‘Focusing on the middle-income segment now’, says Shriram Life Insurance CEO
Considering Shriram Life Insurance’s focus is on the middle-income segment with lower ticket sizes, growing individual regular premium polices would be its main line, says MD & CEO Casparus Kromhout. In an interview with Mithun Dasgupta, Kromhout says the insurer hopes to have an annualised premium equivalent (APE) growth similar or higher for FY24 as compared to FY23. Excerpts:
Shriram Life Insurance’s new business premium for the first part this fiscal (H1FY24) grew by a 85.54% year-on-year to Rs 859 crore. What were the factors that contributed to it? What is the outlook for new business premium growth for this fiscal?
Given the fact that the beginning of the year is usually flat for the sector, our growth momentum in H1FY24 has been firmly defined by its retail and group businesses. While some of our flagship schemes helped catapult group business to Rs 515 crore, our retail new business witnessed a robust growth of Rs 344 crore, a rise of 30% based on the financials. Our mission centres around securing lives of vulnerable families residing in rural and tier III/IV cities, the majority of who have never taken a life insurance policy. As of September 2023, Shriram Life’s individual non-single business grew to Rs 319 crore, reflecting our stable pace in leading the business forward.
What kind of changes are you witnessing in the demand pattern as from April 1 proceeds from non-ULIP products, where premium exceeds Rs 5 lakh annually, become taxable?
The impact of tax changes is hardly felt on our customer base as our focus is more on rural customers. As a result, our pricing is also in tune with what the middle-income segment can afford. If you see our products, policies have a lower ticket size — the average policy ticket size being in the range of Rs 20,000. Only a very small percentage of our customers are from higher ticket sizes, where they need to bear the burden of tax on maturity proceeds.
The company’s retail annualised premium equivalent (APE) grew 24% y-o-y for FY23. What is the APE guidance for FY24?
The focus on the current year would be to expand more on individual non-single premium in our customer segments. The company has continued its growth momentum on retail APE and is at a YoY growth close to 30% (on financials) up to the month of September, 2023. We hope to continue the same path and have a growth similar or higher for FY24 as compared to FY23.
The company crossed an AUM of Rs 10,000 crore. What is the target to grow it in the next two-three years?
We have been growing consistently on Assets Under Management (AUM) over the last few years. Our five-year CAGR on AUM has been close to 20% as at March, 2023. Our AUM growth would depend on numerous factors, but we hope to continue growing in line with the company’s growth plans. We also hope that the country’s economic condition will remain upbeat in the coming months, making insurance a good investment choice. Even though the inflation rates might have come down from the peak it’s still prevailing beyond RBI’s comfort level of 4-6 % level. Hence RBI will probably continue with its status quo on policy rates for the fourth time in a row. The concerns at the global level and the weak monsoon in India, higher retail inflation, surging oil prices may lead MPC to continue with its policy rate and stance.
The company’s claims settlement ratio for last fiscal stood at 97.4%. Kindly inform us about the claim settlement ratios in urban versus rural areas.
Our response to claims has been accelerated through robust processes, analytics and technology framework which helps us fast track smart settlement. We source 45% of our business from rural areas and 50% of our claims come from those rural areas. Our claim settlement ratio has sequentially grown over the years, and we hope to improve it further this year depending on the quality of claims which relies upon various factors. However, we are positive that by enhancing our scale and doubling down on our processes, we should be able to minimise the gap from the last document received to the time when the claim is settled.