EP940: Securing Bharat’s Financial Future: Digital Inclusion in Life Insurance

Casparus Kromhout, Managing Director & CEO, Shriram Life Insurance

Life insurance in India is undergoing a pivotal shift from traditional, agent-driven models to digitally enabled, inclusion-led experiences. Rural and emerging India, once underserved, has now become the next frontier for financial protection and long-term security.
 In this episode, Vriti Gothi sits down with Casparus Kromhout, MD & CEO at Shriram Life Insurance, to explore how the industry is evolving with technology, simplified onboarding, and trust-driven distribution. They discuss the unique needs of rural India, the rise of digital channels, the role of AI in risk evaluation and customer engagement, and Shriram Life’s approach to building accessible financial protection for every Indian household. 

Transcript

SPEAKER_02 0:00

I'm Friti Gurti of IBS Intelligence, and you are listening to the IBS IBUs podcast. With me is Casparus Kramhu, the managing director and CEO at Sri Ran Life Insurance.

SPEAKER_00 0:11

Thank you very much, Friti. It's nice to be here.

SPEAKER_01 0:14

Life insurance in India is an interesting crossroad with the government pushing for financial inclusion and industries embracing digital improvements. How do you see life insurance evolving in India, especially in the new era of transformation?

SPEAKER_00 0:29

Thanks, Friti. That's a very interesting question. The most positive of these is the fact that a lot of government focus on uh improving the reach of life insurance to everybody in India. So you might be aware of the insurance for all by 2047 slogan that is being used. Um, and I think it's a very powerful one, which basically says that we need to get everybody covered by, you know, after 100 years of independence and make sure that everybody's covered by life insurance, all families are covered by life insurance. So that's a very positive thing. We have always been um focused on those segments of the society um that really need life insurance cover the most. So the government and the regulator really pushing for financial inclusion. Um everything, you know, all the changes that are coming are pushing towards that. However, on the other side of the scale, we are seeing insurance penetration dropping. For two years in a row, insurance penetration has dropped from 3% in 2023 to 2.8% at the end of 2024. We we kind of have the opposite happening. And partly that might be due to the fact that you know the industry is really growing, the country is really growing so well. Um, so we see GDP growth really you know happening quite fast, which means that it's to continuously improve its um its penetration, because penetration of life insurance is basically measured by the total life insurance premium, you know, divided by the the GDP. However, we are seeing uh you know penetration drop, um, unfortunately. And in there are other countries that um that life insurance penetration is is much higher, upward of 10% plus in some countries in the world. So there's a long way to go. Um there's on the other side, the there's a big push for making sure that everybody gets covered by life insurance and financial inclusion is is really happening. The third dynamic that I want to highlight is that what we also see in life insurance is that, or what I have observed in the time that I've been here, is that um the average life insurance premium um is actually very high. So um we're talking about a life insurance premium of 90,000 rupee plus on average. Um, this is an annual premium. And um with a 90,000 plus annual premium, basically means that life insurance is mostly being positioned to higher income segments in the uh in the country and not necessarily to the lower income segments. So as a company, we are focusing on the lower income segments of the um of the country. You know, people typically earning between or families earning between five and 15 lakhs. And um, and what we're finding is our the premium size that we are selling is is just above um 20,000 rupees, uh, which is understandable. Family earning you know five lakhs in a year um might find it difficult to pay 90,000 plus for a life insurance premium, um, whereas maybe 20,000 is more affordable. So affordability um then becomes an issue. And what we so what what it also means is that um life insurance in in India is more successful in the higher segments, and it's being sold not only as life cover, but more as an alternative investment. Low penetration, you've got to focus on the on on higher segments, and on the other side of the scale, you've got the you've you've got the government asking and pushing for uh financial inclusion. Um so I think these these three forces are um are in play and and and that is what's happening um right now in the um in the life insurance um space. Uh we're seeing technology being developing very fast. Um and um that is how that is, of course, helping uh penetration um in the industry as well. So we we are seeing some reasonable growth, um, but I think there's a long way to go um in the industry as it is.

SPEAKER_02 4:45

That's a great perspective. Let's zoom in on rural India. A market that does not receive as much attention has urban areas. What's the current market positioning of rural areas in the life insurance industry?

SPEAKER_00 4:59

This is also very important because um the distribution of the uh of the population in India is um roughly two-thirds still in rural and around one-third in the metros. So um what we see in the industry is that um and according to regulation, uh we have to have um a rural business um in our um in each of our life insurance companies. Um and that's around 20%. So what you what you are seeing is that um life insurance companies are compliant, so they um they in the industry on average, it's just about just over 20% of the life insurance business is coming from rural India. But the um but the population in rural is um is closer to 70%. So um so there's a there's a big gap that um rural India is being underpenetrated uh by life insurance as it is today. Um and it's a big need, and that's that's why the industry, that's why the government is also um pushing for insurance for all by 2047, meaning that that's understandable to some extent because um, you know uh from a profitability perspective of a life insurance company, um, to go deep into rural um and to sell um affordable life insurance uh becomes very difficult. So um life insurance companies also have to manage their sustainability and their profitability. Um and they find it easier to actually do business in the metros, where they find more well-to-do customers, where they can get much higher premiums. And in that way, it supports the company in a in a in a much better way. We've always been um in rural, and uh, whereas for the industry, it's about 20% of the of the premium um coming from rural India. Uh, for us, it's uh it's closer to 40%. Um and uh we believe that that 40%, you know, we we're pushing towards 50% um over time. There's a massive population that's not getting covered right now, and uh, we are actually trying to um to to reach out to all of them and to make sure that um that they are getting covered. So that's the situation as it is now.

SPEAKER_02 7:17

That's a great initiative by Sri Ram Life Insurance. Speaking more on rural India, serving these customers often come with unique challenges, and at the same time, there is immense opportunities. How do you see those challenges?

SPEAKER_00 7:32

Yeah. I agree with you. I think the opportunity in the rural is huge and it should not be um underestimated or neglected. So the one side of it is that um it's our moral responsibility to reach out and make sure that everybody gets covered. That's why in Sri Ram Life we have the purpose of making sure that you know everybody gets covered who really needs life insurance the most. And then at the same time, you have a massive population in rural. Um, and we have um the benefit of a very fast-moving technology advancement um in the country itself. So a lot of things have been done by government and outside of government uh to improve the reach of technology to people in rural. So Digital India Initiative as an example, uh, you know, now so many people, um doesn't matter where they are, actually have access to data and actually have access to information, um, and actually has access to uh to commerce. So um so rural is not uh we should not be underestimating um rural India um at all. And this is the message that I constantly give to our team here as well, because we've we've gone out into rural India, we go and visit our customers a lot, we see we see how fast it is actually developing. So we are we we're seeing all of these um uh these things develop. And what we are trying to do is in in our technology advancement is to make sure that in in the places where it makes the biggest difference um to customers. Um so that's the one thing about uh about rural. So we what we do is we focus on you know how easy it is for a customer to get a life insurance policy, um, and then most importantly, how easy is it for a customer to get a claim paid? Um, and how fast is the claim getting paid? Um and then there's also in in rural, there are uh there are a number of um of other hurdles as well for life insurance. Um the one is that um affordability, of course. Um the the the size of the premium um and the cover that people can afford in rural. Um the other thing is that uh most people in rural, most of our customers are would be small business people or farmers. Um and um and they would have uh variability in income. So they may not be able to, when the renewal premium needs to be paid at that time, they may not be having enough money available to actually pay the renewal premium. So then you've got a persistency issue in um in rural as well, in lower segments. So we have to build in a huge amount of flexibility to support our customers in rural so that they don't lose their cover uh necessarily because of this. So we work on um you know how to reach customers, um, all our innovation is how to create more reach, um, then how to make sure that claims are getting paid faster. So right now, 90% of our claims are being paid within 12 hours. Um, so if the client comes and the documentation is there, and we don't need to investigate it, then we pay it within uh within 12 hours. So we make it as simple and as easy as possible for people to actually get get their money. And the third thing is um is awareness and education. Um, what we find is that you know, insurance and life insurance specifically is not an easy topic. It's not easy to understand, and products are not that that easy to understand. Um, so um actually, but um we find that people who are not aware of life insurance, we need to spend um a lot more time uh with our customers um before the sale and also after the sale to ensure that they fully understand what they have bought.

SPEAKER_02 11:20

That brings me to another powerful force reshaping the industry technology and AI. From improving customer experience to ensuring fraud preventation, technology is becoming central to insurance. How crucial do you think tech and AI are in shaping the future of life insurance?

SPEAKER_00 11:38

Uh it's absolutely uh crucial. It's both um very disruptive um for any industry, only for um for life insurance, but it's also very much needed. Um we've been using um technology in a big way, um, and then also um analytics and now AI. Um, and where it helps us um in a big way is that we're scaling very fast. The business is growing fast, um, but to then serve a very large volume, small premium policies, um, we need to be very efficient and very effective. Um, and in that way, um, analytics in AI has been a real um game changer for us because we're able to bring it in. AI is is is revolutionary technology. We know it's it's the industrial revolution um you know of the past that we will see a big shift um in multiple industries because of um because of AI. And every week we we learn about you know more things that can actually be done by AI. It's not like every year there's some improvement. Actually, now it's every day and every week that we see uh things happening and uh that we realize the power of um of AI and what it can actually actually do. Now, for us um in the in the business, um, we've been using um data analytics um and machine learning models since 2017 in a in a bigger way and formally. So we have models that um you know the bigger ones are um lapse propensity models and fraud propensity models, which helps us to identify and understand when we get new proposals coming in, what is it, what are the chances of that proposal to um to be a fraudulent proposal and what are the chances of it to be to to lapse early? Um and uh and and these models, these machine learning models have to learn over time. So we've had good time of them to learn. Um, and uh they're helping us in a big way. So now we we know that you know we know the risk of the business that's uh that's actually coming in, and we know how to manage each of these policies, you know, as as it comes in. And we also know that how to how to interact with uh with with customers um depending on um you know their specific set of circumstances and um and data, uh AI models running in the business as well. And we mostly use it on the customer service side um and on the um on the processing side to make things more efficient. Um we basically scratching the surface. We know we'll there'll be a lot more uh that we need to do, but it's helping us. And then we're working on things like uh, you know, hyperpersonalization of experiences uh with customers. You know, how can we how can we improve every customer's experience much better because we have the access to the data um and the models, um the AI models are actually learning uh very fast. And then in each um each part of the business, so we're able to use it um to make the business more efficient, building the relationship, making sure that they're comfortable with what they've bought and that they've understood it properly.

SPEAKER_02 14:51

That's interesting, Cassie. Let's talk about the road ahead. What is a long-term vision for Sri Ram life insurance and how are you aligning your people and strategies to stay ahead in such a dynamic and competitive market?

SPEAKER_00 15:07

We have a specific vision, um, which is a medium-term vision that we set up in 2023. Our vision is very much based on two things. Um so the one thing that drives our vision is um insurance for all, um, or our purpose of reaching out to um as many families as possible and getting them into the protection of life insurance. Um, because we know that in in the families that that that we serve, typically there's one life, there's one um breadwinner, and if the breadwinner is not there tomorrow, the family goes into financial distress. So that's a big purpose for us. And um we also feel that we've got the most powerful purpose um in the industry because that really drives us, it really motivates us. We feel that we are we're making a contribution by doing that. According to regulation, our premiums need to be mostly invested into um government securities. So um we're also proud of the fact that uh we're contributing to nation building. So we serve the family, um, the community, and also the country uh by growing the life insurance business uh fast. It becomes a big pillar for the uh for the government as well. Um and we've got a specific um vision to build the business to a certain level of value, um, you know, at certain milestones. So 2030 is one of those milestones where we want to grow the business to a certain size and a certain value. And uh the size that we're talking about 3x from where we are now. We want to build a business that will be around 5 to 7x um of where we were um after 2022. We are growing at um a CAGR basis of around uh um 35% uh for the last three years, where the industry is growing at around 15%. Um so we're growing significantly faster than the industry. Um I think the second part of your question was more about the capabilities and the people, uh the people side of it. Five years we've been focusing on um getting the right people on board at the leadership level. So all of us need capability development. Um, so we've got programs running and a lot of focus on our leadership development and capability development, making sure we've got the right people. Um, and that has helped us in a big way to um to ensure that on all parts of the business, um, everybody's able to contribute and bring their part. Um, and also because the environment in the business is changing so fast, um, you need people who are also uh very agile, flexible, um, who can absorb and um and then also keep uh you know um keep growing themselves in as as they're growing the business.

SPEAKER_02 17:58

Thank you, Gasparis. Gasparis from Hood, managing director and CEO Sri Ram Life Insurance.