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Post tough FY21, Shriram General MD Prakash sets sights on growth

Informist, Thursday, Jul 8, 2021

 

By Shreejit Nair and T. Bijoy Idicheriah

 

MUMBAI – The coronavirus pandemic led to a 13% contraction in Shriram General Insurance Co Ltd's premiums in the previous financial year, but the insurance major looks set to chart a different course in 2021-22 (Apr-Mar). Managing Director Neeraj Prakash believes while the current fiscal may be muted, it will see growth in premiums returning. 

 

Prakash said the insurer's business activity in Apr-May had built on the traction seen a year ago. 

 

“I believe that the economy is now improving and once it will open and lockdown relaxed barring few states, the improvement in overall business will start happening.”  

 

Unlike most general insurers, Shriram General Insurance does not underwrite health insurance or solely depend on new motor insurance, where growth is driven by tie-ups and new sales. 

 

Instead, the insurer has a niche in the used vehicle insurance segment, which Prakash noted had been less impacted than the rest of the automobile sector.

 

Lockdowns imposed last year, though, meant fewer commercial vehicles on roads. 

 

In Shriram General Insurance's core motor insurance segment, net earned premium fell 14% on year to 4.9 bln rupees in the March quarter, data on its website showed. For the year ended Mar 31, the net earned premium from the motor segment fell nearly 6% to 21 bln rupees.    

 

This segment contributes nearly 98% to its revenue.

 

But the insurer managed to report a 7.7-bln-rupee profit before tax driven by treasury income, even as its premiums slipped. 

 

With the vaccination drive and economic activity picking up, Prakash believes Shriram General Insurance has seen better traction in the first few months of this fiscal compared with the same period in 2020-21.  

 

The Shriram General Insurance MD, though, cautioned that even though the company sees growth in premiums this fiscal, the possibility of a third wave will weigh. 

 

“We are not very much optimistic for FY22 considering the pandemic situation and COVID third wave expected in a month or so, even though we have a plan to grow as per the industry growth.”

 

According to ICRA Ratings, the gross direct premium income of general insurers may rise 7-9% in 2021-22.

 

Even in the mainstay motor segment, Prakash does not expect a hike in motor third party premium rates this financial year, in contrast to most insurers' expectations.

 

"Under this tariff…because in most of the types of vehicles, the loss ratio is less than or close to 100%, IRDAI can also not push to the government to increase the third party premium."  

 

The third party premium rates, notified by the Insurance Regulatory and Development Authority of India on an annual basis, were not revised last fiscal amid the pandemic crisis. The regulator is yet to notify about the rates for the current financial year.

 

The insurance business in India is seen relying heavily on bank partners for growth. Shriram General Insurance, too, is actively scouting for a strong bancassurance partner for distribution of its insurance products in addition to existing tie-ups with smaller channels like co-operative banks and regional rural banks. 

 

Prakash said strong bank partner will also help the insurer increase the share of business coming from outside Shriram Group entities. 

 

"Bancassurance definitely will be a good vertical for us because each bank is having its own network of its branches. And it also depends upon the lending portfolio (of the bank), and depending upon that, you will get your pie."

 

In the previous financial year, the business generated from Shriram Group entities was 49% of the total premium written by the general insurer. This number has steadily come down from 59% in 2018-19.  End

 

Edited by Charumathi Sankaran

 

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