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Foreign entrants spur innovationPremium income is well on the road to recovery while customers have a wider range of policy choices Walailak Keeratipipatpong
Attractive returns and a wider choice of policies have seen the industry chalk up 60% growth in new premiums this year, compared with a year ago, according to the Thai Life Assurance Association. New policies collected in the first quarter of the year were worth 4.44 billion baht, a 60.5% rise on the same period of last year. Renewed policies were worth 12.58 billion baht between January and March this year, making total premiums 17.29 billion baht, a 21% increase. The industry earlier forecast total premiums from life insurance for the year would expand by 13%, about the same as last year, but it will revise its projection if business continues to grow at its current pace. Life premiums collected in the first three months from policies covering individuals accounted for 82.2% of revenue, followed by life insurance policies for industries (11.3%), groups (4.7%), and personal accidents (1.8%). Apirak Thaipattanakul, managing director of Thai Life Insurance Co, said insurance premiums were also tax deductible. This year, total premiums are estimated at 72.3 billion baht, including 17.1 billion baht in new business, compared with 64.3 billion and 13.7 billion respectively last year. The number of life policies is projected to reach 7.8 million this year, covering 12.59% of the population. The market has been given a hurry-up by the entry of foreign insurance companies. Insurance Department director-general Norawat Suwan said local companies would inevitably find foreign partners or merge together to strengthen their operations. A number of large foreign insurers have teamed up with Thai companies. Nationwide Global of the United States bought 25% of Thai Prasit Insurance. Allianz of Germany is to buy stakes in CP's insurance units, and Sydney fund manager and insurer MLC will spend A$24 million to buy 25% of Advance Insurance, a subsidiary of the Soon Hua Seng Group. Under the current 1992 Insurance Laws, foreigners can hold a maximum 25% stake in a Thai insurance company. The department plans to ask for the foreign shareholding limit to be increased to 49% when parliament re-opens in late June. "Foreign partners are inevitable in such a competitive market although some local insurers have shown healthy operations,'' said Poomchai Lamsam, president of Muang Thai Life Assurance Co, which is talking with some insurance companies abroad about a partnership. The Thai firm is looking for new skills and product ideas.
For general insurance, new coverage of damage that could arise from mismanagement by directors and officers (D& O) of listed companies will be launched soon. Thai Reinsurance Plc, in co-operation with the US-based Employees Reinsurance Co, has asked for the Insurance Department's permission to sell D& O liability insurance, a type of policy sold widely in Europe and the United States. The department is working out premiums as the product is new in Thailand. For investors eyeing high interest rates on insurance policies, there are potential drawbacks. Some companies are cannot sustain paying 6%, or more in a few cases. The Association of Life Assurance has asked the department to fix interest at 6% throughout the term of a policy or bind the rate to an average of the rates paid by three large banks Ñ Bangkok Bank, Thai Farmers Bank and Siam Commercial Bank. Mr Apirak, who is also president of the association, said the income that insurance companies receive from investing premiums was not worthwhile as banks paid only 1% on large amounts. At the same time, insurers could not expand their investments to higher-yielding products due to tight regulations set by the department. In the non-life insurance sector, premiums from vehicle insurance are expected to rise in line with the substantial growth in automobile sales. Sales of vehicles in the first four months this year grew by 50% on the same period last year to 75,500 units. However, the introduction of the new motor insurance programme since April 1 will change the growth pattern. The programme allows motorists buying first-class auto insurance policies a number of choices. They can join a plan based on their age, years of driving experience, car brand and engine capacity and purpose of the motor. Premiums will vary accordingly. Discounts between 5% and 20% are offered based on a driver's age and driving record. There is a maximum 40% discount as a no-claims bonus. As well, motorists can elect to take responsibility for minor damage costing between 1,000 baht and 5,000 baht to repair. If so, their premiums will be reduced. Chai Sophonpanich, president of the General Insurance Association, said he expected the new programme would see a decline in premiums from first-class policies, which accounted for 30% of the 22-billion-baht auto insurance business last year. However, it should also reduce claims by encouraging motorists to drive more carefully, he said. |
Insurers argue that buying savings-linked life insurance is a better option for investment as potential annual earnings are currently at least 6%, compared with 3.5-3.75% interest from bank deposits.
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