We need to measure success rate of hospitals: Bhargav Dasgupta

ICICI Lombard General Insurance is the country’s largest private non-life company. It is also one of the leading players in the health insurance business with over a third of its premium coming from this segment. In an interview with The Economic Times, Bhargav Dasgupta, MD, ICICI Lombard, speaks on his take on the road ahead for health insurance. Excerpts:

State-owned insurers have withdrawn cashless mediclaim facilities with leading hospitals on the grounds that hospitals are overcharging. You still continue with cashless. What has been your experience?

Dasgupta: Our overall experience is that there is enough proof that hospitals overcharge when there is insurance vis-à-vis an uninsured patient. To that extent the PSUs are justified in their action. But the real issue is whether India can afford the kind of high healthcare costs in the US and the answer to that is we cannot. Of course, there is a price for quality, but we need to get down to defining the quality standards. At the first level, this can be through accreditation of service providers, but at the end of the day quality has to be measured on outcome.

The question is: are you getting a better success rate in hospital ‘A’ vis-à-vis hospital ‘B’? In the long run, there has to be some transparent methodology of measuring the outcome if we have to measure quality. To that effect, all constituents — providers, payers and policymakers —- have to work on the cost angle and secondly on paying for quality. From our perspective although we provide cashless service across the entire network, we have been working with the providers to build a preferred network and we encourage customers to go to these hospitals.

You were at one time the second largest health insurer in the country. Have you brought down your exposure? Do you intend to grow it?

Dasgupta: For us, health will be about one-third of our portfolio. It is an important part of our business strategy given the underpenetration and the need. Our strategy for the last few years has clearly been on profitable growth. One of the things we observed last year was that group health was losing money significantly and we let go of some of the loss-making accounts. What I am now seeing is that group health pricing has improved and I am seeing growth coming back. Retail has been growing during the entire period – last year as well as this year.

You have chosen to in-source management of health insurance rather than hand it over to third-party administrators. What has been your experience?

Dasgupta: The service that we are really providing our customer is claims. The moment of truth for our customer with us is when he or she experiences a claim. It was very important to ensure that we control the service experience of the customer and that was the logic of taking it in-house. It has been more than two years since we took it in-house and the experience has been very positive. Also, we are able to engage with our partner network and manage that service delivery well. Providers have typically had issues such as delays in payments and delays in authorisation. Having managed the process in-house has allowed us to manage service delivery on those fronts better.

This fiscal began with the sinking of an Aban Offshore’s exploration vessel. There has been another marine incident in Mumbai. Has it been a bad year?

Dasgupta: Aban is an unfortunate event, which took place in May. The claim has now been settled and the client is quite satisfied. For us the claim has been almost entirely reinsured and the net loss to us has been only a couple of crores. In terms of Chitra, we do not expect any claims. We have not received any intimation of any cargo loss either.

Even after 10 years of liberalisation except for motor and health, the non-life market continues to be underpenetrated. Does the Indian market lack sophistication?

Dasgupta: I don’t think so. Although its been a slow process, the market for protection has increased. It’s true that for home insurance the purchases have been low, but what we have seen in our offering for high net worth customers is that home insurance followed by art insurance are the most popular products. At that level, the importance and need for buying protection is understood. My sense is that at present our country is still going through the stage of asset procurement and it is a matter of time before people think of protecting those assets. I am personally very optimistic.

This year you will see two new non-life companies promoted by SBI and L&T. Do you see margins coming under pressure?

Dasgupta: It is early days. L&T are waiting for product approvals and SBI is just coming to the market. We have to see what their strategy is. We are focusing on service delivery, quality of business, productivity and profits because we believe that will help us in differentiating ourselves in the market. We will see what competition does. It is difficult to comment on margins at this stage. It all depends on how the game is played. I am seeing some relaxation in pricing pressure. Group health portfolio has improved significantly and overall I am seeing some stability in prices.

Three years after detariffing, the non-life industry continues to make underwriting losses...

Dasgupta: If you see the international experience, typically it is a four-year cycle till prices correct. There is an immediate dip in pricing because of intense competition to grab market share and then it plays out over a period of four to five years and starts to climb again. We have seen the phase for three years and it is in the fourth year — that is next year — that things will start to improve.

Do you see consolidation happening in the industry? Will you be looking at inorganic growth?

Dasgupta: There is definitely scope for consolidation. There are already some talks about consolidation happening. But we would not be looking at inorganic growth currently.

How much have you invested in the business. Would you require additional capital? Is there a likelihood of your promoter stake being diluted?

Dasgupta: Following last year’s net profit of Rs 144 crore, our networth has crossed Rs 1,750 crore and our solvency margin is about 1.78 against the regulatory requirement of 1.5. So, I do not see any requirement for capital. It is for the promoters to answer the question on stake dilution.

Are there any new initiatives you are looking at?

Dasgupta: There are a few products including those on the individual health side that we have worked on and have applied to Irda. The other service that we have just launched is the launch of an insurance account. The thinking is that in the past industry has been product-centric and we should move to a customer-centric model. The insurance account is like a customer relationship with a bank. You may have several policies but the relationship is one and you do not then have to be provide the same information for every product that you buy. We will see how it goes and then look at other benefits like loyalty discounts.