Stuart Purdy believes that his company's flexible and niche products are best suited for the Indian consumer.

New Delhi: Aviva Life Insurance India is a joint venture between Dabur group, one of companies in India in the FMCG sector and Aviva, UK's largest insurer.

In accordance with government regulations Aviva holds a 26 percent stake in the venture while Dabur holds a 74 percent share.

Stuart Purdy, managing director, Aviva Life Insurance India, is also a director on the Board of Dabur India. In addition he serves on the recently appointed Ministry of Finance Committee on Bancassurance and is a member of the Board of Governors of Amity School of Insurance and Actuarial Science, New Delhi.

Mr. Purdy has been associated with Aviva since 1985. He has held a number of positions within the UK and International business units of the Group. He was UK's youngest regional manager in CGU Life, responsible for all sales and operational matters in South West of England and Wales. He planned the launch and development of CGU's new life business in the Republic of Ireland, which he launched in March 1998, and which became one of the strongest producing businesses in the Group's European operations. He served as General Manager of this business until February 2000.

A Fellow of the Chartered Insurance Institute and a Chartered Insurer, Mr. Purdy completed his schooling from Stranraer Academy in Scotland and graduated in Economics from Heriot-Watt University in Edinburgh where he was the President of the Students Association for a year.

He is married to Dr Shona Purdy who is the Global Head of Organisational Development for Ranbaxy Laboratories based in New Delhi.

Mr Purdy who was one of the speakers at the at the recently concluded 8^th Insurance Summit at Hyderabad now speaks to domain-b about Aviva Life Insurance and its activities in India.
Some excerpts from the interview:

Can you give us details about your JV partner- Total income and the premium income from life insurance operations- Size of life fund? Can you provide details about Aviva's Indian operations-Equity base -Shareholding pattern-Distribution of Board membership amongst the promoters?
Aviva Life Insurance has a current paid-up capital of Rs 154.80 crores and is steadily establishing its presence in the country. As per the latest reports, despite being the latest entrant in the market, Aviva has already overtaken some competitors having recorded a total premium income of Rs 65 crores over a 80,000-customer base.

Can you compare and contrast your products with that of other private players? What makes your products/company different from that of others?
Most private life insurance companies launched traditional products in India, very similar to those offered by LIC. Aviva, however, took a different approach and was among the first private insurers in the country to introduce Unit Linked products in the market, offering its customers value for money products that are modern, flexible and transparent.

Aviva is also the only insurer to have launched products in India with the unique With Profits Fund. The With Profits Fund guarantees that the selling price of the units will never fall. The unit value of this fund is increased by crediting bonuses on a daily compounding basis. The fund provides investment security to your capital.

The unique features of Aviva products are:

1. Flexibility:

• to choose different cover levels for the same premium depending on individual needs
  
• to choose between funds: Unit Linked and Unitised With Profits
  
• to increase the premium and sum insured by opting for indexation in order to get a meaningful amount at maturity
  
• of making Additional Single Premium payments as often as required over the duration of the policy. These increase the savings value of a policy besides maximising tax benefits
  
• to opt for partial withdrawals from the fund whenever needed.

2. Transparency:

• to see how funds are invested. Quarterly newsletters are despatched to all customers.
  
• As the NAV is published on a daily basis in leading newspapers as well as www.avivaindia.com

How crucial do you think is pricing of insurance products?
Pricing of insurance products is extremely critical. Correct pricing is dependant on estimation of mortality rates. An insurer levies a particular mortality charge assuming an expected rate amongst a defined section of the population. If the insurer overestimates the mortality rate then the consumer pays more than he should and the reverse is also true. Both of which will effect the investment return on the product.

Can you give us details of your other products on the anvil such as the number of products and the segments to be addressed?
We have recently launched Young Achiever, a children's policy. We have also introduced three products for the rural markets: Amar Suraksha, Jana Suraksha, and Anmol Suraksha. We will be launching some more individual products soon.

February and March are the two months when sales of life insurance products are high. How is the trend for your company?
Our sales also increase during this period. However, our sales strategy is not based on selling insurance to save tax. We have adopted a need based sales approach through the Financial Health Check. We understand the long term savings and protection needs of our customers and then recommend the right product to satisfy those needs. Consequently, we tend to sell throughout the year, including the traditional lean months of April-June.

How many policies have you sold this fiscal and till now? Can you give us the product wise break up and the product wise premium earned? Average sum assured per policy? Mode of premium payment-monthly/quarterly/annual (annual is better for the insurance company)
In 2003, we have sold over 45000 policies and have earned a premium of Rs. 64 crore.

Number of policies sold in rural areas-last year and also till date this fiscal. Could you elaborate on your rural strategy?
We have already met our social sector targets for the year through our tie up with Basix, a micro-finance organisation based in Andhra Pradesh. Till date, we have covered over 30000 lives.

Our rural target for the year is 6000 policies and we have so far sold over 2200 policies. We are confident of meeting our targets as we have started selling in rural markets only in the current quarter. Our strategy involves identifying the villages on a few key parameters, creating awareness for our products in a focused manner in these villages and then selling policies. We have specially designed three products to suit the requirements of customers in rural areas and the response to our products and our communication in these markets has been very good.

What is your target -premium income and number of policies- for the first three years and how are you planning to achieve this?
We had a target of Rs. 60 crore premium income for the current fiscal which we have achieved. Next year we plan to achieve a new business premium income of Rs. 120 crore.

For the current year what is your renewal premium income and new premium income? What trend do you see now in the sense of-size of policies going down/up, change in mode of payment, policy surrenders?
Aviva started selling in India in July last year. 2003 is our first full year of operation and most of our premium income is new business premium income. Our average policy size is increasing continuously and our average for the year is Rs 14000 per policy. With the introduction of our child policy and a few more products, we expect this to move up further next year.

What is your bonus strategy? Did you declare a bonus last year? If not when do you expect to declare a bonus on your policies? Some of your competitors are assuring returns. What is your response to that marketing strategy?
We had announced a bonus at an annual rate of 6 percent for all unitised With Profit life insurance policies last year and rate of 5 percent this year for all products other than Pension Plus. For Pension Plus, the rate was 5.25 percent.

In the last one year Aviva's Unit Linked fund has generated an absolute return of 43.01 percent through prudent in-house fund management, well ahead of the benchmark index mark of 27 percent.

What is the percentage of policy surrenders you have till now and the reasons for that? How does this compare with your budgeted figures?
We have not had any policies surrendered till date.

How many branches do you have at present and what is your plan to expand your branch network?
Aviva is headquartered in Gurgaon, Haryana with 17 branch offices, and 4 special rural sales centres across the country. We are also present in 91 locations through our Bancassurance partnerships.

What is your communications strategy and your budgeted promotional spend?
Aviva has an innovative approach to marketing. We market our products through various innovative methods keeping in mind that we are present where the customer is. We have therefore been associated with cricket across media. We have used outdoor advertising in strategic positions like traffic timers and done topical advertising during the Union budget, Holi and Diwali.

How many agents you have? How many do you propose to add? What is your productivity per agent and number of policies and premium per policy?
We are increasing our strength as we increase our presence. As on date we have over 1600 agents. As per the IRDA data for 2002-03, our productivity is highest in the industry.

Apart from individual agents what other distribution channels are you looking at? Have you tied up with any companies, banks or financial products seller for selling your products? If yes what are the names of such entities and the kind of agreement-whether they will be selling all the products or some selected ones?
Aviva has two primary distribution channels, its direct sales force as well through its bank partnerships. Aviva has pioneered bancassurance in the country through its tie-ups with four leading private and nationalised Banks in the country. They are ABN AMRO Bank, American Express Bank, Canara Bank and The Lakshmi Vilas Bank Ltd. These associations give Aviva potential access to over 2600 bank branches serving over 30 million customers. Already Aviva is recognised as the leader in Bancassurance and 70 percent of Aviva's business comes through this channel.

When do you expect to break even and register profits?
Aviva, like most other life insurance companies in India, is likely to break even in 6-8 years

What is the quantum of additional capital infusion planned by you? When will this be invested?
Our current paid up capital is Rs 154.8crore. In January 2003, we had increased the capital base by Rs 45 crore, taking the total paid-up capital to the current Rs 154.8 crores mark. We will be adding Rs 88 crore in January 2004 to meet our business requirements.

Can you explain your investment strategy and distribution of your investment portfolio? What is your investment income and the yield? How did the sliding down of interest rates and dull equity markets affect alter your business plans? Can you elaborate?
Our investment strategy involves investing the customers' funds in a prudent manner in order to maximize the returns without exposing him to undue risk on account of fluctuations in the market. We are the only life insurance company in India having our own in house fund management team based in Mumbai. Our investment performance this year has been ahead of benchmark indices and ahead of the performance of our competitors based on the published data for balanced funds.

Pension is said to be a lucrative market. What is your plan? Are the regulations a stumbling block? If yes, can you give details?
We are currently awaiting the government's announcements regarding pension reforms. Life insurance companies are best suited to participate in this market as they have the necessary distribution and products. While we are keen that existing life insurance companies are permitted to participate in the pensions market, should regulations require the activity to be carried out by a separate entity, we will be willing to abide by Government regulations for the same.