CEO SPEAK — SUNIL MEHTA

“We will devise policies for the local environment”

Sunil Mehta (43), country head and chief executive, American International Group, Inc. (AIG) in India is busy identifying new streams of activities for the group in the country. Having set up operations in alliance with the Tatas in the insurance sector, AIG is now eyeing asset management, pension funds and the software sector in a major way. A chartered accountant by profession, Mr Mehta started his career with the management consultancy, A.F. Ferguson. He joined the Citibank in 1983 and before joining AIG in 2000. His current priority is to execute the AIG franchisee in India with a greater emphasis. In an exclusive interview with Sangeeta Singh of The Financial Express, he talks at length about AIG’s plans for its India operations. Excerpts:

What were the driving factors that brought AIG to get into the Indian insurance sector?
We see a great potential for the insurance sector in India. With growing awareness, people at large have started looking at insurance more from a risk point of view rather than from the point of filing income tax returns. Also, as Indian families are moving away from joint family units to nuclear ones and with women becoming earning members, there is a greater awareness about savings and the intrinsic advantages of life insurance. AIG also thinks that with only a fraction of population being insured, there is tremendous scope in this business.

You have tied-up with the Tatas to enter both the life and the non-life sectors. Was it because Tata is a household name?
We have been talking to the Tatas since 1994 and once we got the government clearance to enter the Indian market, we signed the deal with the group. Tatas are the best group we could have thought of. In fact this alliance was the first choice for both sides. The Tata brand is known for its integrity and strong leadership. Today, both Tata AIG Life Insurance and Tata AIG General Insurance are well poised to penetrate both the life and the general insurance businesses in a big way.

What is the kind of agency services that the two companies are developing?
Both Tata AIG Life Insurance and Tata AIG General Insurance are making it sure that not only do the agents carry a larger menu but also have precise knowledge when they sell an insurance product. We also want that these agents should be able to effectively commence tailor-made policies to suit individual needs. Besides, these agents undergo 100 hours of training before they are put in the field.

Just to give an example, one of our agents who is amongst those who have sold maximum number of policies in Mumbai recently, discovered a huge clientele in priests. These are the people who would rather depend on destiny than plan for their future. But our trained agents have got very good business out of them.

With 11 players already entering the private insurance sector, don’t you think the insurance market is getting crowded? Also, do you think the new players would look at the rural sector seriously?
I think there is enough space for each of the new players. The success depends on the potential of the new company that is entering the market to sell its products rather than the numbers. We all have certain rural commitments which we would abide by. Tata AIG is working with local NGOs (non-governmental organisations) for a better distribution network in these areas.

In the non-life segment, what are the specific areas that Tata AIG General Insurance is looking at? Does it plan to introduce new products or will it simply transfer products existing in the developed world?
We are looking at energy, commercial lines, marine, accidents, health and personal insurance (both home and auto). We will devise policies which can be adapted to local environment and transfer best practices from the developed world.

Besides insurance, what are the other interest areas for AIG?
AIG is one of the largest private equity investors in India. We have done a private equity business of over $425 million in several areas. For future, we are looking at telecom, toll roads and bridges, manufacturing and retailing in software. AIG plans to make long-term investments in these areas. We are also sourcing software development services out of India. Other promising areas for AIG seem to be asset and risk management and consumer finance and we are evaluating the right strategies for these segments.

Yet another business that AIG is looking at in a big way is pension fund. I think there is an immediate need to open this sector and it will have two-fold effect. On the one hand, it will generate long-term funds and on the other it will give the much needed comfort to people serving in the disorganised sector.

When do you think an economic revival will happen and which sectors are likely to lead this?
I think by the middle of next year, the economy should revive and the country will have the anticipated growth in its GDP. I personally feel the consumer goods industry will take the lead, followed by others.

But the primary market as well as the secondary markets are showing no signs of revival?
Well, these markets are also governed by factors other than macro-economic fundamentals. However, I feel that this market has to revive. Because the corporates have to resort to the equity market as they can’t just depend on loans and internal accruals. It’s just a matter of time and once the first round of IPOs (initial public offerings) are made by quality players others will follow suit. Besides, the Reserve Bank of India is taking proactive steps and the interest rates have gone down making cost of capital as competitive as international standards.