Aviva is planning to enter the Indian non-life insurance business having established its presence in the life insurance arena.

"Entry into the general insurance business proves critical as this will give us cash flows immediately," said Charles Anderson, managing director Financial Services Aviva Plc.

Unlike the life insurance business, which is seen as a long haul of seven years, general insurance business starts giving returns in the first couple of years, he added.

"General insurance business gives one the cash flows needed to pay dividend and maintain funds to run the businesses," said Anderson.

Seventy-two per cent of Aviva's global income comes from the life business and 28 per cent from the non-life business.

"We'd like to maintain a similar ratio in the Asian market," he added. Anderson however, did not give any time frame for Aviva's entry into the non-life business stating that the initial focus will currently be on the life business.

He however, was confident that the second joint venture would also be with its existing partner Dabur. Aviva Life Insurance Company is a 74:26 joint venture with Dabur India, and has a capital base of Rs 155 crore (Rs 1.55 billion), which will be further capitalised by Rs 45 crore (Rs 450 million) by January 2004.

It might be recalled that Aviva (when it was known as CGU) had tied up with Bombay Dyeing to set up a general insurance joint venture in India.

However, following the merger of CGU with Norwich Union, the global insurer decided to break off the joint venture and focus on the life insurance market in both India and China.

Anderson sees immense potential in the Asian market, with 40 per cent of the world population concentrated in these two developing countries.

He sees China growing at a rate of 30 per cent per annum for the next 10 years, thereby outperforming the size of the UK market by three to four times.

In contrast, while he sees India growing at a rapid pace, it will become more than twice its current size, but just a fraction of the UK market.

Today, the penetration of life insurance is low in India at 2.15 per cent and 1.34 per cent in the case of China.

This affords immense opportunity for growth especially considering the savings propensity in these countries at 23 per cent and 40 per cent respectively.

This is as opposed to 15.7 per cent in developed markets like the UK. Anderson added that Asians tend to spend more on insurance than the global average mainly due to the lack of a social security structure.

Following the European model of sales through bancassurance, Anderson sees the Asian market developing on similar lines.

India has become an important location for Aviva, as it has set up two back offices in the country in Bangalore and Noida.

"It is not just the cost advantage that attracted us to set up base here, but also the quality of people," said Aviva (India) CEO Stuart Purdy.

Aviva, among the last of the joint ventures to commence operations, expects to climb among the top three in the next four years, with sales of over 250,000 policies per annum.

The company is looking at growing through primarily the bancassurance route and has already established four bancassurance partners -- ABN Amro, American Express, Canara Bank and Lakshmi Vilas Bank.

"Bancassurance will help us take on the Life Insurance Corporation of India with its 2,048 offices. With our four tie-ups, we will be able to expand our reach across to 3,000 bank branches," said Purdy.