 "David Mcmillan")
From looking at exit options a few years ago to doubling its India investment earlier this year, Aviva India, a life insurance joint venture between the UK’s Aviva Plc and the Dabur group, has come a full circle over its decade-long presence in the country. David Mcmillan, chairman, Global Health Insurance and chief executive officer, Aviva Europe, tells Veena Mani and Sudipto Dey that going forward, the insurance company would aggressively take the organic route to ramp up India business. Edited experts:
Could you take us through the reasons for the U-turn in India strategy?
India is an exciting market for us. You have a GDP growth of eight per cent, and an insurance market that is heavily under-penetrated, relative to many emerging markets. We expect India to be among the top eight insurance markets globally in the next five to 10 years. A couple of years ago, we were sceptical about whether we would be allowed to invest more in India. So, we explored some options for exit. Now, having been given the opportunity to double up our investments, the future is rosy.
Where do you see Aviva’s India business in 2020?
Globally, Aviva makes about £2.5 billion in operating profit, and India’s share in that today is very small. For us, India, China and Indonesia are markets of the future. I would like India to be a significant part of Aviva’s operating profit and market value over a 5-10-year period.
Will focus be on profit-driven growth?
An old colleague of mine once said that volume is vanity and profit is sanity. Over the long term, we’ll build a profitable business while we are prepared to invest in the country in the short term.
What are the targets for the India business?
I would like to increase the size of the customer base. We currently have around half-a-million customers in India. We should have five million customers over the next five years. Aviva has all the ingredients to be successful in this market, and we should be ambitious about it.
One of our key strategic themes globally is being a digital-first company. We’d like to get more focussed on the digital play. Already, around 25 per cent of our customers in India are connected digitally – this is highest across all markets globally.
The insurance space has started seeing some consolidation with the proposed merger of life insurance businesses of HDFC Life and Max Life. Are you open to the merger & acquisition route to grow in India?
Our priority in the country is to build distribution, alliances and joint ventures in a number of different sectors. We have a five-year strategy for the business built around three big pillars – SME (small and medium enterprises), health and child – and the potential to grow rapidly in India.
In some other markets, telcos and super markets have become important channels for distribution of our products. We’ll see the distribution landscape changing in the digital world. We want partners – not just banks and traditional distributors – from the new economy as well.
Our order book for India is looking full at the moment. We hope to have some of these alliances (in place) in the next few months. We do not have specific plans for M&A in the country. In the short term, our strategy for India will be more organic than inorganic.
Are you exploring the Dabur group’s retail presence to distribute insurance products?
We’re looking at that space. We’ve had a couple of pilot projects over the past 12 months. We would like to make more of that distribution.
Any plans to list the Indian joint venture?
We don’t have any defined plans. The business in India is not yet ready to go public. We may consider it after three to five years when the business grows to a substantial level.
What is your take on the regulatory regime for the insurance sector in India?
What you look from the regulator is a degree of consistency. A lot needs to be done to make the country more insurer-friendly. The electronic-approval process is way too slow. In a digital era, it takes almost a year to make simple changes in products. We need to develop our products and propositions much more quickly.
The country also needs to look more holistically at the agent side of the business.
Did Brexit have any impact on your global outlook?
For UK Inc, Brexit means we’ll be looking at more bilateral relations with companies in countries like India, China, Japan, the US etc. From Aviva’s perspective, operationally we’re not massively impacted. Largely, it will be business as usual.
