Writing crop business does not make economic sense right now, says ICICI Lombard CEO

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The crop insurance business is not making business sense for the largest private sector general insurer ICICI Lombard General Insurance. In the post results earnings call, Bhargav Dasgupta, MD and CEO, ICICI Lombard General Insurance, said that they have not been able to write any new crop business in H1FY20 due to the prevailing rates.

“On the one hand, reinsurers have hardened rates. On the other, the commissions that reinsurers pay is not even sufficient to cover the basic cost of sourcing business. Hence, it does not make economic sense,” he added.

Despite no major drought-like situation in the country, Dasgupta said that the crop losses have been on the rise. The rise in these underlying losses, he said, has led to the hardening of rates. Here hardening of rates means that an insurer has to pay more to secure a cover from a reinsurance company.

While there has not been one catastrophic event this financial year, he added that there have been a series of events like cyclones and floods that have led to crop losses piling up.

“It is largely due to the reinsurance rates. In the long term, we believe that it is valuable business. If rates improve, we will look at it. But we are staying cautious right now,” he added.

The gross direct premium income (GDPI) of ICICI Lombard was impacted in Q2 due to a dip in the crop business.

Dasgupta said that in FY19 the share of crop insurance in their business mix was 17 percent.

“We want to grow our target segments between 15-20 percent. If we grow these segments (non-crop) slightly above 17 percent, then we will have a small single digit growth in premium in FY20. If they grow slightly below 17 percent, then we will not even have a single digit premium growth this fiscal,” added Dasgupta.

The GDPI of ICICI Lombard saw a 16.4 percent year-on-year (YoY) decrease to Rs 2,953 crore in Q2FY20. Excluding the crop segment, the GDPI grew by 14.5 percent YoY in the September quarter to Rs 2,898 crore.

[“source=moneycontrol”]

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