BL Interview. There is a lot of vibrancy in the life insurance sector, says Shriram Life CEO

We are seeing the penetration level growing and Covid has helped to accelerate it. Now India’s GDP is growing faster and the insurance industry has to keep pace with that. The global average (life insurance penetration) is about 3.3 per cent. So there’s a lot of scope to improve in India. The real positive factor is the growth of income levels along with raising awareness about insurance products. The regulator is helping in a big way to drive growth. So we’ll see less friction in the future, which will help the companies to tap the potential. There is a lot of vibrancy in the Indian life insurance industry now as every player is growing fast.

We try to serve customers who don’t always have the access to financial services. So coming from the Shriram group, Shriram Life also serves people in the lower income bracket. While we have customers in all market segments, our core market is lower-income category people. These are families earning ₹2-5 lakh in a year (or a little higher). So this is the segment where if the breadwinner is not there tomorrow, the children may drop out of school or need to go to a different school. We are one of the life insurance companies that, I feel, has an extremely strong purpose by serving those people who need life coverage.

We bring solutions, not just products. Of course, we are offering normal products that are available in the industry as we serve multiple customer segments. But the core product strategy is to innovate and bring solutions to families who really need those. The bulk of our customer segment is either farmers or small businessmen, who will have money at some period of a year. . We try to offer solutions where they will be able to pay for their life insurance, keep their cover and not lose it if they don’t have money. We do a lot of technical innovation and we have tie-ups with fintech and insurtechs to serve our customer base efficiently.

For us, about 44 per cent of business is coming from rural India. Typically, the industry average is about 20 per cent. Also, almost 50 per cent of our claims are coming from rural India. So, we have a big focus on rural India. We tried to go right down to the village levels or mandals, not just district headquarters. Our business model is technology-driven deep rural. In this digital era, life insurance also needs face-to-face interactions, especially in the case of rural segment. We recognize that and we’re enabling people at the ground level to give advice efficiently using technology.

In FY21, we received about 24,000 claims. But in FY22, which was hit by the second wave of the pandemic, the number of claims shot up to 54,000. It was a big hit for the company. Knowing that most of our customers are in rural and their income levels, we made sure that all claims were settled. Our settlement ratio even increased to 96% in FY22. Ultimately, an insurer has to pay the claims. We had a 48-hour claim settlement scheme. If the claims don’t need to be investigated, we have paid the claim within 48 hours from the time we received documentation. Now we’ve implemented a 12-hour settlement promise under which the claims are settled within 12 hours. This is what makes the biggest difference. We have received positive feedback as families are very happy to get money in their hands early. Also in many cases, we try to employ eligible members of the families that have received settlements. We have already employed a number of people from the families for whom we paid claims. So, we try to do those types of things that actually make a difference in this business.

Yes, it is a powerful distribution model. However, it can also be volatile depending on your partners. Also, it’s not necessarily a low-cost model. What we believe is to reach out to people, especially in the rural areas, we need to have people on the ground. We are not averse to partnerships with banks, but we will be looking for tie-ups with regional banks, smaller banks, cooperative banks, etc to reach more customers. But we need people who are part of the same community in those rural areas. We have inherited our purpose from the Shriram Group. We are doing social service in the form of a life insurance business as we are reaching out to families who need life insurance the most. We will continue to penetrate deep into rural India.

Financially the company is robust as we maintain profitability. Though we took a hit due to a more than two-fold increase in claims in FY22, the sum assured amounts of our segment of customers were not that high. So, the hit we took was lower in terms of percentage when compared with the average in the industry. Though it impacted the bottom line significantly. we ended up making a small profit as against the projection of losses. Our individual business has been growing at 21 per cent in line with the industry growth in this fiscal. But our group business growth is higher at 40 per cent, which is higher than the industry growth. Our AUM has grown by 21 per cent to ₹8,149 crore. We are keen to sustain the current level of growth and want to grow our new business by 20-21 per cent in FY23. Of course, we will continue to push the renewals. Our premium income in FY22 was about ₹2,350 crore and we will probably grow that by 15 per cent or so.