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Aegon, which is present in India through its insurance joint venture (JV) Aegon Religare Life Insurance, expects to be one of the first insurance players to increase stake to 49 per cent in the Indian JV. Douglas Henck, chairman and chief executive officer, Aegon Asia, talks to M Saraswathy about the company's strategy. Excerpts:
At what stage are your plans to increase stake in the life insurance JV?
Well be one of the first companies to go up to 49 per cent (in foreign direct investment). We've already made the application and gotten the Competition Commission of India (CCI)'s approval. The Foreign Investment Promotion Board hearing is on Friday and we're already on the agenda. The regulatory authorities have also received the necessary documents.
Was the 'Indian management and control' provision in the Insurance Laws (Amendment) Act 2015 a dampener?
I would give the Modi government full marks to have had the Insurance Act early on its agenda and to have got it passed. But we were surprised that the Indian management and control provision was added at the last moment. However, we are already Indian managed and controlled. We have a board of directors and there are three westerners, while the remaining six are Indians. In our company, too, we have only one westerner among the 1,000-plus employees. In the top leadership team, there is none. After Aegon goes to 49 per cent, the Indian partner will still have 51 per cent.
After Religare exits the company, will there be any change in the way business is done?
The way we're operating the company today will not change tomorrow. The name will be changed in due course. Only the shareholding pattern will change, once Religare exits and BCCL takes up its stake.
Aegon Religare has been known for its online products. Will that be the strategy going forward?
There is a strategy to be a leader or be everyone else. There are people who have come in and undercut us in pricing. But the industry says we are better. No one is close to us, with respect to the number of products or the quality of products and services we offer. We have 90 per cent persistency rates in the online space, because these customers stay over us. We have started making some headway in the online Ulip (unit-linked insurance plan) space as well.
How important a market is India for Aegon?
Asia and India are very important markets for us. In India, we're not big enough and need to be bigger. Although we were late to come in, we have already been established as the first digital insurance company and the first online company. Everywhere, not just in India, the digital landscape will transform the way business is done. What we are doing in India will also help us in the mature economies because we are doing it so well.
Are you planning to enter general insurance in India?
We have general insurance businesses in markets such as the Netherlands and Hungary. There are some products sold in general insurance that overlap with life including health and personal accident and we are interested in those. But as far as fresh entry into general insurance by setting up a JV company is concerned, we will not be interested in that. If a customer wants these products, we can source it, but won't manufacture them.
India has been known to be a tough regulatory environment for insurance. Do you agree?
Opening up of the insurance market in 2000 led to a fundamental shift in regulations. In several areas, the Indian regulator has managed it better than those in other countries. For example, in some countries, foreign insurers are regulated differently than domestic companies. Here, Irdai (Insurance Regulatory Authority of India) has managed it well.
In issues like corporate governance and health of the industry, Irdai has been more attuned than others (regulators in other countries). Where all regulators are struggling today is the question of just how deeply do they get involved in the day to-day decisions of the insurance sector. In India, they aren't necessarily more intrusive or less intrusive than others. But my personal view is that regulators should allow the market to do a lot of these things.
Insurance penetration as well as density has been on the decline. Is that a concern?
The low insurance penetration can either be seen as a problem or an opportunity, because it will go up. If you look at the GDP and your population, there are still a lot of people who are not as actively engaged in the economy as others. As people start moving up the ladder as their income levels rise, the first insurance they will buy will be general insurance. Life insurance will come in later.
Insurance penetration and density will go up since the poor will continue to go up to the middle class and the middle class will have better access. There are some short-term measures like the government-insurance schemes that have been launched. At present, it is a little bit of a superficial calculation and, hence, it will go up.
