GENERAL INSURANCE SECTOR OVERVIEW

In fiscal 2007, the general insurance industry registered the highest

growth since liberalisation growing by over 22% from a Gross Written

Premium (GWP) of Rs. 203.79 billion in the previous year to Rs. 250.02

billion in the year under review. The private sector players continued to

expand their market share and grew from 27% to 35% of the industry.

The industry has achieved an overall growth that compares favourably

with that of many of the emerging markets and is in line with global

benchmarks of two to three times the growth in GDP. The positive

trend in the Indian economy is expected to continue over the next 10

to 15 years and this augurs well for the general insurance sector.

General Insurance is an effective mechanism of pooling and transfering

risk and plays a key role in economic growth. The Indian economy is

on a strong growth path and the capital expenditure planned across

industries is estimated to be above US$ 500 billion over the next four

to five years. In addition, the sustained growth in retail credit and an

upward shift in consumption habits have led to the steady growth of

retail assets. The growth in both the commercial and personal lines

of general insurance business reflects these positive trends, which is

likely to continue.

The Indian general insurance market however is still relatively

underdeveloped if we benchmark per capita insurance premiums of

around US$ 5.5 in India as against US$ 10 in a neighbouring country

such as Sri Lanka. This comparison highlights the challenge as well as

the opportunity that is present for all players. The Insurance Regulatory

Development Authority (IRDA) has played a significant role in this

context, ensuring a balanced approach to liberalisation keeping in

mind the interests of the policy holder against the backdrop of healthy

competition amongst insurers.

On January 1, 2007, the industry took its first major step since

liberalisation towards moving from a controlled environment to a

flexible one - the first phase of detariffing was implemented with the

shift from administered to flexible pricing for Fire, Motor and Engineering

policies which contribute to almost 70% of industry GWP. The regulator

adopted a calibrated approach to detariffing and laid down a clear road

map for the industry to follow. The General Insurance Council formed

as an apex body representing the collective interests of the insurers

played a critical role in supporting the process of detariffing. Insurance

companies have been allowed pricing flexibility for the first fifteen

months starting January 1, 2007 after which from April 2008, the policy

terms will also be open to change. The initial success of this measured

approach as reflected in the mature industry response in the first few

months after detariffing has been lauded by international observers.

At the corporate level, intra-portfolio cross subsidization has been

replaced by product level pricing as a result of which Fire insurance

premiums have seen reduction. Conversely, Group Health insurance

premiums have moved up with companies reviewing their coverage

in order to optimize pricing. Motor Own Damage insurance premiums

gravitated towards risk based pricing. The Motor Third Party Liability

cover plays a vital role in ensuring that the other affected party in an

accident has access to the appropriate compensation. The increase

in Third Party Liability premiums coupled with the formation of the

Motor Pool for all such claims in the commercial vehicle segment has

increased the focus on insurance of commercial vehicles. Detariffing

will also help deepen the understanding of risk and its pricing for

customers and other stakeholders, in turn leading to wider insurance

penetration. At the industry level, successful detariffing is expected

to result in an enhancement of risk assessment skills, improvement

in customer service, increase in operational efficiencies, product

innovation and a heightened focus on profitability.

Detariffing removes the comfort of an anchor tariff and will compel

insurers to reduce dependence on the corporate portfolio that was

hitherto profitable. Future growth and profits lie in a portfolio mix that

also includes a healthy contribution from the retail and rural business.

New product development, alternative cost effective distribution

channels and differentiation through customer service will help widen

the acceptance and penetration of general insurance products.

Business Overview

Industry Premium Growth

GWP (Rs. mn)

1,56,7302003-04

1,75,7702004-05

2,03,7902005-06

2,50,0242006-07

18 19

Health insurance contributes less than 2% to India’s total health care

spends and holds forth a challenge for insurance companies to expand

the market through innovative product development, customer

education, penetrative distribution and enhanced customer service.

The set up of stand alone health insurance companies highlights

the focus given to this segment by the regulator. Affordable health

insurance for senior citizens remains an issue while at the same time

offering a sizable market for those insurers who can address the

market opportunity. The increase in the limits for deduction of health

insurance premiums under section 80D of the Income Tax Act to

Rs. 15,000 for individuals and Rs. 20,000 for senior citizens as

announced in the Union Budget will also give a fillip to the category.

The floods in Surat again tested the industry’s customer service levels

and insurers brought to bear their learning from the earlier recent

catastrophes and deployed extra resources to cope with the calamity.

The responsiveness demonstrated by the industry went a long way in

establishing credibility and trust amongst customers.

The liberalisation process of the general insurance industry is moving in

tandem with the economic development of the country. International

benchmarks indicate that as a country’s per capita GDP increases,

insurance intensity as measured by per capita insurance premiums

also increases and we would soon see the evolution of the industry

along these lines. The industry today has quality players with strong

joint venture partners and as the industry enters its next phase of

evolution, there is confidence that the players will emerge even

stronger and more customer oriented.

ORGANISATION STRUCTURE

ICICI Lombard has a matrix organisation structure to give the required

focus on business development and customer orientation supported

by an efficient operating model. The organisation is designed to be

flexible and responsive with the ability to rapidly evolve, re-orient

and exploit market opportunities, while maintaining prudent risk

management practices and controls. There are four principal groups:

Wholesale business, Retail business, Rural and Agricultural business

and Shared Services.

The Wholesale business group focuses on large corporations, Small

and Medium Enterprises (SME), State and Central Governments and

government owned enterprises. Key products include Fire, Marine,

Engineering and Liability Insurance. Group schemes for employees

and large scale state level Health and Personal Accident insurance

schemes fall within the ambit of this group.

The Retail business group focuses on individual customers through

multiple channels including bancassurance, agents, feet-on-street,

telesales, worksites and the internet. The key products include Motor,

Travel, Health and Home insurance.

The Rural and Agricultural business group is responsible for reaching

out to rural customers with relevant products such as Weather

insurance, Health and Personal Accident covers.

Shared Services supports the business verticals. These services

include finance & accounts, administration, technology and operations,

reinsurance, customer service and underwriting, human resources,

legal and marketing communications.

BUSINESS OVERVIEW

The Indian economy and the insurance sector have witnessed

another year of robust growth. ICICI Lombard continued to maintain

its leadership position amongst the private sector general insurance

companies. We have built sound platforms of growth and consolidated

our key business drivers including

efficient operations, cost effective

distribution, scalable technology

platform, responsive customer

service and speedy claim

settlement.

ICICI Lombard’s GWP increased

from Rs. 15,919.9 million in fiscal

2006 to Rs. 30,034.5 million in fiscal 2007 with a compounded annual

growth rate of over 84% in the last two years. This increase in GWP

helped grow our market share from 29.3% to 35% amongst the private

players and from 7.8% to 12% in the industry. Our accretion increased

from Rs. 7.07 billion to Rs. 14.11 billion and we contributed in excess

of one - third of the growth in industry premium. Net profits increased

from Rs. 503.1 million for the year ended March 31, 2006 to Rs. 683.6

million for the year ended March 31, 2007 while gross claims paid

increased from Rs. 7,683 million to Rs. 11,666 million respectively.

The increase in our retail business was reflected in the total number 18 19

of claims handled which was up 152% from 243,951 in the previous

fiscal to 642,777 in the current fiscal and number of policies issued

which went up from 1,461,039 to 3,136,478 growing by 115%. Claim

disposal ratio i.e. percentage of claims settled against claims reported,

improved from 95% to 96% as on March 31, 2007. As a result of our

thrust on retail, the contribution of the retail business increased from

46% in fiscal 2006 to 56% in fiscal 2007. The number of employees

required to resource our expansion more than doubled from 2,283 at

March 31, 2006 to 4,770 at March 31, 2007. The number of offices

rose from 154 to 220 offices with business being sourced up from 350

to 500 locations.

To ensure that there is adequate focus on the rural customer and the

social sector, the IRDA has laid down specific contribution guidelines in

terms of percentage contribution of the rural sector to total premiums

and the number of lives covered in the social sector. ICICI Lombard

comfortably fulfilled these requirements.

A string of awards recognised our efforts in building a quality business.

ICICI Lombard was adjudged the most Customer Responsive Company

in the Insurance category at the Economic Times Avaya GlobalConnect

Customer Responsiveness Awards 2006 and awarded the Gold Shield

for “Excellence in Financial Reporting” by the ICAI (Institute of Chartered

Accountants of India) for the year ended March 31, 2006. We were

also among the top three finalists for the “General Insurance Company

of the Year” award at the 10th Asia Insurance Industry Awards.

In addition, we were assigned an iAAA rating by ICRA (an associate

of Moody’s Investors Service) for highest claim paying ability and a

fundamentally strong position. The prospect of meeting customer

obligations is the best. Our paid up capital increased from Rs. 2,450

million at March 31, 2006 to Rs. 3,357 million at March 31, 2007

while our net worth more than doubled from Rs. 3,729 million to

Rs. 9,427 million respectively thereby increasing our retention

capacity.

A study commissioned through the Indian Market Research Bureau

to gauge brand health showed that ICICI Lombard had a top-of-mind

brand awareness of 32% amongst our target audience, the highest in

the industry. Brand consideration defined as the only brand that would

be considered while buying an insurance policy was also the highest

in the industry at 29%.

We continued to invest in scaling up our operations to support the

business goals. We are committed to reaching out to customers

across all segments with a focused range of products and services

that create a distinct position for us.

WHOLESALE BUSINESS

The Wholesale business group targets Corporates, Central and State

Government departments and government run enterprises offering

them a range of products and services. The sustained expansion in

the Indian economy along with a robust investment pipeline points

towards an increasing demand for risk management solutions and ICICI

Lombard has geared up to tap the opportunity. We set up distinct teams

for new business development and for retention. Dedicated verticals

were set up for engineering and aviation targeting the growth in the

manufacturing and civil aviation sectors. Separate teams focus on large

accounts, SME and government related opportunities.

Detariffing has significantly influenced the approach towards

underwriting and product development. We realised that claims

servicing is impacted by prudent underwriting and have merged our

customer service and underwriting resources to have a synergistic and

practical approach towards risk management. We have introduced

the concept of “walk-away” pricing and adopted a Profit and Loss led

approach towards risk rating. The focus is on demonstrating added

value to our customers through our risk advisory, product innovation,

high claims paying ability and responsive customer service.

The economic upturn has generated business demand triggering an

increase in entrepreneurial activity in the country resulting in a growing

SME sector. ICICI Lombard views the SME sector as an area of

profitable growth and has deployed a separate distribution team which

leverages the direct field force, intermediaries and bancassurance

channels to reach out to this dispersed customer segment. Our SME

portfolio grew well above the market growth rate and we have over

5,000 trained agents across the country concentrating on this sector.

The existing corporate base and competitive presence is regularly

mapped to identify areas to consolidate and drive those which offer

new business opportunities. Some of the key emerging segments

include educational institutions, religious establishments and retail

Business Overview

22 23

petrol station networks. ICICI Lombard recognises the need to provide

customised solutions to specific business requirements and views

SME as a focus segment for the year ahead.

We continue to focus on the Liability business with a consulting-led

approach in order to stimulate demand through customer education.

During the past year we diversified our liability book across industries

and products including Product Liability, Directors’ & Officers’ Liability

and Product Recalls. Globalising of the Indian industry has increased

the demand for liability policies in the country and ICICI Lombard plans

to expand the market for liabilities during the current year by targeting

new customers as well as developing new product lines.

The growth in exports including project exports as well as increase in

overseas acquisitions has exposed Indian corporations to international

risks. We offer a range of Credit insurance products for export and

domestic credit as well as political risk covers for Project Exports and

Permanent Investment insurance for overseas acquisitions. Our Trade

Credit insurance cover is designed for companies that are selling

their goods and services on open credit to international and domestic

buyers. Credit insurance protects the insured against the risk of non-

payment by its buyers due to insolvency or protracted default. Project

Exports and Permanent Investment cover risks such as confiscation,

expropriation, nationalisation and deprivation.

A dedicated team addresses the insurance needs of public sector

units, the State Governments and the Central Government. A focus

area over the last two years has been large scale social and employee

welfare schemes where we have achieved considerable success.

We have worked on the premise that the Governments’ social and

welfare initiatives can be outsourced for better implementation. We

structured need-based, cost effective insurance solutions for a number

of State Governments, ministries of the Government of India and

State Police departments, covering over 40 million lives for Personal

Accident insurance and Health insurance. A key challenge was to offer

service of a consistent quality across geographies and to all strata of

customers in a timely and transparent manner. ICICI Lombard has

now successfully established the model for such large scale initiatives

with significant learning in underwriting large retail risks and managing

the related customer service processes.

RETAIL BUSINESS

The retail segment promises to be the growth driver for general

insurance and an area of focus for ICICI Lombard as part of our strategic

objective to diversify our portfolio and create stable annuity streams.

We have built a strong retail portfolio and expanded our distribution

footprint as well as service capability. Our retail business grew by

129% from Rs. 7.30 billion in fiscal 2006 to Rs. 16.71 billion in fiscal

2007 with its contribution to total GWP increasing from 46% to 56%.

The increase in disposable income complemented by a consumption

led lifestyle has led to higher asset acquisition thereby growing the

addressable market for asset insurance policies such as Motor and

Home insurance. The growing incidence of lifestyle related diseases

such as heart attacks and cancer along with the rising cost of quality

health care is fuelling the demand for Health insurance. Indians are

increasingly travelling abroad for business, pleasure or education driving

the need for Overseas Travel insurance in the face of higher medical

costs abroad. In order to realise this opportunity ICICI Lombard has

adopted a multi-channel approach to reach out to the retail segment

through agents, brokers, feet-on-street, bancassurance, telesales,

internet and worksites with focused teams targeting each opportunity

and sourcing business from over 500 locations across the country.

Bancassurance is the key contributor to retail volumes with

ICICI Lombard having tie-ups with 19 bancassurance partners.

Bancassurance contributed 67% to our overall retail business and

our key partners include ICICI Bank, ABN AMRO, American Express,

Centurion Bank of Punjab and SIDBI (Small Industries Development

Contribution of Retail Business

Total GWP (Rs. mn)Retail GWP (Rs. mn)

04-05

8,85

2

3,1

00

05-06

15,9

20

7,29

9

06-07

30,0

34

16,7

12

02-03

2,07

0

207

03-044,

912

737

22 23

Bank of India) along with 14 cooperative banks. The success of our

bancassurance model rests on an integrated approach and seamless

product delivery to the banks’ customers.

Our electronic channels allow the customer to buy insurance instantly

over internet and over phone through toll free numbers accessible

day and night from India and abroad. Customers can view, print and

renew their policies online as well as calculate premiums and track

their claims status through our website. Our online platform enables

secure transaction through 132 bit encryption with multiple payment

options including internet banking and online credit card with an EMI

option with zero percent interest.

Motor insurance is the largest product category in the industry and

constituted 68% of our gross retail premiums. ICICI Lombard is present

in all key segments including four wheelers, two wheelers, tractors,

construction equipment and commercial vehicles. We target new

vehicles as well as renewals with a strong distribution footprint through

dealers, garages as well as manufacturer tie ups. Our manufacturer

alliances include Hyundai, Ford, General Motors, Hero Honda and Eicher.

A dedicated team for Motor retentions utilises a range of fulfilment

channels to reach the customer through agents, feet-on-street,

telephone, internet and direct mail thereby increasing our retention

ratios in a cost effective manner.

Health insurance contributed approximately 12% to industry retail

volumes and we estimate that this will double to 25% in the next three

years. Our retail health portfolio offers hospitalisation covers as well

as benefit based critical illness policies and personal accident plans.

We had pioneered the family floater Health insurance plan in retail and

this continues to be well received by customers. To grow the health

insurance market and our share in it, we are focusing on simplifying

the product construct, promoting benefit based policies such as

critical illness, introducing new products, enhancing distribution and

streamlining the claims process.

ICICI Lombard is presently serving about 3.5 million retail customers.

The wider base of retail customers gives opportunities to cross-sell

and up-sell to maintain growth and also help in reduction of overall

origination costs.

RURAL AND AGRICULTURE

Rural India continues to be underinsured and its higher susceptibility

to fundamental risks which affect the economic profile of rural citizens

also makes it the next frontier for growth of general insurance. Labour

intensive agriculture remains the key economic activity and vagaries

of weather, poor health and accidental deaths are the common risks

faced. The challenge for insurance companies lies across the entire

product delivery cycle including product design at the appropriate

price supported by cost effective distribution and service reach.

Cost structures need to be one tenth of those in urban markets

and companies that design simple products and invest in customer

education and awareness will see success over the long term.

ICICI Lombard has a range of products targeting the rural and

agricultural segment with cost effective distribution mechanisms and

robust processes for claims servicing. Weather insurance covers the

weather related risks faced by crops or by any other economic activity

and promises immediate redressal based on objective data. In fiscal

2007, the product was offered across a larger geography and with

a wider range of crops. During the year, the company insured over

200,000 farmers and 250,000 acres of land for wheat, paddy, orange,

cotton, coriander, grapes, cumin, fenugreek, kinnu, castor and soybean

across 140 locations in the states of Andhra Pradesh, Rajasthan, Tamil

Nadu, Punjab, Maharashtra, Chhattisgarh, Gujarat and Uttar Pradesh.

The Government of Rajasthan had endorsed ICICI Lombard’s weather

insurance cover for the orange crop in fiscal 2006 and continued to do

so in fiscal 2007 with subsidy for small and medium farmers. Based on

the experience in oranges, the Rajasthan government has extended

the subsidy to include coriander, fenugreek, isabgol, kinnu and cumin.

Weather Insurance

Number of farmers Acres covered

2004-052,0006,800

2005-06115,000

132,000

2006-07200,000

250,000

Business Overview

26 27

We continued our collaboration with national bodies such as

National Research Center for Grapes (NRCG) and various agricultural

universities to develop technically sound products accepted by the

farmer. We also collaborated with the National Collateral Management

Services Limited (NCMSL), a group company of National Commodities

Exchange of India (NCDEX) to install Automated Weather Stations in

91 locations across the country.

ICICI Lombard’s rural thrust covered over 5.5 million lives under various

health insurance schemes across the country. Floater health policy

and packaged policies with a combination of hospitalisation, personal

accident and critical illness covers were offered to rural customers

through village internet kiosks, ITC’s e-Choupals and rural bank

branches. Self Help Groups, members of Micro-Finance Institutions

and NGOs were offered customised products covering surgical

expenses, hospitalisation, free / subsidised OPD facility, discounted

investigations and medicines. These schemes are designed and

implemented with the help of the community. We also offered training

on health and nutrition through health camps to various groups as a

part of a preventive care program.

Our rural reach has been expanded by activating rural marketing channels

across 800 towns which include rural marketing agents and chains of rural

retail outlets like the Hariyali Kisan Bazaar and Godrej Aadhar.

Weather insurance solutions were extended for non-agricultural products

covering brick kiln manufacturers and we plan to extend the same to

other potential areas such as wind farms in technical collaboration with

CWET (Centre for Wind Energy & Technology). Our relationship with

Bhartiya Smruddhi Finance Limited also moved to the next level and

this year we protected their agriculture lending portfolio in 61 locations

spread across 7 states. The initial success of these structured solutions

indicates the potential that exists in this area.

REINSURANCE

Our reinsurance program is directed towards protection of value at

risk at all points in time. This involves ensuring timely and quality

protection for individual risks beyond our retention capacities; enhanced

automatic capacity to cater to the bulk of conventional transactions;

adequate catastrophic protection by tracking accumulations on a real

time basis; assessing exposures and determining extent of protection

required.

Our reinsurance program will continue to be a mix of proportional

and non-proportional treaties in line with the current year. We have

significantly increased our retentions and our automatic capacities

this fiscal with maximum flexibility in tune with business growth.

Reinsurance programs are assessed on the strength and spread

of securities used. In line with this philosophy ICICI Lombard has

structured a robust reinsurance program supported by various leading

reinsurance companies across the world that fit the criteria of size and

strong credit rating.

We have created a state of the art risk accumulation and tracking

system. The front end of this system is a digital map which is

updated to monitor earthquake zones, wind storms and other natural

catastrophic exposures in any region. The information so retrieved has

proved to be an effective source of data for accumulation mapping

by internationally accredited models. This helps us in monitoring our

risk exposure on a real time basis and plan appropriate risk hedging

strategies by buying catastrophic covers.

The reinsurance function in ICICI Lombard acts as a business facilitator

and enhancer and helps generate and develop new product initiatives.

Our associations with the leading reinsurance players in the world

have strengthened our capability to arrange quality and competitive

facultative reinsurance terms for all classes of business including

various mega risks in the area of Offshore Energy, Property, Liability,

Credit insurance and Aviation. This has enabled us to offer a complete

range of risk management solutions to our corporate customers with

the assurance of servicing large claims.

Balance Sheet Strength

Paid up Capital (Rs. mn)

2004-05

2,20

0

2,49

4

2005-062,

450 3,72

9

2006-07

3,35

7

9,42

7

Net Worth (Rs. mn)

26 27

CUSTOMER SERVICE & UNDERWRITING

Insurance is all about distress management and its effectiveness

manifests itself essentially during the time of a claim. ICICI Lombard’s

philosophy behind customer service and claims settlement revolves

around being responsive, sensitive and fair with genuine claims being

settled quickly. In fiscal 2007, ICICI Lombard’s gross premiums nearly

doubled over the previous year with significant contribution from the

retail business which reflected in the number of claims increasing

from 243,951 to 642,777. The amount of gross claims settled also

increased from Rs. 7.68 billion to Rs. 11.64 billion. Efficient and speedy

claims servicing has resulted in greater customer satisfaction. This is

reflected in the reduction of the average time taken to settle claims

from 25 days to 22 days.

There has been a continuous focus on expansion of the service

network to better reach out to customers and we now have a network

of over 2,000 garages to service cashless Motor insurance claims and

over 4,000 hospitals for cashless Health insurance claims across the

country.

Cost-effectiveness and efficiency during claims settlement are

important for us and empathy and transparency in the settlement

process are paramount. Technology has helped us register, process,

track and settle claims while reducing cycle time and increasing

visibility of claims status to all stakeholders.

Fiscal 2007 witnessed floods in Surat and heavy rains in places like

Chennai. Our experience of the July 2005 floods in Mumbai enabled

us to manage these events with alacrity and with sensitivity and we

were able to successfully deploy our customer service teams and help

our customers get back on track. Our understanding of the catastrophe

exposures also helped us seek appropriate reinsurance protection.

We have pioneered and excelled in servicing mass health policies,

mostly consisting of government and semi-government schemes. Most

of these were serviced in-house leading to efficiently controlled and

transparent customer service. We have set new standards of customer

service for our wholesale business clients by having dedicated teams

for underwriting, for claims servicing and for policy issuance with

quality checks at each level. Customer service help desks have been

set up at the branch level to cater to walk-in customers.

With the onset of detariffing from January 1, 2007, the team structure

and processes are now geared towards a risk based pricing regime.

There is an increased emphasis on risk inspection for accurate

assessment of risk and as an input for underwriting. Appropriate

systems are also in place for knowledge management. An actuarial

team was set up to enable us to adopt the best practices for pricing

and reserving. The regulator has adopted a calibrated approach to

detariffication and its full implementation including flexibility in terms

and conditions would lead to numerous opportunities for innovation.

A product development team was setup to leverage the upcoming

flexible environment and ensure simplicity, consistency and regulatory

compliance across all products.

INFORMATION TECHNOLOGY

Technology continues to be the key business enabler for organisational

growth and an enduring source of competitive advantage. Over the last

year, we laid the groundwork for a seamless customer experience at

all stages of the policy life cycle from policy issuance to claims through

our Enterprise Application Integration initiative. We have been able to

give accurate real time information to our customers and agents by

applying state of the art technology at various customer touch points.

Cashless Service Network

Number of Garages Number of Hospitals

2004-05 2005-06 2006-07

400

1,80

0+

550

3,50

0+

2,00

0

4,00

0+

Business Overview

30 31

We migrated to a flexible and web based platform for our retail

products and that has enabled us to quickly adapt to the market

changes brought on by detariffing. Availability of the application over

the web has allowed our partners and intermediaries to have quick and

easy access to the latest updates. The ability to process over 25,000

policies a day for Motor insurance gives us the scalability required to

address rising volumes. A workflow based claims processing system

which integrates with the multiple policy administration solutions for

both corporate and retail products allows us to provide single point

contact claims service to our customers. We implemented point-

of-sale solutions that allow transactions in an offline mode thereby

reducing the dependency on connectivity and enhancing the reach of

our organisation into remote areas for our Travel and Motor products.

We also undertook various initiatives for enhancing productivity and

providing world class customer service for our corporate customers.

The implementation of our document management system provides

a single repository for the corporate policy issuance process and

reduces the time to process a customer quote into a policy.

An increasing number of Indians are now going online and our corporate

website offers direct access to product and pricing information with

the ability to transact for purchasing and renewing policies online along

with other self service options including tracking of claim status.

Growing customer expectations are driving us towards developing

solutions that will sharpen our competitive edge. In our new initiatives,

we are reviewing the pay-per-mile concept that tracks the usage of

the customers’ vehicle using GPS and GPRS technology and allows

premium decisions to be made on the same. Our data warehousing

and business intelligence solutions will provide us the analytics and

forecasting ability enabling us to move forward in a competitive

marketplace where customer knowledge will be a key differentiator.

OPERATIONS

The year 2006-2007 has been a year of consolidation to manage the

current scale of operations and ensure readiness for future growth.

The number of policies issued grew from 1.5 million in the previous

year to over 3.1 million in the current year translating to an average of

10,000 policies per working day reaching a peak of over 40,000 policies

in a single day. The number of claims handled grew from 20,000 a

month to 70,000 a month reflecting the shift towards a retail

portfolio.

The underlying philosophy driving the consolidation has been to ensure

that we are readily accessible to the customer and available at the

time of need, with the objective of getting the benefits of economies

of scale to give quality service at optimal transaction processing costs.

We have leveraged our technology platform to reduce operational costs

and turn around times. Our customers can now transact endorsements

on their policy over the phone and complete renewal on the web. Point

of sale applications were developed to ensure that policy issuance can

be done over the counter. Newer modes of premium collections were

offered such as credit card authorisation over the phone and GPRS

enabled credit card swipe machines to encourage customers to pay

instantly and conveniently.

The deeper retail penetration of our products with expanded

distribution reach has made the branch network a key servicing point

for customers and intermediaries. The branch servicing functions

were separated from the processing hub functions in order to increase

responsiveness. Significant infrastructure and facilities have been

created for the processing hubs with 4 hubs set up for corporate

processes and 11 hubs for retail processes. We deployed image

based processing and workflow applications to manage volumes from

multiple geographies and set up dedicated customer support desks

at key branches. In addition, our Business Continuity site for back

office processing was put in place at Hyderabad for certain critical

processes like Motor claims.

The increase in low value and high volume products like two-wheelers

has brought with it the challenge of ensuring low operational costs

to maintain profitability. The challenges of low cost processing have

been managed by seamless integration with various systems and

processes of distribution partners like Hero Honda and various lending

institutions.

30 31

The success of dedicated verticals for renewals and cross-sell hinges

on the effective and timely management of customer relationships

and interaction. Effective CRM applications and lead management

systems were set up and customised to support their business

objectives. The deployment of a Unified Customer View ensures that

the complete transaction and interaction history of the customer is

available at the time of sale and service from any and all channels.

ICICI Lombard has taken on an organisational level initiative to drive

quality and excellence in business operations. The ISO 9001:2000

certifications obtained earlier were a first step in this direction. We

started the Six Sigma program during January 2006 and till the

current financial year a significant proportion of overall business was

addressed. The Six Sigma program is closely integrated with our

growth plans and is of strategic importance to ICICI Lombard with the

entire workforce aligned to improve performance levels in all customer

centric processes to world class benchmarks. We also adopted work

place improvements through the Quality Circle to enable internal sub

processes to perform at a consistent level. As our processes become

more complex and widespread, the need to ensure compliance

becomes paramount and we have set up a separate team to monitor

and track internal compliance and control instances of external fraud.

Process improvement and robust technology deployment have

supported the above consolidation which continues to enhance

servicing capability in a rapidly growing environment. We upgraded

our policy administration systems and standardised the underlying

processes. Quality initiatives like Six Sigma continue to ensure high

performance and delivery to customers. Our most valuable asset

– skilled and trained manpower has been instrumental in all of the

above. The operations team is responsive and flexible for servicing

complex processes with consistent quality and high customer service

standards.

INVESTMENTS

Our investment objective is to achieve a superior total return on the

investment portfolio adhering to our investment philosophy and the

regulations as applicable from time to time. We follow the path of

capital preservation and total income and are driven by value investing

principles.

The asset mix is determined by two key factors- availability of quality

investments at the right price and the company’s claim obligations.

The investment committee supervises the implementation of

the investment policies laid down by the Board and guides the

asset allocation strategy to ensure financial liquidity, security and

diversification. Commensurate risk management practices are

adopted with an objective to manage risks arising out of duration,

market, credit, legal and operations.

As at March 31, 2007 investments amounted to Rs. 16.85 billion at

market value. The investment portfolio has grown at a CAGR of 70%

over the past five years while the total return averaged 10.5%.

COST MANAGEMENT

Fast growing organisations that are in investment mode need to

continuously optimise expenditure and control fiscal profligacy. To

give this area the desired focus, ICICI Lombard has a dedicated Cost

Management Group which looks at cost planning, co-ordination,

control and reporting of all cost related aspects of the company. The

Cost Management team assists in identifying, developing, improving

and optimising the use of the company’s resources. The team is

also involved in automation of various processes in order to increase

efficiency and reduce expenses on various cost elements.

ICICI Lombard is using online spends management solutions from

a leading international service provider to get the best value from

Scale of Operation

LocationsOffices Employees

2006-074,770

220500

2005-062,283

154350

2004-0596

2151,249

Business Overview

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our vendor partners. Through a comprehensive suite of applications

and services, these spend management solutions have helped us

effectively manage our outflows and improve our bottom line. We

have conducted 24 online forward auctions in areas ranging from

printing and signage to promotional items and office equipment

leading to cost savings up to 70% in some cases. Other benefits of

these solutions include enduring e-sourcing competency, improved

commodity expertise, shorter sourcing lead times and better

processes to identify new qualified suppliers. In the general insurance

industry, salvage disposal is one of the major activities and is a source

of residual value that needs to be realised. We have undertaken online

reverse auctions to secure the best prices for our clients for salvage

disposal. Other areas of cost optimisation that the Cost Management

team has worked on include telecom, travel, events and employee

welfare related expenses.

As we build our business we are conscious of deploying resources

effectively for maximum value. This mindset permeates the

organisation and influences all our resource allocation decisions.

HUMAN RESOURCES

The Human Resource function at ICICI Lombard supports the overall

strategic business plan and plays an integral role in organisational

success. We continue to invest in our human capital in the wake

of rising business volumes and the desire to provide a consistently

superior service to our customers across all locations and touch

points. It is our constant endeavour to build positive experiences for

our customers to reinforce the brand and its core values.

Quality of manpower is a pivotal aspect and starts with the recruitment

and selection process where synergy with organisational values is

assessed. A positive attitude, ability to work in a rapidly changing

environment and willingness to push the envelope are key attributes

that are looked for. Ongoing training for both on the job and specialized

skills creates the organisational capability to take on bigger challenges.

In addition, the organisation consistently mentors high performance

managers to facilitate their taking on greater responsibilities thereby

building depth of leadership and setting the foundation for sustainable

growth.

ICICI Lombard’s entrepreneurial mindset and matrix structure make us

a large organisation with the heart of a small enterprise. A large size

offers our potential employees the comfort of joining an organisation

that has been successful and hence has a viable and sustainable,

growth-oriented DNA. The heart of a small enterprise ensures that

we eschew hierarchies, encourage risk-taking and support people who

take initiative and are result-oriented. As a market leader amongst

private sector general insurers we provide the momentum of critical

mass and with over 80% year-on-year growth offer tremendous

opportunities to the right kind of people.

ICICI Lombard is a young organisation with an average employee age

of 27 years. Our human resource strength has gone up from 2,283 at

March 31, 2006 to 4,770 at March 31, 2007 to support our distribution

thrust for deeper penetration into smaller cities and towns. Our people

are our biggest growth drivers and thrive in an atmosphere of challenge

and meritocracy, giving us the sustainable competitive edge required

to keep us ahead.

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