Motor insurance sector may rebound in 2022 as auto sales picking up: Shriram General Insurance

An unexpected outcome of the Covid-19 pandemic has been awareness with respect to the need for health insurance, by each and every individual. The segment has grown. Motor insurance took a hit during the same period since vehicle sales had significantly slowed down across all categories, including commercial and passenger vehicles. "We expect a recovery in motor sales and thus motor insurance in 2022, as demand recovers and sales rebound," says Anil Kumar Aggarwal, MD & CEO, Shriram General Insurance in an exclusive interview with Bizz Buzz

We are looking at rural expansion to Talukas, where insurance penetration is miniscule. As a part of our growth strategy between FY22 and FY25, we will recruit at least 1,500 employees to make our products available across 25,000 points of sale. We will target 600 talukas with less than 1 lakh population in the next one year through electronic kiosks, sub-dealers, life insurance agents, common service centres, bank branches and other informal methods. The next target will be to reach areas with a population of 20,000 to 1 lakh

Rural and semi-urban markets need better coverage in terms of product and distribution. In order to reach all corners of the country, we look towards informal networks such as self-help group members and banking correspondents. We also have over 38,700 agents, who with the help of our points of sale, facilitate doorstep delivery of insurance to remote locations. The Common Service Centre model is a focus area for us, wherein insurance services are extended through digital kiosks such as under the state government portal 'e-Mitra'. We are also looking to open micro-offices in order to increase our reach

The industry is being driven by the health insurance segment, whereas the largest segment, motor insurance has been witnessing a downfall. Your comment.

An unexpected outcome of the Covid-19 pandemic has been awareness with respect to the need for health insurance, by each and every individual. The segment has grown, but our health portfolio is still very small compared to the overall book. Motor insurance took a hit during the same period since vehicle sales had significantly slowed down across all categories, including commercial and passenger vehicles. We expect a recovery in motor sales and thus motor insurance in 2022, as demand recovers and sales rebound

How much was the underwriting loss in H1?

2021 has been a difficult year for all sectors, the insurance industry included. As the lockdowns eased and restrictions on movement were lifted, our operational expenses surged as we looked to reach out to customers and offer satisfactory services, even as demand for new policies, especially motor policies, remained muted.

This hit our earned premium to an extent, and we made an underwriting loss of Rs30 crore during the first half of the financial year compared with an underwriting profit of around Rs36 crore in the corresponding period of the previous year. Shriram General Insurance witnessed steady premium income for the six-month period ending September 2021 at Rs800 crore. This is expected to nearly treble for the second half of the fiscal, led by better-than-expected economic recovery. Green shoots are visible in Oct-Nov and we expect to close the financial year with total profit of around Rs800 crore and gross written premium income is seen touching Rs2,000-2,100 crore. The higher targeted income and profit will be supported by the thrust on rural, which we expect will contribute to a quarter of the company's sales income by FY25. We are targeting gross written premium income of Rs 550 crore, or 16 per cent of the total premium income, from rural markets by FY25. Rural sales were about Rs 90 crore in FY21 and are expected to double this fiscal. With that, Shriram General Insurance aims to grow the AUM to Rs 15,000 crore by FY25 from Rs 10,720 crore currently.

How much was the investment income in H1?

Investment income for H1 stood at Rs 407 crore, slightly higher than Rs 398 crore in the year ago period.

What about group health insurance?

As a company we are focused on rural insurance, micro and non-motor insurance. Our group health portion is quite small as compared to the overall portfolio.

You have been trying to reduce the reliance on motor insurance?

Shriram General Insurance was the only insurer to start operations by underwriting just motor insurance and today, we are the seventh-largest motor insurer in the private sector. In FY21, 92 per cent of the premium income came from the motor vertical, and the remaining was from other verticals. The target is to bring down this share to around 80 per cent, which should be supported by the push for rural and micro insurance, and non-motor business.

What is the strategy to push micro insurance and increase your rural/semi-urban penetration?

Rural and semi-urban markets need better coverage in terms of product and distribution. In order to reach all corners of the country, we look towards informal networks such as self-help group members and banking correspondents. We also have over 38,700 agents, who with the help of our points of sale, facilitate doorstep delivery of insurance to remote locations. The Common Service Centre model is a focus area for us, wherein insurance services are extended through digital kiosks such as under the state government portal 'e-Mitra'. We are also looking to open micro-offices in order to increase our reach.

However, even though awareness regarding insurance has improved owing to the pandemic, affordability remains an issue and will continue to be an issue, till overall penetration in the country improves. Thus, we believe that the marketing combination of coverage and bundling multiple products for rural customers is a great idea as they need product customisation. The leading insurance products--crop and cattle covers--are more in-demand than motor and health insurance.

We, at Shriram General, offer simple products which can create value for the rural population. As per the customer base and targeted demographics, we have developed our homecare and personal accident insurance covers, and ensured that they are priced, promoted, distributed, and serviced correctly. Long-term two-wheeler insurance and goods-carrying commercial vehicle insurance are our two top products in the rural sector.

What are some of the digital initiatives that the insurer has been working on?

The Shriram Group believes in serving the underserved and under-protected population of the country. We have implemented new business models and products to provide and administer risk mitigation solutions catered to our communities. About 90 per cent of the rural workforce has no minimum wage or social security because they fall under the informal sector. Post the Covid-19 pandemic, this segment needs insurance security the most. We are driving distribution through CSC portals and have invested in the latest technology to deliver services through chat bots, online claim services and digital payment facilities.

We have also relied heavily on

our mobile application 'MySGI' (https://play.google.com/store/apps/details?id=com.svs.sgic), which facilitates all types of services with the benefits of online availability, less documentation and quick claims settlement.

Are you looking at any new products?

We launched our regulatory sandbox-approved Fire Loss of Profit cover policy in November, which is a one-of-its-kind initiative. We had applied for the product under the second cohort of the sandbox allowed by IRDAI. The unique product covers the loss of profit or increase in working cost due to reduction in business turnover/output.

While normally, such a cover is contingent upon a Material Damage (fire) Policy, liability under FLOP will be admitted without compulsion of any such material damage. It is specially designed for shopkeepers, hotels and restaurant, small scale manufacturing unit and automobile workshops, among others.

We are excited about this product and are targeting 10,000 policies on a pan-India basis, as we believe it will help business enterprises, especially smaller business units, tide over temporary cash flow volatility owing to operational disruptions. We are focused on innovation at Shriram General Insurance and will keep looking at new products and technology-driven innovation going ahead.

Geographically, what are the areas you could look to increase your presence in?

We are looking at rural expansion to Talukas, where insurance penetration is miniscule. As a part of our growth strategy between FY22 and FY25, we will recruit at least 1,500 employees to make our products available across 25,000 points of sale. We will target 600 Talukas with less than 1 lakh population in the next one year through electronic kiosks, sub-dealers, life insurance agents, common service centres, bank branches and other informal methods. The next target will be to reach areas with a population of 20,000 to 1 lakh.