Shriram Life Insurance faces margin pressure in rural business, says CEO

The insurer had earlier introduced a 12-hour settlement window for quick payments. This option is used when there is no need for an investigation, Kromhout said.

With persistently low level of policy buying and renewal, Shriram Life Insurance, backed by Sanlam group and Shriram group, faces margin pressure in its rural business, said Chief Executive Officer and Managing Director Casparus Kromhout.

The insurer, Kromhout said, has 40 percent of its total business coming from the rural region and will focus on the business despite margin pressure. “We are committed to this segment and we are continuously trying to find new solutions and new ways,” he said in an interaction with Moneycontrol.

In the first reporting quarter of the fiscal year 2025, other life insurers too faced pressure on their margins. HDFC Life’s value of new business (VNB) margin, for example, shrank 120 basis points to 25 percent, and the same for ICICI Prudential dropped to 24 percent from 30 percent last year.

For Shriram Life Insurance, the new ways to attract more business, according to Kromhout, include introducing a quick disbursal and resolution mechanism. “Even with lower margins, we'll be investing in capacity to keep serving the segment better.” he said. The insurer had earlier introduced a 12-hour settlement window for quick payments. This option is used when there is no need for an investigation.

In Q1FY25, the insurer reported a drop in net profit on a yearly basis from Rs 35 crore to Rs 27 crore. It sold 127,000 individual policies in the quarter, up by 131 percent over the corresponding quarter last year.

With a mixed bag of numbers, Kromhout said that the insurer will continue to focus on scaling its operations which will lead to continuous pressure on its overall margins.

“So, the focus is on scaling, but focusing on scaling intelligently. We might find that the margins will, in the short term, come down slightly as we scale,” he added.

The insurer’s income from retail new business premium grew 57 percent annually to Rs 212 crore, while retail annual premium equivalent (APE) for the quarter stood at Rs 198 crore as against Rs 124 crore last year. With nearly a 60 percent growth in Q1, Kromhout believes that the insurer will not record a similar growth in the coming quarters. “Around 60 percent growth will not continue for this year. I think 30 to 40 percent will be more than possible. If possible, we'll try to hit 40 percent again this year,” he added.