‘Life market is huge, only 3 out of 100 are insured’

As the insurance industry undergoes various changes Hyderabad-based Shriram Life Insurance intends continuing its focus on the low-cost operating model, targeting rural businesses. Of the private insurer’s current business, 60 per cent comes from southern India. Manoj Kumar Jain, CEO and Wholetime Director, expects 25 per cent growth in FY2016 with an expansion of about 70 branches during the year. Edited excerpts:

How was the business last year?

The company’s new business premium increased 28 per cent to ₹498 crore in 2014-15. This year, we are looking to open another 70 branches. We have got board approval and applied to the regulator as well.

Your profit declined 7 per cent to ₹80 crore in FY2015…

Whenever an insurance company expands, we spend. A branch has a gestation of 1-1.5 years. Though we have a frugal way of expanding we have not burnt much capital. We expected this (decline in profit) to happen. We had good investment income last year. So, our gap is very low.

Do you think the Centre’s insurance schemes will come in the way of growth for private players?

Our model has always worked on those lines and about 58 per cent of our policies are sold in rural India. So, the government schemes will help us create more awareness. Last fiscal, we covered around 25 lakh lives. It was more of group insurance policies sold through various agencies, such as MFIs (microfinance institutions) covering two lakh customers every month and collecting ₹200 premium per head every year. We also tied up with gold loan company Muthoot, where customers purchased life cover from us.

Will your schemes earn trust the Centre’s schemes enjoy?

The market is huge as out of 100 customers only three have taken insurance in India. Awareness is missing and the Centre’s schemes will help. I don’t think it will be competition…The risk policies are not even five per cent of the total policies.

What is your product offering?

We are giving simple and easy to use products. We get the calculation done for the customers according to their requirements. The income is tax-free and it brings more money than the pension plan. We have also launched one product for truck companies with an assured money back offer policy and we are selling about 4,000 policies a month (almost 20 per cent of the total policies sold) since its launch three months ago. We sell this across Shriram Transport branches.

Last year, we sold 1.90 lakh individual policies and we are looking at 25 per cent growth there.

What are your expectations from each segment?

From the break up of last year’s premium of ₹500 crore — ₹160 crore was from MFIs and ₹340 crore from Shriram group’s branch network. Business from MFIs and Shriram group’s branch network should increase to ₹200-250 crore and ₹450 crore, respectively.

Do you have any plans to raise capital?

Our business model isn’t very expensive and hence we are quite capitalised. Our solvency is around 4.2 per cent (against in 5.9 per cent in FY2014). It has come down because we had surplus capital and for better returns we took out ₹100 crore and invested it.

Our cumulative profit is ₹328 crore and our share capital is at ₹75 crore.

Any plans on Foreign Direct Investment?

FDI is good to hear but very little action has taken place. Everyone wants to invest but in reality nobody has made money in the insurance business.

Our South African partner Sanlam holds 26 per cent stake indirectly through the group. They had a stake in us directly but due to the regulations in India they had to exit.

Will they pick up stake directly in Shriram Life now?

All the options are open. They can invest 23 per cent more or come through the group. There is no urgency in getting capital right now.

Do we see any IPO plans soon?

Nothing for us in the next three years, at least. Big daddies are already there in the market.

What are your hiring plans?

If I open one branch, I employ 10 people and about 100 agents. We plan to open 70-75 branches more. So, maybe around 10,000 people will be hired directly or indirectly. We have a total of 6,000 agents and employee strength of 3,500, of which 2,800 are field-based. About 60 per cent business comes from group network and 40 per cent comes from open market or agents.

What is your growth target?

In the next three years, we want to grow to ₹1,000 crore in the premium business and the ratio of 60 per cent from south and 40 per cent from rest of India should reverse. Also, we want to have about 1,000 branches by 2018.

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