Mumbai: UK-based Standard Life Plc, which holds 26% stake in HDFC Standard Life Insurance Co. Ltd, is keen to infuse more capital into the insurance venture, but will not be interested in managing it even if the Indian government allows it to raise the stake to 49%, Gerry Grimstone, chairman of Standard Life, said in an interview. Edited excerpts:

As the world recovers from the recession, how do you see India’s recovery?

Infusing capital: Grimstone says Standard Life is willing to increase its stake in the Indian insurance venture. Abhijit Bhatlekar / Mint

I deeply respect the Indian government for the measured approach taken towards liberalization. I don’t think that as a result of this crisis, everybody has to retreat back to their domestic markets. Who would have ever thought that India would be the largest source of FDI (foreign direct investment) into the UK? This is a remarkable statistics and an evidence of the strength of Indian companies.

There is a huge opportunity in India to increase the flow of savings into the insurance and pension markets. It is important to help insurance companies and pension funds to have the ability to help financing the infrastructure growth. This has to be done in a measured way and India is losing the opportunity by not freeing up the ability of the insurance companies and pension funds to help infrastructure.

India plans to hike the foreign investment limit in insurance from 26% to 49%. How will it benefit you?

I have been coming to India for many years and I always come with the expectation that the Insurance Bill will soon be passed. It is a matter of domestic political process but I never understood what is the difference between 26% and 49% foreign ownership... I never understood the logic behind capping the holdings at 26%.

We should remember that the Insurance Bill is not just about FDI limit but it’s a legislation to modernize the legal framework of insurance.

Most of the private life insurers in India, including HDFC Standard Life, are yet to break even. How would the foreign capital help them?

I think it’s important that over a period of time the (agency) commission structures in India change so that the capital requirements become less. Too much commission is paid out at the point of sale here. Of course, agents should be incentivized but that incentivization has to come over a period of time as trail commissions rather than upfront commissions.

It’s not a surprise that insurance companies are taking longer to meet break-even here. It is important in India to produce good products that people want to continue with over a period of time. By this, I mean that many policyholders have either not been paying their premium or surrendering their policies, due to lack of understanding about the product’s benefits. Treating this aspect fairly is an important part of growing a good insurance company.

Recently, a government-appointed committee has suggested to scrap agents’ commission. Do you support this?

It would be foolish to say that agents do not play any role. Remember that insurance products don’t sell themselves; they have to be sold. There should be remuneration that is visible and fair if you want to build a sustainable industry, and I think it’s good that commissions have been a stimulating debate here.

Will you be increasing your stake in HDFC Standard Life Insurance?

This is commercial matter negotiated between the partners. We’d like to have bigger investments in India and we enjoy working with HDFC (Housing Development Finance Corp. Ltd). We share a warm relationship and would like to sit down and negotiate with HDFC in due course on these matters. We can’t say what would be the outcome, but we would like to stay invested in India. A growing business requires capital, and we would certainly like to bring in more capital but with more balance between the partners than in its present structure.

So you will bring in more capital but will never look for management control.

We have a strong bond with HDFC, and you should ask Deepak (Parekh) about this. We are not really worried about who is controlling what.

Will you sell your stake when HDFC Standard Life floats a public issue?

Public offers help a company to receive greater visibility in the Indian market and access to greater domestic capital. We would like to continue with a meaningful partnership with HDFC, but it is difficult to predict without seeing the rules that are currently being worked out by the regulators.

You have always been perceived as a conservative player.

I am proud to be conservative, and Scottish companies have a reputation for being prudent and conservative, but that doesn’t mean that we do not take advantage of the opportunities that come our way. We are running a marathon. It is not a 100-yard street where one has to see which company can produce the best short-term return.

Some companies choose aggression and some prefer sustainability over a longer period of time.

This is not a competition to see who can produce the highest premium income. To my mind, the real test is to see who can produce the top quality competence in the long term, and we are happy to be measured in that way.