With the active participation of private players, the Indian life insurance industry has grown by leaps and bounds over the years. Ever since private players entered the industry in 2000, life insurance, as a percentage to overall GDP, has grown from 2.1% to 4.5% and is set to grow manifold in the years to come. With the advent of Ulips (unit-linked products) life insurance companies are vying for tier-II and tier-III markets, says Akhila Srinivasan, managing director, Shriram Life Insurance Company Ltd, a 74:26 joint venture between the Shriram Group and South Africa?s Sanlam, and the only private life insurer after SBI to be profitable in the first three years of its operations. In an interview with FE?s R Ravichandran, Srinivasan says the industry is already a crowded one and the likelihood of more players entering the fray in the near future is low. Excerpts:
What is your overall view of the industry?
The life insurance industry is poised to see big growth. After experiencing a difficult period for the last one year or so due to the global financial meltdown, the industry hopes to revive and grow aggressively in the years to come. The percentage contribution of the life insurance industry to GDP has substantially gone up from 2.1% in 2000 to the current figure of 4.5% and is set to grow further, thanks to the active and aggressive participation of private players in the industry. Given the widespread awareness, the entry into tier-II and tier-III cities and benefits out of ULIPs, the industry will not only see a continuous growth but also growth on a sustainable basis.
What challenges does the global meltdown present to life insurers?
Since 90% of the total business of private players comes from Ulips (equity-linked policies), which are purely depend on the growth of equity markets, the meltdown has really affected the industry, particularly those who have grown aggressively without proper planning and customer base, coupled with high input costs. Except SBI and Shriram Life, most of the players have to undergo severe pressure. However, given its long-term benefits, Ulips continue to be the major driving factor for the growth of life insurers. With the steady revival of equity markets, the life insurance industry will see major growth in the coming years.
What is your view on more players entering the Indian life insurance market? Will we see any consolidation?
The Indian life insurance industry is more or less saturated with the active participation of close to two dozen players. Since almost all major players across the globe have entered the Indian market in association with local partners, it is firmly believed that new players will refrain from entering the Indian market in the near future. Rather, one will anticipate, possibly can even witness, a consolidation among weak players or acquisition of weak players by the strong ones in the months to come.
You have said that Shriram Life has been one of the few to become profitable in the first three years of its operations and has been the top performer as far as annualised premium equivalent (APE) is concerned. Please explain.
We have a huge customer base of over 30 lakh through our subsidiaries?chit funds, fixed deposits and transport finances. We also have a huge branch network?1,400 offices?spread across the country with an IRDA-certified agency force of 20,000. In addition, we also have a strong workforce of close to 65,000 under our chit funds subsidiary, and they can be converted into a strong agency force in the future. Leveraging our existing strength and huge infra set-up, decades of expertise in financial services and our overseas partner?s strength in bringing out customer-friendly policies, has made us a strong player, though small in nature. After SBI Life, Shriram Life is the first profitable venture among private life insurers in the first three years of operations and we continue to be profitable. At the end of three years (March 2009), the APE stood at Rs 443 crore, making Shriram Life the third player in India with reference to other life insurers in the first three years of their operations. Today Shriram has 360,000 policies on its books, covering 260,000 lives, with a total premium of Rs 1,000 crore.
What is your growth strategy?
Being a mid-sized company we want to maintain a balance between growth and profitability and hope to capitalise on our internal strengths. Our immediate focus will be to expand our presence beyond south to the northern, western and eastern markets in a big way and grow at 40% annually. After opening an office in Gurgaon, Shriram Life will add more offices in the next three years. The company will also focus on high-networth individuals (HNIs), particularly in the northern and western markets, with a renewed vigour.
Another major aim is to convert all the 65,000 chit agents into IRDA certified and active agents of Shrifam Life Insurance, who will help the company, achieve its goals. The company will recruit 5,000 field sales officers and 500 business managers to support its expansion plans.
Sanlam has been allowed to hike its stake to 49%. What are your views on this?
As and when the government comes out with a clear policy, we will allow our foreign partner to raise their stake. Sanlam is not only the oldest life insurance company in the world but also a major player with innovative products and technologies. Both the companies have now picked up more knowledge about each other and are in a position to take the business to new levels.
