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ICICI Lombard General Insurance reported an all-round improvement in Q2FY27, driven by growth across motor, health and commercial lines, disciplined risk selection and stable combined ratios. businessline spoke with its Chief Financial Officer, Gopal Balachandran, about underwriting performance amid rising industry loss ratios, the need for price correction, compliance with Expenses of Management norms, and the long-term implications of the Insurance Regulatory and Development Authority of India’s proposed distribution reforms.

What were the drivers for your Q2 FY27 performance?

From ICICI Lombard’s standpoint, not just this quarter but in general, we have been consciously picking risks that largely drive profitable growth.

As a team, we have consistently focused on delivering an 18–20 per cent return on capital to our shareholders. We saw an all-round improvement. Excluding the more volatile crop insurance business, the industry grew by about 13.2 per cent in the second quarter, while we outperformed the industry, growing by 13.9 per cent.

The momentum in motor, health and commercial lines was a key contributor to revenue growth. Loss ratios largely remained within the expected range, resulting in a favourable overall outcome. Combined ratios were almost flat, excluding certain one-off factors.

Could you elaborate on the combined ratios? What is the industry scenario?

Our combined ratio was 103.9 per cent in the second quarter of last year. Catastrophic losses can vary across periods, but we have maintained a largely flat combined ratio. Several companies will declare their results over the next few weeks or months. We have the overall industry numbers for the first quarter. The industry’s combined ratio was roughly 150 per cent in Q1 last year, compared with nearly 170 per cent in Q1 of the current year. In that sense, the industry’s performance has deteriorated considerably. However, we have maintained a gap of at least 10 percentage points between the industry’s combined ratio and ours. This should continue to support improvements in our combined ratio going forward.

What is your view on Expenses of Management (EoM) in the industry?

The regulator has been focusing on making insurance more affordable. Companies that have sought to gain market share by exceeding the prescribed Expenses of Management (EoM) limits will have to take steps to bring their overall operating costs within the regulatory limits. Of the 35 players in the market, around 13 still have EoM above the prescribed limits. ICICI Lombard, by contrast, has consistently operated within the regulatory threshold. This has also been a key contributor. Overall, the industry environment looks quite favourable.

There has been concern in the industry about price erosion, with calls for price correction. How will this happen?

There has clearly been considerable price erosion in the first half of this year. These are not small-ticket exposures but large risks, making the impact of underpricing significantly more damaging. The regulator has directed companies to revisit their pricing models and ensure that risks are priced appropriately. Reinsurers have also written to primary insurers, emphasising that those seeking to continue accessing similar levels of capacity or comparable insurance terms must ensure that their underwriting books deliver meaningfully favourable outcomes. There has, therefore, been a concerted effort on multiple fronts to correct market pricing.

Q. What are your views on IRDAI’s proposed distribution reforms? Do you think they will pose a challenge to the industry?

There are two aspects to this. Looking at the thought process and objectives outlined in the draft consultation paper on distribution reforms, we believe the regulator has proposed a very progressive set of regulations from a long-term perspective. The primary focus is on increasing the number of consumers covered by insurance and, consequently, improving insurance penetration.

We need to ensure that insurance becomes more of a pull product rather than a push product, as it is at present. This is clearly the thinking behind the objectives outlined in the draft consultation paper. This is also the trajectory the regulator has laid out through the glide path for the industry.

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