‘We Are Doing Things Differently’

There was a point in time when Aviva was looking to exit India, but now it has raised its stake in Aviva Life Insurance. The increase in the FDI limit in insurance certainly played a key role in its decision. Trevor Bull, MD & CEO at Aviva Life Insurance told BW Businessworld’s Paramita Chatterjee that there definitely was a feel good factor about the relaxation in FDI norms. The environment is positive and there are opportunities galore in the Indian market, with its vast demographics and low penetration. Excerpts:

What is your outlook on the insurance industry in India that has of late been in news, thanks to the proposed merger between HDFC Life and Max Life. Has this transaction opened up floodgates for consolidation in the sector?
Well, I would say the industry outlook is definitely positive. Today, you have big players who are investing in the domestic market, bringing in the required capital with the increase in the FDI limit. Some of them are also going in for IPOs. So all in all, it’s a positive environment. Today, the dynamics of the market have changed with new capital coming in, new players entering into the market with new ideas and new approaches that are benefiting customers. That’s good news.
Moving to your next question, merging of two large players like HDFC Life and Max Life is not just good for the two companies, but also for the overall industry. For them it’s a positive step — they are getting all efficiencies, cost and scale efficiencies, which should benefit in terms of products. But for us, it’s good because it creates changes, interests, questions and dynamics within the industry. The industry is changing, leading to positive dynamics and we at the new Aviva, want exactly that. We are refreshed and we are back in the game. So it’s easier to deal with market dynamics today.

You mentioned the ‘new’ Aviva. There was a point in time when Aviva was looking to exit India but now it has raised its stake in Aviva Life Insurance. That was also the phase when I guess your banks’ assurance partners DBS and IndusInd Bank exited Aviva. Going forward, what are your expansion plans?
You mentioned DBS and IndusInd Banks. DBS has always been and in fact, continues to be an active partner. So there was never a break in the sales process consideration. As far as IndusInd Bank is concerned, there was a break until the new corp policy came out. As per their rights and strategies, they chose another partner. But we will commence with them as their second partner. There has been a pause there — not related to sales processes but as I mentioned, to IndusInd Bank’s own strategies.

Coming to your bigger question, yes, there was a consideration issue. However, no decision was made. Aviva was certainly looking and exploring. But the increase in the FDI limit played a key role. Now, with more FDI coming in, there is definitely a feel good factor. The government is positive and there are opportunities galore in the Indian market with its vast demographics and low penetration. The potential in India can now be truly realised and we are best placed to grow.

In India, trust of the customer has been damaged in the past with issues pertaining to misselling. Keeping that in mind, we have decided to do things differently and focus more on customer needs. In fact, last year, we spent a huge amount of money on research to understand customers, their changing lifestyles and behaviour.

How smartphones have changed people in every way — the way they do business, the way they choose things, the way they interact with each other. We looked for what’s happening in e-commerce and other retail distribution channels and in this respect, we also tried to understand how insurance can solve things in the digital world. We chose several customer segments to understand what difference we can make in each category, and how child and health-related plans can make a difference in the domestic market. Currently, the financial literacy in India is very low — 76 per cent are still financially illiterate. By this, I refer to those who still don’t actively understand the basics of financial markets — what makes markets go up and down. In fact, this is where we should address the needs and start helping people to have confidence and knowledge to understand the contours of financial markets. Also, in that way, we don’t only talk about insurance, we also advise them to take informed decisions.

Well, insurance in India is considered more of a tax saving tool. How do you plan to address that? Does that come across as a challenge? How do you plan to change people’s mindset?
Insurance has always been a struggle. Insurance is considered more of a market investment. People are more concerned about tax benefits from it. The key question in their mind is what will be the return and will it give you a 10 per cent tax benefit. While insurance is considered an investment tool, one must remember that it is definitely not that. Insurance is an assurance, it is a protection and it helps you secure your future.

It needs to be promoted in a different way. For instance, if it is about looking after your son, one should look for an insurance policy. Insurance is equal to protection during lifetime or even otherwise. One should not think of insurance as an investment product. When you are no longer there, it is there to protect your family and that’s what is important.

One should not think if it is offering a 7.3 per cent return and whether that is good enough or whether that is doubling. Until now that has been the mindset of people. So, the key question here is how do you change that? We are trying to change and talk about insurance and financial issues. Insurance is not an investment. It is the savings absolutely for some of your needs, your life-goals. It’s something you put together as a lifetime goal, a goal say for 20 years. For instance, if you want to marry off your daughter with your salary, how will you do that; how will you ensure your mother has the best healthcare facility when she gets to a hospital. These are key topics.

Please throw some light on the kind of product mix in the market now? What is it for Aviva?
Well, we typically have a ratio of 80:20, where traditional comprises the majority. We launched a new product in March, in the high networth market, where specifically the minimum premium can be one lakh. In terms of the industry, I don’t have the exact data but I’m guessing ULIPproducts comprise more than over 50 per cent of the market. This is mainly because of the bigger bank-led players,such as ICICI Prudential.

paramita@businessworld.in