Health has become the biggest sector for the insurance industry as against motor in FY22 as new vehicle sales have been muted, Bhargav Dasgupta, MD & CEO, ICICI Lombard said on Friday.

“As an industry collectively, we pay about Rs 25,000 crore of health claims. If you look at profitability, we make roughly about Rs 4,000-5,000 crore as an industry. And this is one industry, which has taken this large a shock, hasn't gone back and asked for any help from anyone. For us in ICICI Lombard, we have had roughly about Rs 550 crore plus hit, because of COVID for the year”, he told CNBC-TV18 in an interview.

On a sector basis, motor was traditionally the largest segment but this year, for the industry as a whole motor has become the second biggest sector after health, he said. The motor sector was hit because new vehicle sales have been muted, he explained.

“Two-wheeler has had two consecutive years of degrowth and that's largely we believe is demand-driven. Motor has been a supply-driven constraint," he said.

The fourth quarter also saw an impact of the third wave of COVID-19, he said, adding that it will take a couple of quarters to get synergies from Bharati Axa, which ICICI Lombard General Insurance Company acquired Axa General Insurance in September 2021 after announcing the deal a year ago.

His comments came a day after the insurance firm reported a 10 percent decline in net profit at Rs 313 crore for the December-March quarter. The non-life insurer had posted a net profit of Rs 346 crore in the corresponding period of 2020-21.

The gross direct premium income (GDPI) of the company stood at Rs 4,666 crore in the quarter under review as compared to Rs 3,478 crore in the year-ago period, ICICI Lombard said in a statement.

Dasgupta sees health loss ratios coming down going ahead whereas motor insurance loss ratios should normalise at current levels. He expects the combined ratio to improve going ahead.

“The health loss ratios should come down because this COVID impact, we are hoping, is one of and that will go away. On the motor side, we are hoping that the motor loss ratios will stabilize. We don't see it coming down significantly from this level unless the pricing intensity or competition comes down,” he said.

He, however, said there has been an improvement in ratios over the last quarter. Moving ahead, the combined ratio shall improve. “We will have to decide, how fast we want to do that because we are also investing heavily in terms of some of our distribution channels,” said.

He added that the insurance company offered about 1,000 people to run its health agency team and of them, 750 have already joined. When people come on board, it's an incremental cost and revenue can’t be generated immediately, so that's an investment ICICI Lombard is making, he said.