Examination of Witnesses (Questions 100-108
AVIVA OFFSHORE
SERVICES AND
NORWICH UNION
31 JANUARY 2006
Q100 Mr Weir: I am not sure I am
quite understanding this. You are saying to me that the original
traumatic incident is always dealt with by a UK-based employee.
The second phone call goes into the virtual system and can be
routed anywhere around the world.
Mr Egan: Yes.
Q101 Mr Weir: There is no continuity
of dealing with the UK employee after your initial call.
Mr Egan: No, there is continuity
dealing with Norwich Union in all honesty, but not with the same
person, that is not how we operate.
Q102 Chairman: Perhaps I should have
declared an interest because my insurance policies are largely
with Norwich Union. I have not had to make a claim for a while,
but at least I know what will happen when I do.
Mr Ainley: Thank you very much.
Q103 Chairman: The purpose of this
inquiry really is our concern that British companies do not seem
to be exploiting the opportunities in India to the extent that
some of our competitors are; the Indian growth is not being exploited
fully by Britain. We are looking for obstacles, that are either
real or imaginary, and you have helpfully suggested today that
quite a lot of them are actually imaginary obstacles, and getting
the right advice in India is a very important conclusion. But
there are some practical actual obstacles too, both in India and
here in the UK, and I would just like you to talk a bit more about
one that you referred to in your evidence, and then just reflect
as you do that whether there is anything else you want to say
to us as a final concluding message. That is the VAT issue which
you refer to in paragraph 49 of your evidence, which seems to
be an EU-based regulatory problem for increasing trade and investment
relations with India.
Mr Egan: I guess I should have
put this in the proper context, in a sense. Insurance services
are zero-rated for VAT and traditionally it has been the case
that if you get a third party provider to provide some of those
insurance services, those would be zero-rated. There was a case
that was taken to the European Court to do with some services
being provided by Accenture and the European Court came to a different
view on that and said that those should not be exempted anymore,
so there was issue number one if you like, which affects our industry,
which is about whether those should be exempt, and that affects
whether you are dealing with a company like Capita in the UK or
dealing with a company in India, it potentially affects both.
Q104 Chairman: Outsourcing rather
than offshoring.
Mr Egan: Yes. From an offshoring
point of view there is also a review being done at the moment
which is going to affect some of the economics of this in terms
of saying that at the moment it is the source of supply that determines
whether something is VAT-able; there is a review going on to change
that to place of consumption, and that would mean of course that
the services that are to be provided from offshore would definitely
all be VAT-able. The end point of this is that it is going to
cost our industry a lot more money and will no doubt, I suppose,
make parts of our industry have to rethink where it outsources
versus having things in-house.
Q105 Chairman: The predominant effect
is on outsourcing, not offshoring.
Mr Egan: It affects both because
both are effectively the same thing from a supply point of view.
Mr Ainley: It particularly affects
Aviva from the perspective that a lot of our outsourcing is offshored.
Q106 Chairman: Is there anything
else you want to say to us?
Mr Ainley: We believe there is
huge potential in the Indian market for UK companies like ourselves,
and in particular in the life industry we would like our Government's
help to persuade the Indian Government to deliver on their promises
to raise this ownership restriction that currently exists in our
industry. India and China remain huge potential markets for insurance
companies; there are 300 million middle class people in India
and, currently, we are restricted in terms of the investment we
can make. That is our only plea.
Q107 Chairman: To put it in context,
the middle class in India is bigger than the entire population
of the United States of America.
Mr Ainley: Exactly.
Q108 Chairman: It shows the size
of the market.
Mr Ainley: It certainly does.
Chairman: Gentlemen, thank you very much.
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