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December 22, 1999


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"We are targeting the high-end market"

The Rediff Money Channel presents a guide to the private insurance companies that are open to shop in India.

M J Levett, chairman and chief executive, Old Mutual Plc., is very confident of repeating his South African experience in India. Old Mutual is the largest life assurance corporation in Africa, operating in South Africa, Namibia, Zimbabwe, Malawi Kenya, UK and Hong Kong. Levett sees a big market for life insurance in India and wants to be among the first MNCs to set foot in the market. Old Mutual has a market capitalisation of 5 billion and is part of the FTSE 100 index making it the sixth largest listed insurer in London. Neena Haridas spoke with him.

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, the total premia amounts 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 of growth.But it has the advantage of having a regulatory system in place. Also 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 be entering any of the non-life insurance programmes that you have mentioned?

No, It is unlikely that we will enter any non-life insurance products. Not because we don't see a market for them in India but we want to establish ourselves in the life insurance market first, and then expand our brand portfolio. It is always better to build the market in a consistent manner.

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 in 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 at the point of time, we are happy to agree with it. 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 lawmakers enables industry to participate in shaping the regulatory and fiscal environment. 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 will come down?

It is not just the prices that will be affected. With more players in the market, there will be a significant increase in advertising, brand building, and keen pricing not ridiculous pricing. Other industries will gain from the liberlisation of the insurance industry.


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