FDI in insurance sector needed

Bert Peterson is the managing director of Aviva Life Insurance India, a joint venture between Dabur and Aviva. In his 22-year long association with Aviva, Mr Peterson served in various roles. Before joining the Indian operations of the group, he was the director of Aviva International with responsibility for a portfolio of business units including Turkey, The Czech Republic, Romania and Hungary.

Apart from being the managing director and CEO of Aviva India, he is also on the board of Aviva Asia Pacific.

Excerpts from an interview with S. UMAMAHESHWAR:

What is your take on the life insurance industry?

The life insurance industry is very dynamic in India. The market penetration in India is only four per cent and as such there scope for expansion. When the insurance opened up, there were only 12 players. However, that number has risen to 19, and six applications are pending for regulatory approval.

Don’t you see more competition in this industry?

With the entry of new players, competition is bound to increase. However, this will lead to more promotion and expansion of the market. We at Aviva can beat our rivals by holding on to our customers and focusing on new business.

Ulips have been popular because of their high returns compared to traditional insurance plans. Do you see an effect of lower returns on Ulips due to the volatilty of stock markets and a global economic slowdown?

Yes. There has been an effect on customer preferences. Now, people are shifting towards guaranteed return plans, which offer them a fine balance between low risk and high returns. However, there is no reduction in the demand for insurance.

How are you going to deal with it?

In the insurance industry, it is very difficult to differentiate ourselves. Aviva was the first insurance company to start bancassurance and unit linked insurance policies (Ulips). Immediately, other companies adopted these plans. On the bancassurance front, we lost our earlier partners — Canara Bank and Centurion Bank of India — affecting our reach. However, our new plans will address both the global slowdown and our dependence on others.

What needs to be done to encourage the industry?

The government of India should increase the foreign direct investment limit in insurance companies. It should expedite the creation of the Pension Funds Regulatory and Development Authority and open up the pension sector to private players. The government should also encourage Insurance Regulatory and Development Authority (IRDA) to maintain a fine balance between regulation and development. In short, we would like the IRDA to be liberal in the development of the industry.

What are the reasons that made you enter the health insurance segment?

We found that our customers need health products. There is a huge potential in the health insurance market, which is estimated to grow 600 per cent per annum. Aviva is planning several new health products to capture the market.

What is the percentage of micro-insurance in your revenues?

Premium paid-for micro-insurance products are very small starting from Rs 40 per annum. As such, the percentage of micro-insurance in our revenue is also very small. However, there are opportunities in this market too. According to a study by the United Nations Development Programme, Up to 90 per cent of the Indian population or 95 crore people are excluded from the insurance market and represent a powerful missing market. So, we are focusing on tapping this huge market by offering our unique products specially developed for the poor.

Where do you see your company in the next five years?

We will lead the markets.