Aviva needs to convince the market it has an exciting growth story. And the launch of an Asian general insurance business is unlikely to do the trick, writes Hester Plumridge of Dow Jones in his Heard on the Street column.

Aviva’s decision to launch an online car insurance business in Singapore is a prelude to expansion into motor, home and travel insurance across Asia. It contrasts sharply with rival Prudential’s decision last month to acquire AIA for US$35.5 billion ($49.3 billion), giving it a No. 1 position in seven Asian countries. Aviva is a much smaller regional player, ranking fifth in Singapore, and fourth among Chinese foreign insurers, and its strategy is far more cautious. For now, the launch is limited to one country, and will add just one new member of staff.

Admittedly, the move seems logical. There is evidence consumers in mature Asian markets are becoming more price-sensitive on insurance, and the company believes its online motor offering in Singapore could save drivers an average 7% on their premiums. In Western markets such as the UK, the bulk of home and car insurance is already bought online, and Aviva is the No. 1 domestic player.

But the move is likely to create uncertainty about the focus of Aviva’s growth strategy. Despite chief executive Andrew Moss signalling a focus on Europe for growth last month, announcements this year have centred on Asia, including a push into Indonesia. Before Moss took over in 2007, Aviva’s US$2.9 billion acquisition of life insurance business AmerUs pointed to US expansion. The recent announcement could also be seen as back-tracking. Aviva sold its previous Asian general insurance business back in 2005.

Trading at eight times forecast 2011 earnings, its shares look cheap historically, according to Credit Suisse. But for now, the Asian launch is unlikely to re-rate them.