Shriram Life Insurance eyes Rs110-crore in FY07

Shriram Life Insurance Company, a joint venture between Chennai-based Shriram Group and South African insurance major Sanlam, has targeted a turnover of Rs 110 crore for the 2006-07 financial year.

The company collected Rs 8 crore annualised premium from April till June. During the last quarter (January-March) of the previous financial year, the firm did a Rs 15-crore first premium business. So far, it has issued 15,000 policies. The firm boasts of being the first and the only chit company in the country to have entered insurance in January this year

Shriram Chits Pvt Ltd executive director Y S Chakravarti told Business Standard that over 600 branches of the chit firm, with the help of 65,000 agents spread across the country "� particularly in Andhra Pradesh, Tamil Nadu, Karnataka and Maharashtra "� recorded a Rs 330-crore auction turnover and disbursement from April till June this year.

The company's chit business touched Rs 3,500 crore last year (2005-06). About 200 branches in Andhra Pradesh registered a business turnover of Rs 2,160 crore in the same year. The firm caters to 13 lakh customers, including 8 lakh customers in the state. It runs chits ranging from Rs 10,000 to Rs 10 lakh but a majority of them come under the Rs 2-lakh category.

Chakravarti said the firm was aiming at consolidating its chit business this year. Shriram Truck Finance, which gave Rs 2,000 crore truck finance this year, is expected to increase the same to Rs 10,000 crore in the next two years.

The Cabinet Committee on Economic Affairs (CCEA) recently cleared the proposal of New Bridge Investment to invest $150 million in Shriram Holdings, the group's holding company. Chrys Capital had already invested $100 million in the group.

The insurance company manages 10 divisional offices of which four are located in Hyderabad, according to Chakravarti. The city also houses its headoffice.

He said the margin of a chit fund company is only 5 per cent of which 1 per cent goes to agents, 2 per cent to administration, and 1-1.5 cost to arrears maintenance cost, leaving a minimum of O.5 per cent to 0.75 per cent net margin to the company. If the arrears maintenance cost crosses the limit, the company is bound to land in the red.

The Foreman Commission fixed the commission of 5 per cent in 1971 and there was a need to hike it, he felt, urging the government to increase the margin of chit fund companies to at least 7 per cent.