ICICI Lombard flags unsustainable fire insurance premium after Q1 profit drops
Aggressive pricing in India's fire insurance market is unlikely to last as mounting underwriting losses and weakening capital force insurers to pull back, ICICI Lombard's
Aggressive pricing in India's fire insurance market is unlikely to last as mounting underwriting losses and weakening capital force insurers to pull back, ICICI Lombard's management said on Wednesday, arguing that long-term growth cannot be built on uneconomic pricing. Managing director and chief executive Sanjeev Mantri of the insurer said pricing that moves too far above or below sustainable levels eventually corrects. "Anything which is superfluously way above the normal or way below will have a tendency to correct," he told analysts in a post-earnings call. Operational efficiency, rather than aggressive pricing, would determine long-term winners, Mantri added. Chief financial officer Gopal Balachandran said insurers' ability to sustain underwriting losses was "purely a function of the extent to which they would want to continue to keep writing business growth", adding that the industry was reaching its limit. Quick answers to key questions • 5 QUESTIONS 1 What led to ICICI Lombard's 46% drop in net profit for Q1 FY27? ⌵ ICICI Lombard's net profit fell by 46% in Q1 FY27 primarily due to two significant fire claims costing ₹63 crore and increased reserves related to a Supreme Court ruling affecting motor third-party claims. 2 Why are fire insurance premiums experiencing a decline in India?
⌵ Fire insurance premiums are declining due to aggressive pricing strategies that have led to unsustainable underwriting losses, compelling insurers like ICICI Lombard to pull back and restore pricing discipline. 3 How does the combined ratio relate to ICICI Lombard's profitability? ⌵ The combined ratio reflects the proportion of claims and expenses compared to premium income; ICICI Lombard's ratio rose to 107.2%, indicating that claims and expenses exceeded their premium income, thereby affecting profitability. 4 What strategies is ICICI Lombard adopting to address underwriting losses? ⌵ ICICI Lombard is focusing on operational efficiency and opting to cede business rather than engage in aggressive pricing, aiming for a more sustainable approach in the fire insurance market. 5 What impact did the recent Supreme Court ruling have on ICICI Lombard's financial results? ⌵ The Supreme Court ruling expanded compensation for homemakers in motor accident claims, leading ICICI Lombard to increase reserves by ₹165 crore, which adversely affected their combined ratio and net profit. Also Read | Foreign insurers raise India bets as reforms reshape insurance sector He pointed to industry solvency falling to 1.56 times in March 2026 from about 1.75 times a year earlier, while the industry combined ratio worsened by about 500 basis points to roughly 117%.
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