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ICICI Lombard General Insurance Co.’s Digital Day meet on 29 September has raised hopes of improving the insurer’s profits from its recent slump. The stock gained 4% the next day (Wednesday).
The management showcased how technology is moving from a back-office enabler to being integrated across the entire length of its business, from underwriting, risk management and pricing to distribution, claims and servicing.
The digital share of its servicing has expanded from 20% in FY23 to 47% in FY26, and further to 71% in the June quarter (Q1FY27), aiming for 90% by FY29. Digital servicing costs almost 90% less than manual servicing. The insurer’s share of digital sourcing is also set to expand from 6% to 15%, which, along with the shrinkage in product launch time (6 months versus 4 weeks), can bring in 3-5% of gross written premium from new launches by FY29.
The digital leap is expected to translate into 100-200 basis points higher growth versus the industry, a sustained 10+ percentage point advantage in combined ratio, and 17-20% return on equity (RoE).
Combined ratio measures underwriting profitability; it is the ratio of claims paid and other operating expenses (including commissions paid out) to premiums earned.
The timing is important, as its stock has fallen 13% since Q1FY27 earnings after the combined ratio worsened to 107.2%, from 102.9% a year ago. Excluding large fire claims and regulation-driven higher provisions, it would have been 102.3%. A higher combined ratio means lower underwriting profitability, while a ratio above 100% indicates an underwriting loss.
Notably, for FY26, ICICI Lombard’s combined ratio stood at 103.4% versus the industry’s 117.8%.
ICICI’s gross direct premium income grew 7.5% year-on-year to ₹8,318 crore in Q1. But dragged down by deeper underwriting losses, net profit fell 46% to ₹403 crore despite investment profits. RoE fell from 21% to 10%.
While Irdai’s tighter commission and expense-of-management norms proposed last month are expected to trigger a structural reset of the industry, ICICI Lombard’s management expects large-scale multi-channel, multi-product insurers like itself to sustain on top.
So, as commission-led growth takes a backseat, brand equity and technology-led cost savings, along with superior products and servicing, are expected to turn even more valuable.
The stock has remained largely flat over five years, and is trading at 23 times FY28 earnings based on consensus Bloomberg estimates. A sustained rerating will hinge on whether the promised tech-led efficiencies can lead to underwriting profitability.
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