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Gopal Balachandran,


11 October 2022 Episode #2
How ESG is shaping the Insurers’ Strategy & Business Model Gopal Balachandran, CFO & CRO

Podcast description

Welcome to IL cafe, we are talking on this podcast about how technology drives innovation in the insurance industry.


Good to have you join us on episode two of IL cafe. I'm your host Sheetal and the topic of conversation today is ESG and its impact on the insurance industry. Our guest on the podcast is Gopal Balachandran, Chief Financial Officer and Chief Risk Officer at ICICI Lombard. He's also a pioneer of excellence in financial reporting and corporate governance for India Inc. Let me tell you a little bit more about Gopal. He has been associated with ICICI LOMBARD for nearly two decades and wears several hats. He heads finance and accounts, investor relations, risk management, mid and back office investments as well as internal control and loss minimization functions. He was also instrumental in ICICI Lombard becoming the first Indian non life insurance company to be listed. And he's received wide acclaim and recognition for his work, including awards like the Financial Express Best CFO of the year, and the CFO 100 award in different categories like risk management, cost management and financial reporting. So on this episode of IL Cafe, it gives me great joy to have Gopal, tell us about what is top of mind for insurance organizations across the world today - ESG. Thanks so much Gopal for joining us on IL cafe. Welcome to the show, and how are you?

Speaker 2


Pretty good, Seetal, thank you. Thanks for that kind introduction. I don't kind of deserve so much of it. But thank you so much for that.



Well, Gopal, I'm certain every bit of that is deserved. And thank you for joining us, one more time. Now, to get started, ESG efforts have certainly become a significant differentiator for Responsible enterprises. ICICI Lombard, clearly a marquee brand in India, the second largest general insurance company in India for FY 2022, and also pioneer of SOS, has also demonstrated leadership in the adoption of ESG as part of its growth strategy. So I'd love to hear from you on that Gopal - the company's sustainability goals, some of the focus areas and some of the efforts that have been undertaken in this regard.



Oh, that's a great start Sheetal. So, I think when you look at it, you started off by saying that we are the first non life insurance company to be listed on the stock exchanges in India, even the fact that we are a responsible institution. And therefore, clearly ESG is something that we kind of largely imbibe, as an organization, as a part of running the institutions not just for one or two years, but over several decades, is how we are looking at ESG. To kind of embrace it, as a part of the way we work. To your point on how do we kind of look at this space? I think, honestly, I will kind of divide it into a couple of aspects. One is if you look at in terms of what we have been doing as a company, I think we started off disclosures well ahead of mandatory timelines of reporting in this particular space. Just to kind of give an example, the ESG report that we put out publicly on our website, this has been the third year running. So that's something that we have been doing on an ongoing basis, as you would recollect.

I think there was this new mandate, which actually is coming into force from FY 2023, which is the business responsibility and sustainability reporting requirements for the top 1000 listed companies. Now, while this is mandatory for FY 23, we thought, given an institution that's responsible and sustainable, that's kind of voluntary or updated from one year before. So, it is a part of our FY 2022 annual report. We also had a separate section on the BRSR as it is kind of largely known (as an acronym). We wanted to kind of start ahead of time. So that's something that we are really pioneering in kind of taking initiatives well ahead of deadlines that are stipulated for companies to comply with, if I were to kind of just move forward, while I said that we've been doing this way or a voluntary basis. But honestly, I think the last quarter fit is primarily because we have been able to engage significantly with multiple stakeholders. When we say stakeholders, it spans across customers, regulators, our shareholders, reinsurers, our own employees, government…I think all of them have been a part of our journey in getting appropriate feedback mechanisms so that we can improve our disclosures better.

So, there has been extensive engagement with stakeholders that we've been doing as a company. Now, while we've been doing that, I think obviously the tone is always set from the top. The board is very, very actively involved. We always had a corporate social responsibility committee, but in order to kind of embrace it with a flavour of sustainability, we also kind of renamed it as CSR and Sustainability Committee. So, that kind of gives flavour too, from the top. The boards are actively involved in the design and the framework of the ESG that we want to kind of run as an institution, to create this board oversight. That's the third thing that we have been kind of focusing on. The fourth, I would say, is CSA…this year, in fact, was the first year where we also started disclosing sustainability disclosures across the various scope one, two and three emissions that we do as a company. We kind of again did sustainability disclosures for the first time as a part of the effort we need to read. More importantly, we also were able to get an assurance done by an independent external firm to validate the disclosures that we put out as a part of the report. (Those), in essence, are the four or five key pillars in the way we look at ESG.



Important takeaway for all of our listeners, I would imagine, is that having buy-in from the leadership levels is something that can certainly drive your ESG agenda a lot better. The other thing that comes to mind Gopal, is that there has been a growing emphasis in the larger financial sphere globally on sustainability. For example, we've seen a lot of talk around sustainability-linked loans, and other such, you know, nuanced approaches. Similarly, the insurance industry has pursued sustainability goals in its own way. So, what significant, tangible changes do you think they're likely to see in the insurance sector over the next decade or so?



Okay, that's a great question, because we are looking at maybe the future, right? So, I'm sure amongst the audience, who are kind of possibly listening to me, a lot of…a lot of them in their minds are already thinking the next vehicle that he or she is likely to buy will be an electric one. Now, it doesn't matter whether two wheeler or four wheeler, but effectively, I think there is a clear need for transitioning to, move to, electric vehicles. But that's the reality. And clearly, we know that electric vehicles are relatively far better insofar as promoting the sustainability theme is concerned. In that regard, I think from an ICICI Lombard standpoint, we have been pioneers in providing insurance solutions for this transition to electric vehicle mobility, kind of put some data points in the table on the electric vehicle space. I mean, for just the quarter that had kind of gone by, on the private car side, we are roughly at a market share of over almost 14%, and in the two wheeler space, which we think will kind of largely transition faster into adoption of EVs - there we have a substantial market share of almost 65%. The number is quite high at this point of time, though over a period of time, we believe it could get moderated. That's one area where we want to kind of see ourselves taking the lead in possibly offering insurance solutions for the electric vehicle segment. The other area that I'm sure all of us will be kind of looking forward to seeing our entire power consumptions getting moved into solar powered or renewable forms of energy consumptions. There again, I think we have been pioneers in that space of being able to offer insurance solutions to some of these capabilities. That's again a segment that has done very well for us.

So, as a company, as a responsible institution, we would want to see how we can partner some of these corporates or institutions to be able to transition into some of the sustainability themes that they will be kind of working towards. So that's one area, which I would say, one can look forward to. Second, what we have seen in the last couple of years, particularly during the COVID environment, is all of us clearly learned how to work digitally. That obviously means across the spectrum of your operations, you could see increased adoption of digital/technology. And that by itself is going to kind of lend a significant amount, insofar as promoting sustainability is concerned, because you're all going to see maybe reduced consumption of paper, reduction of footprint, and so on and so forth. So clearly, that's going to be an area which we'd like to see for the future. The third area, I would say from an insurance company standpoint - an area which we will be significantly focusing on - is responsible investments. There again, from a licensing standpoint, we already have a responsible investing framework, which is largely based on the UN principles for Responsible Investing, where we look at maybe getting insights from investing companies in the way they are promoting sustainability. We do have an exclusion list in terms of assets where we want to kind of make our investments in. So clearly, I think, both on offering insurance solutions which kind of takes care of responsible underwriting, and at the same time responsible investments, is equally a theme that we're working on.



Now you spoke of technology, but it would be remiss of me to not dwell a little bit more Gopal, because we know that technology - “oh, what can we do without it now?” - but I'm quite certain that ICICI Lombard has taken it to another level. From that point of view - how you've leveraged these innovations, and also digitalization- what have you done in your organization?



So from our standpoint, I think when we talk of digital, it kind of cuts across the entire spectrum of the way we source policies, the way we service our claim proposition. More importantly, the way we kind of digitize our internal processes. That's the way we look at digital/use of technology, innovation across the various areas that we operate on. Last couple of years, we have seen tough times in COVID environment. But over the last so many years of our operations, I think we have been a firm believer in technology. Let me give you examples of how we are leveraging technology in the way we operate.

Let me take a relatively simpler one - motor insurance. All of us know as and when a claim happens, we are all in a hurry to get our claim serviced. That's what we want, we want our vehicles back at the shortest possible time. Now there again, we take a lot of initiatives in making sure that you can speed up the process of survey of the vehicle. And in the process, the customer is able to possibly get the vehicle back on time.

Over the last seven years, I would say that we developed an app - InstaSpect. Now what this app essentially does is, when a vehicle goes for survey at a garage, the garage is able to use the app, and through a live video streaming process, our experience claims service managers, who are sitting at a remote location, are able to look at the video live. And there is a voiceover that is happening between the claim service manager and the garage person. In the process, you're able to significantly kind of be more efficient in the entire survey process. This has been a great enabler for us in processing the claims much faster. And today, more than 85% of our claims that we settled on the motor insurance side of this Instaspect app. And in the process, we have been able to create customer delight in the way we settle claims on motor insurance. That's one sample of motor, even on the policy buying process.

Many times customers may tend to possibly miss the renewal date. So, in the process, effectively, you may be without insurance at the point of expiry of your last policy. But given the fact that you want to have a continuing insurance cover, there is a process which is called as braking inspection because you would want to see whether the vehicle was already having damage at the time of the renewal process. In case you have missed the renewal date, there again, I think through the help of technology, we created an app by which the entire braking process is quite seamless, the customer can actually undertake a self-inspection of the braking process. And in the process, if everything is clean, it's a kind of green channel for the renewal process to happen. So there again, I think a very large proportion of our breaking process is significantly done through use of digital/technology. And in the process, getting customer experience which is positive.

We move to health quickly. If you look at health, I think one of the things…again, we have been a firm believer of using technology in the health insurance piece as well… the IL Take Care app, which is something we created to largely advocate the health insurance proposition though, increasingly, we are expanding the products that we can offer through the app. But that's again a capability which significantly helps in the health insurance segment. One other example if you were to talk about the use of technology in the health side - a typical pain point for a customer is at the time of seeking a cashless authorization at the hospitals - it's always something that we generally get to hear about. Most of us would have faced that for unfortunate reasons in case any of us have to get admitted to hospitals. (With) The use of technology, we significantly streamline the entire cashless authorization process, which used to run into maybe a few hours, which obviously is a painful process for the customer today, with the help of AI/ML mechanisms. What used to take us easily more than three, four hours, now most authorization for a select set of procedures is down to less than 90 seconds. Again, I think a clear innovation that we were able to do on the technology side.



The last time you know Girish Nayak was here, and he was talking about the cool ways in which technology is leveraged to offer value or deliver impact to all stakeholders, and primarily, of course, customers in his particular case. He spoke about IL Scan and I was like, Whoa, give me you know, that samosa that I'm about to eat, you're gonna tell me exactly how many calories it has. And now you're telling me about things like Instaspect. And it's all fascinating how, you know, technology is helping us achieve this very, very important objective for ICICI Lombard. But a lot of our listeners, I'm quite certain you too Gopal, must have been wondering, why is Seetal asking me so much about technology? Where is the connection to ESG? So I'm coming to that now, Gopal. We need to dwell a little bit more, because here is a country where you are certainly seeing people getting more and more comfortable in using tech in financial transactions and also in your investment options. Is this an accurate assessment, according to you? Or would you say that this adoption that we talked about by consumers is still too nascent to actually contribute to the industry’s sustainability efforts? In essence, I'm asking you to connect the dots between your ESG efforts and technology adoption.



When COVID happened, I think we all had to suddenly change the way we had to operate. We have been so used to operating in a physical world, we had to significantly transform ourselves into a digital world. And believe me, some of these capabilities were already available with us, it's just that we did not want to kind of possibly explore and make the best use of it. Today, the way most of the organizations would like to operate on in an hybrid environment, which is a combination of both physical plus digital customers. Again, (they) have kind of learned it because they are used to availing different forms of services. Insurance is definitely one of them. And they have also kind of migrated themselves from doing it completely in the physical world into I would say more hybrid environment of operating.

Yes, your point is absolutely right. I think the customer preferences are clearly moving towards use of technology, use of digital as a way to operate in our process of sustainability, where we are saying a large part of our offering will be made available to the digital. Means we see a significant positive adoption from a customer standpoint as well. That's where, when I look at it on the policy side…for example, we issue roughly 29 million policies on an annual basis, of that 97-98% of those policies do not even enter our office…there is a capability created at the hands of the customer who is able to do the requirements on their own, or my intermediary or distributor is able to get it done to the customer again, in a digital form. So clearly, I think customers are embracing digital/technology far, far better. And in the process, as you rightly mentioned, it has been a key enabler or contributor to the sustainability initiatives that any which ways we are focusing as an organization.



You know, I was just thinking about it a few years ago - when there was talk of driving digital transformation across sectors and organizations, a lot of leaders spoke of how this is a function of culture, you need to have the right organizational culture to drive detail. And I think the same is probably true of ESG as well, one of the major hurdles that organizations will have to overcome is a lack of knowledge and skills in their best practices. So how does ICICI Lombard plan to train and equip its workforce to understand these important issues like sustainable finance, social and environmental risk management, and also the pivot towards sustainability as a differential element in customer value? How are we approaching this?



Now, as an organization on the social responsibility side, that's an area where our employees actually volunteer for some of these initiatives. The one is you obviously as an institution need to build a culture to embrace either social responsibility, or ESG. As a part of the way we operate. A lot of our employees have been kind of volunteering for some of the social initiatives that we've been running. And they say that we will take the lead in shaping up some of the agenda for the organization, so clearly there is already a cultural mindset in the employees to make sure that they embrace social responsibility.

On the ESG front, again, we have employees taking the lead on the part of the framework. I think a lot of our employees have clearly demonstrated areas where we as an organization can kind of look forward to some of those elements to be kind of implemented. They've done it at their homes. They've done it through some of the social work that some of them may be carrying out. And clearly they are giving ideas to ICICI Lombard by which we can embrace some of these elements as a way we want to kind of promote sustainability. That's clearly…volunteering is one thing that's kind of already working as a culture for the institution.

The second is capability building sessions that we undertake across the spectrum of the organization. And more importantly, I think we always keep kind of pushing our people to say why don't we look at something each one of us can take the lead in (as far as) sustainability is concerned. So that's how we kind of largely promote - through voluntary initiatives and to a lot of capability building/cultural sessions, is what we kind of embrace.



So, perfect coming together of employee aspirations and organizational objectives. I want us to dwell a little bit more on that ‘S’ aspect of our ESG goals - diversity, equity and inclusion. Gopal, at the start of the year, I recall a lot of consulting organizations talking about how D&I will remain in sharp focus for organizations, and the D&I ethos in most organizations is something that contributes to innovation, productivity, and also profitability. So, the business imperative has been long established. It would be great for us to know what ICICI Lombard’s policy is regarding these important aspects of ESG, inclusivity, equity and diversity.


20:52 Those are great questions. And that's something that's, again, the need of the hour, as a largely spoken topic. And from an ICICI Lombard standpoint, we're equally committed on the D&I initiative. In that regard, there is already a cross functional committee that we have created in the organization, which was primarily responsible for designing, planning, driving and monitoring the implementation of the D&I interventions. The tone is set from the top, internally. On gender equity, we already have goals to achieve over the next, let's say, three years across the various verticals, across the various divisions, the organization. Each one of them is championing this agenda of bringing about gender equity in the organization. That's one form of diversity, equity and inclusion.

The second element is to also make sure that when you look at the entire working environment, we need to embrace people of different work streams, or people who have got different requirements to be able to contribute to the organizational sustainability initiatives; need to create more a flexible way of operating for people so that you get people from different requirements, a part of the organizational initiatives. And there again, I think from an ICICI Lombard standpoint, we launched ‘flexi working’, part time working, which are all great enablers for us. To be able to get the right set of talent to contribute, as I said, insofar as the organizational growth is concerned, even insofar as employee initiatives are concerned, we do carry out a lot of annual checkups, counseling programs, yoga sessions. All in all, the whole objective is to make sure that D&I is pretty much a part and parcel of the organization.



Right. I'm glad you also touched upon employee well-being as an important, you know, pillar of all that you are building for the ESG strategy at ICICI Lombard. Gopal, now, I want to go back to something that you had mentioned…this has got to do with the volunteer work and CSR that you spoke of. Would we want to our listeners to get a sense of some of these flagship programs that you might have done, which made a big difference in several locations and communities. Tell us a little bit about the ICICI Lombard’s sustainability agenda and CSR activities, and how those two come together.



I think for ICICI Lombard, social responsibility is something that we are quite cognizant of. And some of our initiatives in this space date back almost close to 10 years. And the reason why I'm saying this is we embrace social responsibility not just to meet the minimum regulatory stipulations that came in some time back. But, for us, social responsibility is a way of operating. Right to safety for us in India today is…we unfortunately have a lot of people succumbing to accidental deaths. And the primary reason for some of this is that helmets are not being worn. So that's an area where we want to kind of step in, and there have been specifically designed helmets that have been crafted for us. Again, these helmets are being offered not only to the parent, or the person who is kind of driving the vehicle, sometimes you will also have the child sitting at the back. So we realized that, or maybe there was also a demand from some of the parents to say, why don't you also offer a helmet for the child as well? So these are specifically designed and crafted helmets that have been created to make sure that the country becomes a much better place to ride vehicles. And the extent of damage or the extent of unfortunate deaths could kind of be significantly minimised.

So that's one of the flagship programs that we have been running as an organization. Since the time we have been doing this, close to to 4,25,000 lives have been impacted as a result of the right to safety initiative. To move away from, let's say, vehicle to Caring Hands, a lot of employees of the organization, almost more than 50% of them, actually volunteer to work on this initiative. The objective is to kind of make sure that children are given a better place to read. We do a lot of free eye checkups, so that the problem gets detected ahead of time. And in case, for some reason, if any of the children need spectacles, we also make those available as well. We have impacted more than 3,75,000 lives as a part of this pioneering effort that we've been doing over the last several years. The third area, which also contributes significantly to sustainability, is safe drinking water. We call it Niranjali. Again, we work with schools. The whole objective is to make sure that children get safe drinking water. And we kind of install water purifiers at the schools, including taking care of the maintenance of those unifiers. So that's again an initiative which is very close to us from a social responsibility standpoint.



Absolutely! As they say, miles to go. But then kudos most certainly, Gopal, to you and the teams involved in all of these projects for actually making such a difference, and get, you know, relevant areas to ICICI Lombard in the area of CSR. Superb to hear of this! And on a final note Gopal, one of ICICI Lombard’s mottos, if I may add, is Fulfil Promises Responsibly and Sustainably. How do you see ICICI Lombard playing a leadership role in the insurance sector’s push towards achieving their ESG goals?



That's a difficult one, right? Because it's always tough to kind of figure out how we stay ahead of the curve in shaping the elements of the future. We have generally taken the lead in some of these areas. For us, the first and the foremost thing that we will obviously stand committed to is the country's objective. And then we know clearly, I think, as a country, they have already committed to become net zero by 2070. So obviously, we will play a very, very vital role in being able to contribute to that particular element, which will help the country to kind of commit itself.

The second, embracing digital, embracing technology contributes a lot in the way we kind of promote a sustainable way of operating. And therefore, even when I said 97% of my policies are sold digitally, there is still that 3% that's left out. Can I keep looking at it area by area, in figuring out how some of these elements can be kind of brought down?

Third, can we step back and start contributing to the corporates in figuring out how we can minimize risk itself in the first place? For example, fire incidents. Fire incidents happening for a particular corporate also results in challenges from a sustainability standpoint, or let's say from air pollution risk standpoint. If you're able to meaningfully contribute or minimize some of the risk incidences, then, in effect, you're kind of promoting or contributing to the stability objectives. That's when we kind of worked on what we call this value added services initiative. Over the last eight years, and area by area, we have been looking at what typically causes a loss, or what typically is a risk that an institution or a corporate could be facing. And in case you're able to mitigate some of those losses, that possibility will be minimized, which actually kind of is environment positive. That's the way we look at it. So VAS will definitely be an area that we will focus on. We will continue to look at how we can, even in our management of funds, be more responsible in the various investment decisions that we take. That's one of the areas that we will be kind of committing towards. At the end of the day, employees, our people, are our asset. Therefore, creating a flexible, friendly workspace, and focusing on employee well-being will definitely be a very, very important agenda in our sustainability initiatives.



Superb! And, you know, when I started out this conversation Gopal, I realized that we are going to get some best practices but I didn't realize that this is going to be a comprehensive look or insight into how ESG is being realized by a marquee brand likeICICI Lombard, and for that we must thank you. Thank you so much for walking us through all of these various aspects of ESG,breaking them down into actions and behaviors, not just the level of individuals, but also teams and the organization, and helping us connect those dots. Brilliant chatting with you, and hope to catch up with you again on IL Cafe. Thank you for being here.


Thank you so much. Thanks everyone.

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