The insurance business is forecast to grow in a range of -0.36% to 1.64% in 2021 as rising household debt deflated people's purchasing power.
The non-life insurance segment is expected to grow based on increasing health consciousness amid the pandemic, said Suthiphon Thaveechaiyagarn, secretary-general of the Office of Insurance Commission.
Life insurance could be flattened by -1.42 to 0.58% while non-life insurance is forecast to grow by 2.11% to 4.11% driven by health insurance, which is projected to grow by 0.59% to 2.59%.
"The latest surge of the outbreak is making people anxious and heightened their need for insurance as risk management for their lives. The low interest rate will also attract people to various life insurance products such as whole life protection, retirement, unit-linked, and universal life insurance rather than endowment products as in the past," said Mr Suthiphon.
Anon Vangvasu, president of the Thai General Insurance Association, said the association forecast total direct premiums for non-life insurance to grow by 0-5% in 2021 to 250-262 billion baht, spurred by the government stimulus packages which will inject the money into the economy.
The global economy, which is expected to recover this year, will also boost inter-trade transactions and revive exports and car sales spurred by marketing campaigns during the end of last year.
"Health insurance itself, even without Covid-19 insurance, could grow by 2.5-3.5% thanks to people's increased health consciousness," he said.
Travel insurance is another product which is likely to show positive growth this year due to an already low base in 2020 as the sector was battered by the outbreak.
Mr Anon said insurers will still face many challenges this year, ranging from personal data law, Thailand's transition into a fully-fledged ageing society, technological changes affecting consumers' behaviour, as well as an increase in cybercrime.
"Insurers must adopt insurtech to manage cost and increase efficiency to survive through rapid changes thereafter," he said.
Sara Lamsam, president of the Thai Life Assurance Association, said the contribution of unit-linked products will rebound thanks to prospective growth in equity investment spurred by the low interest rate.
The endowment insurance will still occupy a core market share but its contribution will decline 36% from total insurance premiums received, down 50% from accumulative volume during the past five years.
Kris Chantanotoke, chief executive of AIA Thailand, said critical illness (CI) insurance is another product that can potentially grow in addition to unit-linked products. An AIA survey shows Thais have CI protection of about 700,000 baht per person on average, far below the average for CI medical expenses, at over 2 million baht today.