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December 24, 1999

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The Rediff Business Interview/M J Levett

'Other industries will also gain from insurance liberalisation'

Mike J Levett, chairman and chief executive officer, Old Mutual PLC, is confident that the company can repeat in India its success in Africa's insurance industry. Old Mutual is the largest life insurance corporation in Africa, operating in South Africa, Namibia, Zimbabwe, Malawi, Kenya, the UK and Hong Kong.

Levett sees a big market for life insurance in India and wants to be among the first multi-national corporations to set foot in the market. Old Mutual has a market capitalisation of 5 billion (about Rs 350 billion) and is part of the FTSE 100 index; it is the sixth largest listed insurer in London. Neena Haridas interviewed him recently in New Delhi.

What is your reading of the Indian insurance market?

Since liberalisation has just begun, there is a long way to go. But I think a beginning has been made. Obviously, with the size and population in this country, there is great potential.

Since we operate in Africa, I can only compare it with the South African market. In South Africa, total premia amount to over 13 per cent of GDP, the highest in the world. Compared to this, India's premia amounts to only 1.4 per cent of its GDP. In SA, there is a 5 per cent annual growth in premium against a GDP growth of 1.2 per cent.

In a market with about 32 life insurers, Old Mutual has a 32 per cent share of the market followed by Sanalam's 21 per cent and Liberty Life's 10 per cent. It will take a while before India reaches this kind growth, but it has the advantage of having a regulatory system in place and the fact that a host of MNCs are interested in setting up shop here.

Have you decided on your joint venture partner?

Well, we are still in talks and are yet to decide on the partner. I don't think it would be appropriate for me to talk about the matter in detail.

What are the kind of products that you will bring to India?

We only deal with life insurance and asset management and this will be the area of competence in India too. We also deal in pension fund, mutual fund, UTI fund and retirement fund. Retirement funds are very important in India and there should be a move to encourage savings.

Will you enter any of the non-life insurance programmes that you have mentioned?

No, it is unlikely -- we entering any non-life insurance products.

Why is it that most companies entering India are looking at life insurance?

Well, I think it is the size and the potential of the market that is attracting insurers to this area. Besides, life insurance is an area for long term players and it is the best route to build relationships.

Are you contended with the 26 per cent cap as regulated by the government?

It is not a matter of being contended. If the government thinks it is necessary to lay down such rules, we are happy to agree with it. And you see, the insurance market is not a fly-by-night business, players are here for the long term and as and when the market evolves, the rules will change.

I think a good relationship with the regulators and other law-makers enables industry to participate in shaping the regulatory and fiscal environment. And ultimately, it will be a self-regulated industry. For India to reach this level of evolution, it has to go through the teething phase first.

What is the market segment that you are targeting?

We are targeting the high-end market segment which we would like to call the upper middle income.

Well, most of the companies seem to be focussed on the 'high-end market'. What about products for the poor?

We are conducting a study on the market and will launch products that will suit the maximum number of people.

What is your lowest premium on a product?

It is about $180 a month.

Which means you have discounted the middle income group as they will not be able to afford this premium?

Not really, we have not discounted any one. We will work it out according to our research results.

Does opening up of the sector mean that the premia prices will come down?

It is not just the prices that will be affected. With more players in the market, there will be significant increase in advertising, brand building, keen pricing not ridiculous pricing. You see, there will be other industries that will gain from the liberalisation of this industry.

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