‘India Attracting a Lot of Investments Because it’s a Long-term Opportunity’
Hong Kong: Rapid urbanization, wide protection gaps, and an increase in the insurable population have combined to burnish India’s allure for global insurers such as the AIA Group, with the rising flow of investments enhancing the valuations of local insurance businesses.
“The paper is in short supply in India and that is driving the valuation,” Bill Lisle, the regional chief at pan-Asian insurance powerhouse AIA, told ET. “We have seen a lot of foreign investment coming into India as they see India as a long-term opportunity, which is positive for the industry.”
According to the India Brand Equity Foundation (IBEF), a trust established by the Commerce Ministry, India currently accounts for less than1.5% of the world’s total insurance premiums and about 2% of the world’s life insurance premiums despite being the second-most populous nation. The country is the world’s 15th largest insurance market by way of premium volume, and its insurable population is anticipated to touch 750 million in 2020.
Life insurance is projected to comprise 35% of total savings by the end of this decade, as against 26% in 2009-10. In the next decade, the market size for life insurance could be as large as $160 billion from less than $50 billion now.
In India, AIA has a joint venture with the Tata Group in the life-insurance business, with AIA owning 49%. The company has moved up the local leader board by adopting a multidistribution channel approach and expanding partnerships by joining hands with large banks. It has moved away from part-time agency, and now employs professional agents.
“That is the right way for the agency to be in India,” said Lisle. “There are millions of agents in India who are part-time, which is not the right strategy. Our strategy in India is to run a premier agency, as it is in the rest of Asia.”
Tata AIA is profitable in India for the last seven years. It was ranked sixth on the basis of individual first year premium adjusted at the end of March 31, 2017.
“Market share does not necessarily mean profitability for shareholders and for the company,” said Lisle. “Since our IPO in 2010, we are extremely disciplined about the busi-
accounts for less than
of the world’s total insurance premiums of the world’s life insurance premiums
ness we write. We look at VNB and not APE. We don’t chase topline, hence we are not the top writer of unit-linked insurance plans. The highest market share is not equal to the highest profitability.”
Ng Keng Hooi, group chief executive and president AIA Group, said that he has no plans to list the Indian life insurance company. “Everywhere we operate in, we own as much as we can,” Ng Keng Hooi said. “We have no need to list. People who list are sometimes looking for capital. We have no need to go to the market for capital in India. As far as AIA in India is considered there is no need for markets to be listed.” India has recently seen local listings by ICICI Prudential Life Insurance and SBI Life. Ng Keng Hooi said that India is a tough market. “The level of insurance protection is still very low and it is a growing economy,” he said. “There are regulations in terms of products, in terms of what people do, (and) there are limits on the number of products companies can launch. All those things are constraints for businesses.”
(This correspondent travelled to Hong Kong at the invitation of the AIA Group)