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HDFC ERGO CEO: Soft Commercial Cycle Risk, Health Business Surges
HDFC ERGO's retail health new business doubled in October, but commercial lines face a soft cycle. CEO Ghosh says the company is protecting its balance sheet. Watch for commercial rate hardening.
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HDFC ERGO General Insurance is navigating a soft cycle in commercial lines while retail health business surges, MD and CEO Parthanil Ghosh said. The company is focusing on protecting its portfolio and balance sheet, reducing volatility in a market where pricing pressure persists.
Retail health new business more than doubled in October compared with the same month a year earlier. Overall retail health premiums, including renewals, grew about 52% in the last three months. Motor insurance premiums rose 55%. The company's first-quarter overall growth was 20.6%, roughly twice the industry average.
Soft cycle puts pressure on commercial lines margins
The commercial lines market is in a soft cycle, Ghosh said. That means premium rates are falling as competition intensifies and capacity increases. HDFC ERGO is responding by underwriting selectively and managing exposure. "We have focused on protecting our portfolio and balance sheet and reducing volatility," he said.
The soft cycle is the key risk for the company's commercial book. A prolonged soft cycle could compress margins and increase loss ratios. What would reduce the risk is a hardening of commercial rates, which typically follows a period of elevated claims or reduced capacity. What would make it worse is a further softening of rates combined with an unexpected rise in claims from natural catastrophes or liability losses.
Ghosh noted that only 10-15% of economic losses from natural catastrophes in India are covered by insurance. That gap represents both a risk and an opportunity for the industry. Parametric insurance products could help close the gap, he said.
Retail health surges on regulatory reforms
Regulatory changes over the last four years have been pro-customer, Ghosh said. GST reforms improved affordability. Insurance Act amendments and regulations pushed for greater transparency. The trust quotient between consumers and insurers needs to improve, he added. About 9% of policyholders file a claim in a given year across products, while the other 91% need confidence that the insurer will pay when an event occurs.