Motor Insurance Sales Fell To Almost Nothing In April, Says ICICI Lombard
ICICI Lombard General Insurance Company Ltd. couldn't sell any new motor insurance policy last month as buyers stayed away from automobile showrooms amid the nationwide lockdown to tackle the new coronairus pandemic.
“New vehicle sales by original equipment manufacturers were zero in April. So new insurance policy sales had gone down to nothing,” said Bhargav Dasgupta, managing director and chief executive officer at the general insurer. Motor insurance, according to an investor presentation, constituted around 51 percent of ICICI Lombard's product mix in 2019-20.
Renewal of motor insurance policies, however, happened, albeit at a muted pace. “There has been some postponement,” Dasgupta said in a post-earnings interaction with BloombergQuint. He also expects demand for auto insurance to come back as “one needs insurance to drive a vehicle”.
ICICI Lombard's gross premium fell 8.7 percent year-on-year to Rs 3,181 crore in the quarter ended March. Its profit after tax, however, rose 23.8 percent over last year to Rs 282 crore.
In this current scenario, Dasgupta said any kind of fiscal support would be important. “I would urge the government to consider a vehicle scrappage policy, whenever they come out with a package. It will go a long way in helping the auto industry,” he said.
The company, on the other hand, saw “reasonable” growth in health insurance. “On the indemnity side, demand is reasonably stable, people are renewing and inquires have increased,” Dasgupta said. “But the rate of conversion of inquiries has dropped as people are delaying the decision to buy.”
Key highlights from the conversation:
- While the company has a large exposure on the debt side, 10-11 percent of its exposure lies in equity.
- Due to the economic meltdown, the mark-to-market loss for the company stood at Rs 550 crore.
- Out of this, according to its impairment policy, Rs 120 crore is the diminution in value that the company has taken in its profit and loss account during the quarter.
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