This is the website of ICICI Lombard General Insurance https://www.icicilombard.com/

ICICI Lombard General Insurance Company Limited is one of India’s leading private sector general insurance companies. ICICI Lombard is in this insurance business for the last 2 decades. For me, it is very important to invest in a company that has a proven track record because this shows that the company has passed through the ups and downs of the economy and insurance industry and they are matured enough. Because for me the protection of my capital is more important than the thrill of getting superfast returns. Now the experience of two decades gives this company insight into customer requirements and they have reached a position where they can frequently anticipate the needs of the customers and delight them with above-expected products and services. And in the annual report, the company was clearly claiming this capability they have achieved by being in this industry for a long time.

ICICI Lombard General Insurance is in the business of selling general insurance to individuals and corporates under different verticals. Types of insurance provided include vehicle insurance, health insurance, property insurance, travel insurance, cyber insurance, business insurance, crop insurance, and home insurance.

As the Indian economy grows, demand for all these products must increase. Why? The reason is simple, we need security for our businesses and properties and we need to protect ourselves from all unanticipated expenses that can hit us any time that could erode all our lifelong savings. So having good coverage of insurance is always a no-brainer.

Based on the discussions with my friends, relatives, and colleagues, I have realized that the awareness of people about the need for health insurance is very less. For the same reason, many are not at all covered for healthcare expenses, and those who have insurance are not adequately covered considering the present expenses that one has to bear if they get admitted to a Hospital. Now, if we consider the inflation rate of healthcare expenses, 99% of people who have health insurance now are not covered enough if we consider the inflated healthcare expenses that one has to incur after 15 to 20 years. If you want to read about the inflation rate of healthcare expenses, you can use this link that will give you an idea about how much the healthcare expenses can go up in the future which is unfortunately very alarming for a layman.

Click on this link to find the complete list of non-life (ie general insurance) companies in India listed by IRDAI (Insurance Regulatory And Development Authority Of India). You will find that there are total 34 non-life insurance companies in India, out of that we are discussing only ICICI Lombard General Insurance Company. Now, why ICICI Lombard stands away from all other general insurance companies? Let us find out that.

ICICI is a company that people trust and in the insurance business, people want to buy insurance from trusted companies. It is difficult for a new entrant to create trust among the common man especially in the case of insurance.

ICICI Lombard GIC is one of the leading private sector general insurance companies in India with a Gross Written Premium (GWP) of Rs135.92 billion for the year ended March 31, 2020. This company is the second-largest general insurance company in India and the largest general insurance among private insurance companies.

Why I am interested in investing in Insurance Sector in India

Which company I should invest in the insurance sector in India is secondary. The first thing for me is to decide whether I should invest in the insurance sector in India. And specifically the general insurance sector. The answer to this question is simple. The Penetration of insurance in India is still in its infant stage. It is only during recent times that people started actively discussing insurance. Still most of the people are either not covered or under covered specifically for health insurance. As per the data given by IBEF overall insurance penetration in India is 3.76% in FY 20 which shows a large untapped market to grow.

Find more statistics at Statista

Demographic factors like the growing young middle-class population having the capability to insure themselves from any adversities and their growing awareness of the need for protection and retirement planning will definitely help in the growth of general insurance in India, especially health insurance.

Private Insurance Companies Vs Public Insurance Companies

Image source: Link

From the above image taken from statista.com. one thing is clear that value migration is happening in the Indian insurance sector. If you closely look at the above chart you can find that the market share of the private sector is increasing and parallelly, market share of public sectors is increasing. Market share of private sector increased from 42% to 48% just in 4 years and at the same time period market share of public sector dropped from 47% to 39%. This means the private sector is taking away the customers from public sector.

Share Holding Pattern

As of March’21 promoters have a shareholding of 52%. This they have reduced from 56%, ie around 4 percentage in last one year. But the striking point is the increase in shareholding among FIIs which from 7.2% in the year 2018 they have raised it to 29% by March’21. This shows the confidence FIIs have in this company. DIIs also increased their shareholdings and shareholding of the public from 28% has gone down to 7%. Means FIIs are buying all the shares sold by the public.

In the year 2020 company has written a gross premium of 136 billion. Issued 26 policies and settled 1.8 million claims. As given in the above image, this company has 237 branches, 840 virtual offices (COVID impact) with a partner network of 8800 garages for cashless claims for vehicle servicing, and 6536 hospitals for cashless hospital treatments.

Let us discuss automobile insurance or vehicle insurance. Vehicle insurance is legally mandatory. If you want to drive your vehicle on road, you must need to carry a copy of your vehicle insurance. It is a must. This data shows that the number of vehicles per 1000 population in the US is 842 and in China, it is 204 whereas in India it is only 20 per 1000 vehicles. Now considering the size of the population in India, the number of 4 wheelers in India is near to nothing. If you want to know the number of people that own 4 wheelers you must read this article “India runs on two-wheelers and animal carts, data shows”.

Also as people start travelling abroad to mitigate unanticipated events while travelling, people in the future will make sure that they get minimum travel insurance before every vacation.

As a developing economy, organizations will ensure that they are well protected against all manmade and natural disasters by getting adequate insurance for their businesses and properties.

The next step is to ensure that the net profit is real. For that, we need to see whether cash flow from operations (CF)) is matching with the net profit. It can vary a little bit here and there, but both should go in tandem year on year. In fact, I prefer those companies that generate CFO more than its profit. The positive difference between CFO and net profit is called Float. I like companies having Float and in this company, we can see this formation ie creation of float during the period 2017 to 2020.