alternative cost effective distribution
channels and differentiation through customer service will help widen
the acceptance and penetration of general insurance products.
Business Overview
Industry Premium Growth
GWP (Rs. mn)
1,56,7302003-04
1,75,7702004-05
2,03,7902005-06
2,50,0242006-07
18 19
Health insurance contributes less than 2% to India’s total health care
spends and holds forth a challenge for insurance companies to expand
the market through innovative product development, customer
education, penetrative distribution and enhanced customer service.
The set up of stand alone health insurance companies highlights
the focus given to this segment by the regulator. Affordable health
insurance for senior citizens remains an issue while at the same time
offering a sizable market for those insurers who can address the
market opportunity. The increase in the limits for deduction of health
insurance premiums under section 80D of the Income Tax Act to
Rs. 15,000 for individuals and Rs. 20,000 for senior citizens as
announced in the Union Budget will also give a fillip to the category.
The floods in Surat again tested the industry’s customer service levels
and insurers brought to bear their learning from the earlier recent
catastrophes and deployed extra resources to cope with the calamity.
The responsiveness demonstrated by the industry went a long way in
establishing credibility and trust amongst customers.
The liberalisation process of the general insurance industry is moving in
tandem with the economic development of the country. International
benchmarks indicate that as a country’s per capita GDP increases,
insurance intensity as measured by per capita insurance premiums
also increases and we would soon see the evolution of the industry
along these lines. The industry today has quality players with strong
joint venture partners and as the industry enters its next phase of
evolution, there is confidence that the players will emerge even
stronger and more customer oriented.
ORGANISATION STRUCTURE
ICICI Lombard has a matrix organisation structure to give the required
focus on business development and customer orientation supported
by an efficient operating model. The organisation is designed to be
flexible and responsive with the ability to rapidly evolve, re-orient
and exploit market opportunities, while maintaining prudent risk
management practices and controls. There are four principal groups:
Wholesale business, Retail business, Rural and Agricultural business
and Shared Services.
The Wholesale business group focuses on large corporations, Small
and Medium Enterprises (SME), State and Central Governments and
government owned enterprises. Key products include Fire, Marine,
Engineering and Liability Insurance. Group schemes for employees
and large scale state level Health and Personal Accident insurance
schemes fall within the ambit of this group.
The Retail business group focuses on individual customers through
multiple channels including bancassurance, agents, feet-on-street,
telesales, worksites and the internet. The key products include Motor,
Travel, Health and Home insurance.
The Rural and Agricultural business group is responsible for reaching
out to rural customers with relevant products such as Weather
insurance, Health and Personal Accident covers.
Shared Services supports the business verticals. These services
include finance & accounts, administration, technology and operations,
reinsurance, customer service and underwriting, human resources,
legal and marketing communications.
BUSINESS OVERVIEW
The Indian economy and the insurance sector have witnessed
another year of robust growth. ICICI Lombard continued to maintain
its leadership position amongst the private sector general insurance
companies. We have built sound platforms of growth and consolidated
our key business drivers including
efficient operations, cost effective
distribution, scalable technology
platform, responsive customer
service and speedy claim
settlement.
ICICI Lombard’s GWP increased
from Rs. 15,919.9 million in fiscal
2006 to Rs. 30,034.5 million in fiscal 2007 with a compounded annual
growth rate of over 84% in the last two years. This increase in GWP
helped grow our market share from 29.3% to 35% amongst the private
players and from 7.8% to 12% in the industry. Our accretion increased
from Rs. 7.07 billion to Rs. 14.11 billion and we contributed in excess
of one - third of the growth in industry premium. Net profits increased
from Rs. 503.1 million for the year ended March 31, 2006 to Rs. 683.6
million for the year ended March 31, 2007 while gross claims paid
increased from Rs. 7,683 million to Rs. 11,666 million respectively.
The increase in our retail business was reflected in the total number 18 19
of claims handled which was up 152% from 243,951 in the previous
fiscal to 642,777 in the current fiscal and number of policies issued
which went up from 1,461,039 to 3,136,478 growing by 115%. Claim
disposal ratio i.e. percentage of claims settled against claims reported,
improved from 95% to 96% as on March 31, 2007. As a result of our
thrust on retail, the contribution of the retail business increased from
46% in fiscal 2006 to 56% in fiscal 2007. The number of employees
required to resource our expansion more than doubled from 2,283 at
March 31, 2006 to 4,770 at March 31, 2007. The number of offices
rose from 154 to 220 offices with business being sourced up from 350
to 500 locations.
To ensure that there is adequate focus on the rural customer and the
social sector, the IRDA has laid down specific contribution guidelines in
terms of percentage contribution of the rural sector to total premiums
and the number of lives covered in the social sector. ICICI Lombard
comfortably fulfilled these requirements.
A string of awards recognised our efforts in building a quality business.
ICICI Lombard was adjudged the most Customer Responsive Company
in the Insurance category at the Economic Times Avaya GlobalConnect
Customer Responsiveness Awards 2006 and awarded the Gold Shield
for “Excellence in Financial Reporting” by the ICAI (Institute of Chartered
Accountants of India) for the year ended March 31, 2006. We were
also among the top three finalists for the “General Insurance Company
of the Year” award at the 10th Asia Insurance Industry Awards.
In addition, we were assigned an iAAA rating by ICRA (an associate
of Moody’s Investors Service) for highest claim paying ability and a
fundamentally strong position. The prospect of meeting customer
obligations is the best. Our paid up capital increased from Rs. 2,450
million at March 31, 2006 to Rs. 3,357 million at March 31, 2007
while our net worth more than doubled from Rs. 3,729 million to
Rs. 9,427 million respectively thereby increasing our retention
capacity.
A study commissioned through the Indian Market Research Bureau
to gauge brand health showed that ICICI Lombard had a top-of-mind
brand awareness of 32% amongst our target audience, the highest in
the industry. Brand consideration defined as the only brand that would
be considered while buying an insurance policy was also the highest
in the industry at 29%.
We continued to invest in scaling up our operations to support the
business goals. We are committed to reaching out to customers
across all segments with a focused range of products and services
that create a distinct position for us.
WHOLESALE BUSINESS
The Wholesale business group targets Corporates, Central and State
Government departments and government run enterprises offering
them a range of products and services. The sustained expansion in
the Indian economy along with a robust investment pipeline points
towards an increasing demand for risk management solutions and ICICI
Lombard has geared up to tap the opportunity. We set up distinct teams
for new business development and for retention. Dedicated verticals
were set up for engineering and aviation targeting the growth in the
manufacturing and civil aviation sectors. Separate teams focus on large
accounts, SME and government related opportunities.
Detariffing has significantly influenced the approach towards
underwriting and product development. We realised that claims
servicing is impacted by prudent underwriting and have merged our
customer service and underwriting resources to have a synergistic and
practical approach towards risk management. We have introduced
the concept of “walk-away” pricing and adopted a Profit and Loss led
approach towards risk rating. The focus is on demonstrating added
value to our customers through our risk advisory, product innovation,
high claims paying ability and responsive customer service.
The economic upturn has generated business demand triggering an
increase in entrepreneurial activity in the country resulting in a growing
SME sector. ICICI Lombard views the SME sector as an area of
profitable growth and has deployed a separate distribution team which
leverages the direct field force, intermediaries and bancassurance
channels to reach out to this dispersed customer segment. Our SME
portfolio grew well above the market growth rate and we have over
5,000 trained agents across the country concentrating on this sector.
The existing corporate base and competitive presence is regularly
mapped to identify areas to consolidate and drive those which offer
new business opportunities. Some of the key emerging segments
include educational institutions, religious establishments and retail
Business Overview
22 23
petrol station networks. ICICI Lombard recognises the need to provide
customised solutions to specific business requirements and views
SME as a focus segment for the year ahead.
We continue to focus on the Liability business with a consulting-led
approach in order to stimulate demand through customer education.
During the past year we diversified our liability book across industries
and products including Product Liability, Directors’ & Officers’ Liability
and Product Recalls. Globalising of the Indian industry has increased
the demand for liability policies in the country and ICICI Lombard plans
to expand the market for liabilities during the current year by targeting
new customers as well as developing new product lines.
The growth in exports including project exports as well as increase in
overseas acquisitions has exposed Indian corporations to international
risks. We offer a range of Credit insurance products for export and
domestic credit as well as political risk covers for Project Exports and
Permanent Investment insurance for overseas acquisitions. Our Trade
Credit insurance cover is designed for companies that are selling
their goods and services on open credit to international and domestic
buyers. Credit insurance protects the insured against the risk of non-
payment by its buyers due to insolvency or protracted default. Project
Exports and Permanent Investment cover risks such as confiscation,
expropriation, nationalisation and deprivation.
A dedicated team addresses the insurance needs of public sector
units, the State Governments and the Central Government. A focus
area over the last two years has been large scale social and employee
welfare schemes where we have achieved considerable success.
We have worked on the premise that the Governments’ social and
welfare initiatives can be outsourced for better implementation. We
structured need-based, cost effective insurance solutions for a number
of State Governments, ministries of the Government of India and
State Police departments, covering over 40 million lives for Personal
Accident insurance and Health insurance. A key challenge was to offer
service of a consistent quality across geographies and to all strata of
customers in a timely and transparent manner. ICICI Lombard has
now successfully established the model for such large scale initiatives
with significant learning in underwriting large retail risks and managing
the related customer service processes.
RETAIL BUSINESS
The retail segment promises to be the growth driver for general
insurance and an area of focus for ICICI Lombard as part of our strategic
objective to diversify our portfolio and create stable annuity streams.
We have built a strong retail portfolio and expanded our distribution
footprint as well as service capability. Our retail business grew by
129% from Rs. 7.30 billion in fiscal 2006 to Rs. 16.71 billion in fiscal
2007 with its contribution to total GWP increasing from 46% to 56%.
The increase in disposable income complemented by a consumption
led lifestyle has led to higher asset acquisition thereby growing the
addressable market for asset insurance policies such as Motor and
Home insurance. The growing incidence of lifestyle related diseases
such as heart attacks and cancer along with the rising cost of quality
health care is fuelling the demand for Health insurance. Indians are
increasingly travelling abroad for business, pleasure or education driving
the need for Overseas Travel insurance in the face of higher medical
costs abroad. In order to realise this opportunity ICICI Lombard has
adopted a multi-channel approach to reach out to the retail segment
through agents, brokers, feet-on-street, bancassurance, telesales,
internet and worksites with focused teams targeting each opportunity
and sourcing business from over 500 locations across the country.
Bancassurance is the key contributor to retail volumes with
ICICI Lombard having tie-ups with 19 bancassurance partners.
Bancassurance contributed 67% to our overall retail business and
our key partners include ICICI Bank, ABN AMRO, American Express,
Centurion Bank of Punjab and SIDBI (Small Industries Development
Contribution of Retail Business
Total GWP (Rs. mn)Retail GWP (Rs. mn)
04-05
8,85
2
3,1
00
05-06
15,9
20
7,29
9
06-07
30,0
34
16,7
12
02-03
2,07
0
207
03-044,
912
737
22 23
Bank of India) along with 14 cooperative banks. The success of our
bancassurance model rests on an integrated approach and seamless
product delivery to the banks’ customers.
Our electronic channels allow the customer to buy insurance instantly
over internet and over phone through toll free numbers accessible
day and night from India and abroad. Customers can view, print and
renew their policies online as well as calculate premiums and track
their claims status through our website. Our online platform enables
secure transaction through 132 bit encryption with multiple payment
options including internet banking and online credit card with an EMI
option with zero percent interest.
Motor insurance is the largest product category in the industry and
constituted 68% of our gross retail premiums. ICICI Lombard is present
in all key segments including four wheelers, two wheelers, tractors,
construction equipment and commercial vehicles. We target new
vehicles as well as renewals with a strong distribution footprint through
dealers, garages as well as manufacturer tie ups. Our manufacturer
alliances include Hyundai, Ford, General Motors, Hero Honda and Eicher.
A dedicated team for Motor retentions utilises a range of fulfilment
channels to reach the customer through agents, feet-on-street,
telephone, internet and direct mail thereby increasing our retention
ratios in a cost effective manner.
Health insurance contributed approximately 12% to industry retail
volumes and we estimate that this will double to 25% in the next three
years. Our retail health portfolio offers hospitalisation covers as well
as benefit based critical illness policies and personal accident plans.
We had pioneered the family floater Health insurance plan in retail and
this continues to be well received by customers. To grow the health
insurance market and our share in it, we are focusing on simplifying
the product construct, promoting benefit based policies such as
critical illness, introducing new products, enhancing distribution and
streamlining the claims process.
ICICI Lombard is presently serving about 3.5 million retail customers.
The wider base of retail customers gives opportunities to cross-sell
and up-sell to maintain growth and also help in reduction of overall
origination costs.
RURAL AND AGRICULTURE
Rural India continues to be underinsured and its higher susceptibility
to fundamental risks which affect the economic profile of rural citizens
also makes it the next frontier for growth of general insurance. Labour
intensive agriculture remains the key economic activity and vagaries
of weather, poor health and accidental deaths are the common risks
faced. The challenge for insurance companies lies across the entire
product delivery cycle including product design at the appropriate
price supported by cost effective distribution and service reach.
Cost structures need to be one tenth of those in urban markets
and companies that design simple products and invest in customer
education and awareness will see success over the long term.
ICICI Lombard has a range of products targeting the rural and
agricultural segment with cost effective distribution mechanisms and
robust processes for claims servicing. Weather insurance covers the
weather related risks faced by crops or by any other economic activity
and promises immediate redressal based on objective data. In fiscal
2007, the product was offered across a larger geography and with
a wider range of crops. During the year, the company insured over
200,000 farmers and 250,000 acres of land for wheat, paddy, orange,
cotton, coriander, grapes, cumin, fenugreek, kinnu, castor and soybean
across 140 locations in the states of Andhra Pradesh, Rajasthan, Tamil
Nadu, Punjab, Maharashtra, Chhattisgarh, Gujarat and Uttar Pradesh.
The Government of Rajasthan had endorsed ICICI Lombard’s weather
insurance cover for the orange crop in fiscal 2006 and continued to do
so in fiscal 2007 with subsidy for small and medium farmers. Based on
the experience in oranges, the Rajasthan government has extended
the subsidy to include coriander, fenugreek, isabgol, kinnu and cumin.
Weather Insurance
Number of farmers Acres covered
2004-052,0006,800
2005-06115,000
132,000
2006-07200,000
250,000
Business Overview
26 27
We continued our collaboration with national bodies such as
National Research Center for Grapes (NRCG) and various agricultural
universities to develop technically sound products accepted by the
farmer. We also collaborated with the National Collateral Management
Services Limited (NCMSL), a group company of National Commodities
Exchange of India (NCDEX) to install Automated Weather Stations in
91 locations across the country.
ICICI Lombard’s rural thrust covered over 5.5 million lives under various
health insurance schemes across the country. Floater health policy
and packaged policies with a combination of hospitalisation, personal
accident and critical illness covers were offered to rural customers
through village internet kiosks, ITC’s e-Choupals and rural bank
branches. Self Help Groups, members of Micro-Finance Institutions
and NGOs were offered customised products covering surgical
expenses, hospitalisation, free / subsidised OPD facility, discounted
investigations and medicines. These schemes are designed and
implemented with the help of the community. We also offered training
on health and nutrition through health camps to various groups as a
part of a preventive care program.
Our rural reach has been expanded by activating rural marketing channels
across 800 towns which include rural marketing agents and chains of rural
retail outlets like the Hariyali Kisan Bazaar and Godrej Aadhar.
Weather insurance solutions were extended for non-agricultural products
covering brick kiln manufacturers and we plan to extend the same to
other potential areas such as wind farms in technical collaboration with
CWET (Centre for Wind Energy & Technology). Our relationship with
Bhartiya Smruddhi Finance Limited also moved to the next level and
this year we protected their agriculture lending portfolio in 61 locations
spread across 7 states. The initial success of these structured solutions
indicates the potential that exists in this area.
REINSURANCE
Our reinsurance program is directed towards protection of value at
risk at all points in time. This involves ensuring timely and quality
protection for individual risks beyond our retention capacities; enhanced
automatic capacity to cater to the bulk of conventional transactions;
adequate catastrophic protection by tracking accumulations on a real
time basis; assessing exposures and determining extent of protection
required.
Our reinsurance program will continue to be a mix of proportional
and non-proportional treaties in line with the current year. We have
significantly increased our retentions and our automatic capacities
this fiscal with maximum flexibility in tune with business growth.
Reinsurance programs are assessed on the strength and spread
of securities used. In line with this philosophy ICICI Lombard has
structured a robust reinsurance program supported by various leading
reinsurance companies across the world that fit the criteria of size and
strong credit rating.
We have created a state of the art risk accumulation and tracking
system. The front end of this system is a digital map which is
updated to monitor earthquake zones, wind storms and other natural
catastrophic exposures in any region. The information so retrieved has
proved to be an effective source of data for accumulation mapping
by internationally accredited models. This helps us in monitoring our
risk exposure on a real time basis and plan appropriate risk hedging
strategies by buying catastrophic covers.
The reinsurance function in ICICI Lombard acts as a business facilitator
and enhancer and helps generate and develop new product initiatives.
Our associations with the leading reinsurance players in the world
have strengthened our capability to arrange quality and competitive
facultative reinsurance terms for all classes of business including
various mega risks in the area of Offshore Energy, Property, Liability,
Credit insurance and Aviation. This has enabled us to offer a complete
range of risk management solutions to our corporate customers with
the assurance of servicing large claims.
Balance Sheet Strength
Paid up Capital (Rs. mn)
2004-05
2,20
0
2,49
4
2005-062,
450 3,72
9
2006-07
3,35
7
9,42
7
Net Worth (Rs. mn)
26 27
CUSTOMER SERVICE & UNDERWRITING
Insurance is all about distress management and its effectiveness
manifests itself essentially during the time of a claim. ICICI Lombard’s
philosophy behind customer service and claims settlement revolves
around being responsive, sensitive and fair with genuine claims being
settled quickly. In fiscal 2007, ICICI Lombard’s gross premiums nearly
doubled over the previous year with significant contribution from the
retail business which reflected in the number of claims increasing
from 243,951 to 642,777. The amount of gross claims settled also
increased from Rs. 7.68 billion to Rs. 11.64 billion. Efficient and speedy
claims servicing has resulted in greater customer satisfaction. This is
reflected in the reduction of the average time taken to settle claims
from 25 days to 22 days.
There has been a continuous focus on expansion of the service
network to better reach out to customers and we now have a network
of over 2,000 garages to service cashless Motor insurance claims and
over 4,000 hospitals for cashless Health insurance claims across the
country.
Cost-effectiveness and efficiency during claims settlement are
important for us and empathy and transparency in the settlement
process are paramount. Technology has helped us register, process,
track and settle claims while reducing cycle time and increasing
visibility of claims status to all stakeholders.
Fiscal 2007 witnessed floods in Surat and heavy rains in places like
Chennai. Our experience of the July 2005 floods in Mumbai enabled
us to manage these events with alacrity and with sensitivity and we
were able to successfully deploy our customer service teams and help
our customers get back on track. Our understanding of the catastrophe
exposures also helped us seek appropriate reinsurance protection.
We have pioneered and excelled in servicing mass health policies,
mostly consisting of government and semi-government schemes. Most
of these were serviced in-house leading to efficiently controlled and
transparent customer service. We have set new standards of customer
service for our wholesale business clients by having dedicated teams
for underwriting, for claims servicing and for policy issuance with
quality checks at each level. Customer service help desks have been
set up at the branch level to cater to walk-in customers.
With the onset of detariffing from January 1, 2007, the team structure
and processes are now geared towards a risk based pricing regime.
There is an increased emphasis on risk inspection for accurate
assessment of risk and as an input for underwriting. Appropriate
systems are also in place for knowledge management. An actuarial
team was set up to enable us to adopt the best practices for pricing
and reserving. The regulator has adopted a calibrated approach to
detariffication and its full implementation including flexibility in terms
and conditions would lead to numerous opportunities for innovation.
A product development team was setup to leverage the upcoming
flexible environment and ensure simplicity, consistency and regulatory
compliance across all products.
INFORMATION TECHNOLOGY
Technology continues to be the key business enabler for organisational
growth and an enduring source of competitive advantage. Over the last
year, we laid the groundwork for a seamless customer experience at
all stages of the policy life cycle from policy issuance to claims through
our Enterprise Application Integration initiative. We have been able to
give accurate real time information to our customers and agents by
applying state of the art technology at various customer touch points.
Cashless Service Network
Number of Garages Number of Hospitals
2004-05 2005-06 2006-07
400
1,80
0+
550
3,50
0+
2,00
0
4,00
0+
Business Overview
30 31
We migrated to a flexible and web based platform for our retail
products and that has enabled us to quickly adapt to the market
changes brought on by detariffing. Availability of the application over
the web has allowed our partners and intermediaries to have quick and
easy access to the latest updates. The ability to process over 25,000
policies a day for Motor insurance gives us the scalability required to
address rising volumes. A workflow based claims processing system
which integrates with the multiple policy administration solutions for
both corporate and retail products allows us to provide single point
contact claims service to our customers. We implemented point-
of-sale solutions that allow transactions in an offline mode thereby
reducing the dependency on connectivity and enhancing the reach of
our organisation into remote areas for our Travel and Motor products.
We also undertook various initiatives for enhancing productivity and
providing world class customer service for our corporate customers.
The implementation of our document management system provides
a single repository for the corporate policy issuance process and
reduces the time to process a customer quote into a policy.
An increasing number of Indians are now going online and our corporate
website offers direct access to product and pricing information with
the ability to transact for purchasing and renewing policies online along
with other self service options including tracking of claim status.
Growing customer expectations are driving us towards developing
solutions that will sharpen our competitive edge. In our new initiatives,
we are reviewing the pay-per-mile concept that tracks the usage of
the customers’ vehicle using GPS and GPRS technology and allows
premium decisions to be made on the same. Our data warehousing
and business intelligence solutions will provide us the analytics and
forecasting ability enabling us to move forward in a competitive
marketplace where customer knowledge will be a key differentiator.
OPERATIONS
The year 2006-2007 has been a year of consolidation to manage the
current scale of operations and ensure readiness for future growth.
The number of policies issued grew from 1.5 million in the previous
year to over 3.1 million in the current year translating to an average of
10,000 policies per working day reaching a peak of over 40,000 policies
in a single day. The number of claims handled grew from 20,000 a
month to 70,000 a month reflecting the shift towards a retail
portfolio.
The underlying philosophy driving the consolidation has been to ensure
that we are readily accessible to the customer and available at the
time of need, with the objective of getting the benefits of economies
of scale to give quality service at optimal transaction processing costs.
We have leveraged our technology platform to reduce operational costs
and turn around times. Our customers can now transact endorsements
on their policy over the phone and complete renewal on the web. Point
of sale applications were developed to ensure that policy issuance can
be done over the counter. Newer modes of premium collections were
offered such as credit card authorisation over the phone and GPRS
enabled credit card swipe machines to encourage customers to pay
instantly and conveniently.
The deeper retail penetration of our products with expanded
distribution reach has made the branch network a key servicing point
for customers and intermediaries. The branch servicing functions
were separated from the processing hub functions in order to increase
responsiveness. Significant infrastructure and facilities have been
created for the processing hubs with 4 hubs set up for corporate
processes and 11 hubs for retail processes. We deployed image
based processing and workflow applications to manage volumes from
multiple geographies and set up dedicated customer support desks
at key branches. In addition, our Business Continuity site for back
office processing was put in place at Hyderabad for certain critical
processes like Motor claims.
The increase in low value and high volume products like two-wheelers
has brought with it the challenge of ensuring low operational costs
to maintain profitability. The challenges of low cost processing have
been managed by seamless integration with various systems and
processes of distribution partners like Hero Honda and various lending
institutions.
30 31
The success of dedicated verticals for renewals and cross-sell hinges
on the effective and timely management of customer relationships
and interaction. Effective CRM applications and lead management
systems were set up and customised to support their business
objectives. The deployment of a Unified Customer View ensures that
the complete transaction and interaction history of the customer is
available at the time of sale and service from any and all channels.
ICICI Lombard has taken on an organisational level initiative to drive
quality and excellence in business operations. The ISO 9001:2000
certifications obtained earlier were a first step in this direction. We
started the Six Sigma program during January 2006 and till the
current financial year a significant proportion of overall business was
addressed. The Six Sigma program is closely integrated with our
growth plans and is of strategic importance to ICICI Lombard with the
entire workforce aligned to improve performance levels in all customer
centric processes to world class benchmarks. We also adopted work
place improvements through the Quality Circle to enable internal sub
processes to perform at a consistent level. As our processes become
more complex and widespread, the need to ensure compliance
becomes paramount and we have set up a separate team to monitor
and track internal compliance and control instances of external fraud.
Process improvement and robust technology deployment have
supported the above consolidation which continues to enhance
servicing capability in a rapidly growing environment. We upgraded
our policy administration systems and standardised the underlying
processes. Quality initiatives like Six Sigma continue to ensure high
performance and delivery to customers. Our most valuable asset
– skilled and trained manpower has been instrumental in all of the
above. The operations team is responsive and flexible for servicing
complex processes with consistent quality and high customer service
standards.
INVESTMENTS
Our investment objective is to achieve a superior total return on the
investment portfolio adhering to our investment philosophy and the
regulations as applicable from time to time. We follow the path of
capital preservation and total income and are driven by value investing
principles.
The asset mix is determined by two key factors- availability of quality
investments at the right price and the company’s claim obligations.
The investment committee supervises the implementation of
the investment policies laid down by the Board and guides the
asset allocation strategy to ensure financial liquidity, security and
diversification. Commensurate risk management practices are
adopted with an objective to manage risks arising out of duration,
market, credit, legal and operations.
As at March 31, 2007 investments amounted to Rs. 16.85 billion at
market value. The investment portfolio has grown at a CAGR of 70%
over the past five years while the total return averaged 10.5%.
COST MANAGEMENT
Fast growing organisations that are in investment mode need to
continuously optimise expenditure and control fiscal profligacy. To
give this area the desired focus, ICICI Lombard has a dedicated Cost
Management Group which looks at cost planning, co-ordination,
control and reporting of all cost related aspects of the company. The
Cost Management team assists in identifying, developing, improving
and optimising the use of the company’s resources. The team is
also involved in automation of various processes in order to increase
efficiency and reduce expenses on various cost elements.
ICICI Lombard is using online spends management solutions from
a leading international service provider to get the best value from
Scale of Operation
LocationsOffices Employees
2006-074,770
220500
2005-062,283
154350
2004-0596
2151,249
Business Overview
34 35
our vendor partners. Through a comprehensive suite of applications
and services, these spend management solutions have helped us
effectively manage our outflows and improve our bottom line. We
have conducted 24 online forward auctions in areas ranging from
printing and signage to promotional items and office equipment
leading to cost savings up to 70% in some cases. Other benefits of
these solutions include enduring e-sourcing competency, improved
commodity expertise, shorter sourcing lead times and better
processes to identify new qualified suppliers. In the general insurance
industry, salvage disposal is one of the major activities and is a source
of residual value that needs to be realised. We have undertaken online
reverse auctions to secure the best prices for our clients for salvage
disposal. Other areas of cost optimisation that the Cost Management
team has worked on include telecom, travel, events and employee
welfare related expenses.
As we build our business we are conscious of deploying resources
effectively for maximum value. This mindset permeates the
organisation and influences all our resource allocation decisions.
HUMAN RESOURCES
The Human Resource function at ICICI Lombard supports the overall
strategic business plan and plays an integral role in organisational
success. We continue to invest in our human capital in the wake
of rising business volumes and the desire to provide a consistently
superior service to our customers across all locations and touch
points. It is our constant endeavour to build positive experiences for
our customers to reinforce the brand and its core values.
Quality of manpower is a pivotal aspect and starts with the recruitment
and selection process where synergy with organisational values is
assessed. A positive attitude, ability to work in a rapidly changing
environment and willingness to push the envelope are key attributes
that are looked for. Ongoing training for both on the job and specialized
skills creates the organisational capability to take on bigger challenges.
In addition, the organisation consistently mentors high performance
managers to facilitate their taking on greater responsibilities thereby
building depth of leadership and setting the foundation for sustainable
growth.
ICICI Lombard’s entrepreneurial mindset and matrix structure make us
a large organisation with the heart of a small enterprise. A large size
offers our potential employees the comfort of joining an organisation
that has been successful and hence has a viable and sustainable,
growth-oriented DNA. The heart of a small enterprise ensures that
we eschew hierarchies, encourage risk-taking and support people who
take initiative and are result-oriented. As a market leader amongst
private sector general insurers we provide the momentum of critical
mass and with over 80% year-on-year growth offer tremendous
opportunities to the right kind of people.
ICICI Lombard is a young organisation with an average employee age
of 27 years. Our human resource strength has gone up from 2,283 at
March 31, 2006 to 4,770 at March 31, 2007 to support our distribution
thrust for deeper penetration into smaller cities and towns. Our people
are our biggest growth drivers and thrive in an atmosphere of challenge
and meritocracy, giving us the sustainable competitive edge required
to keep us ahead.
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