53-year-old Casparus Kromhout, CEO and Managing Director at Shriram Life Insurance has been in India for over ten years. But Kromhout, who is of Dutch origin but hails from South Africa, finds the 24x7 work culture of India fascinating which he has not seen elsewhere. Talking about the insurance industry, Kromhout tells FPJ’s Jescilia Karayamparambil and RN Bhaskar about the opportunities and challenges to tap the untapped market.
Edited Excerpts:
How do you find India personally and professionally?
The Indian business climate is different, but I am fortunate to come here with my family. It is completely life-changing for us. India is a welcoming country. I travelled a lot and was able to take a trip with my son to the Himalayas.
In India, we work 24x7. In many other countries, they do not send emails after work hours. But that is not the case in India.
People are very hardworking and diligent in the country. I have been able to learn a lot here.
There is a lot of potential for insurance in India, but a lot of competition as well. How do you explain that?
It is competitive here. But at the same time, I believe there is an immense potential to grow as well. If you look at South Africa from where I come from, there are around 55 million people and the market is saturated. That is highly competitive. The question is how do you grow in a market such as South Africa.
But in the case of India, the population is huge but the penetration is still very low. I do not think the market is the limitation. Limitation is one's own ability to innovate and find ways to reach the market.
A lot of the insurance companies are focused on the high-income segment -- if you just analyse their premium size -- with a focus on the metro and higher-customer segments. In that, there will be stronger competition.
There is a concentration of competition in the higher income segment whereas the rural and lower segment is underserved. It is difficult to conduct business in rural regions. Shriram Group has always been focused on serving the Aam Aadmi, serving the community and doing business with people who need such financial assurance.
Our sense of purpose comes from the Shriram Group. We focus on families who need life insurance the most. Life insurance is about protecting the family but it is often sold as an investment option. Insurance is usually for people who have low income. It is difficult to do business with them as at times they cannot pay the premium. But that does not mean we should ignore them.
There is competition which is concentrated. But there is a very big market out there, if you are willing to roll up your sleeves and work in that market, it can be different. I do acknowledge the fact that it is difficult to build a life insurance business in India. Culturally, it is not easy in India and it is a lot more difficult among the low-income group.
If you can build trust then you can run a successful business.
Life insurance works best when the insured start early. And the best way to do so is by having a law forcing people to insure lives at an early stage. What are your thoughts on this?
A law or a regulation asking people to insure life at a young age will be really helpful. It forces a safety net for everyone. This allows a drop in premium. It is good if any such regulation is there. While it is there for general insurance like motor cars, it is not there for human lives.
The industry is growing reasonably well. So, it is not that the industry is struggling to grow and this is the only explanation. It is one of the reasons which can support growth.
It will be a game-changer if the government comes with such a law. One big beneficiary out of this will be the government. The stronger the industry becomes, the stronger the country becomes.
How has COVID impacted the company?
During the first wave of COVID in March-April, we were very worried as our customer segment got a double whammy. Our customer’s income was hurt. Added to that was the expenditure on medical emergency. However, last year the medical emergency was not that much. But in the second wave, medical emergencies have risen. Both times, our customer segment was hurt by loss of income and medical emergencies. And it was a big concern for us.
We had to do a lot of continuity plans. Fortunately, by the end of the year, we did very well due to all efforts including cost savings.
April business was good this year, as last April was a complete washout. In May this year, the business was much lower. We will end at the same level as last year in May 2020.
Things are still unknown as the second wave is huge.
How many COVID claims has Shriram Life received? What is the impact so far on business?
In FY 19-20, we had total claims of 27,403 which include retail and group business. We did not have any COVID claims in that year.
In FY 20-21, we had total claims of 25, 257, of which 277 claims were related to COVID.
In April and May 2021, we had 551 claims and the total number of COVID claims was 10. We saw an increase mainly in the first half of FY 2021. But it is still very low. The total number of claims was low as people were not moving around much. But in the second half, we saw uptake and now it is rising, especially in group business.
In group business, we cover MFIs, usually small lenders and their families. We saw an uptake there. It is not impacting our business in terms of the number of new business and claims.
While the claims are increasing, it is not a concern from a company perspective. We have enough reserves for this as well. In terms of COVID claims, we are ensuring there is no delay.
What is your company’s claim settlement ratio?
In terms of settlement ratio, we were able to bring it up to 95 per cent in the last financial year. It is not as per industry stand but for a company like us which deals with lower segments, it is difficult. It was 64 per cent earlier. But we want to improve further this year. We use a lot of sophisticated methods for this.
Two years back, we introduced 48-hour claim settlement. For families who lost their loved ones and are in financial distress, they need that money quickly. If the claims have to go for investigation, it is a different case. If we are comfortable paying, but due to administrative systems there is a delay, it is unacceptable.
In the last couple of months, we changed that 48 hours to 12 hours. We made sure that we streamlined the backend processes. So, once the claim information comes, we get the necessary documents. This not just helps families and also helps our company and its brand.
How is the new business growing despite COVID?
For FY 2021, our total group business (for new business) was Rs 317 crore; and the total individual business was Rs 568 crore.
About 47 per cent of our business comes from rural India, which has increased by 2 per cent compared to FY 2020. Meanwhile, we get 54 per cent of claims from rural regions. This is higher compared to industry standards.
We have seen a good response as there is a need for insurance. But the work is a lot harder. Nevertheless, we were able to grow our retail new business faster than the industry.
What are the trends in the insurance segment today?
There has been a rise in technology adoption in rural India. We had a good mix of online and offline customers. Today, we are seeing a shift to online payments which is very encouraging. Thus, we keep investing in technology like machine learning.
We have an app called ShriMithra. In that application, customers can check their policies and place service requests in the application.
Pre-COVID, 20 per cent of our business came through our Astra application but last year (during COVID), around 60 per cent of our retail new business came through the application.
Then, there was a customer service application and we got a lot of service requests from that application rather than call centres and other means.
What are your expansion plans?
We want to expand with our feet on the street. We have agents and employees selling policies, and we plan to grow this. But when it comes to the number of branches, we plan to reduce them.
In FY19, we had 588 branches and in FY21 it is 455 branches. We are trying to reduce branches. So, we can streamline our business.
