Interview: Matthew Kearns
How would you assess the sophistication of the insurance market in Papua New Guinea and the scope for more complex products?
MATTHEW KEARNS: We can divide the complexity of the insurance sector into two halves. The market covered by overseas or multinational insurers is generally quite sophisticated because of their expertise and global presence. However, when it comes to the local companies, we see that knowledge of the market and insurance products is in general much less sophisticated. It is also the case that the understanding of insurance among the population in PNG is low to very low. While there have been some sophisticated and modern products brought into the country, there still has not been a full adoption of the core structure of the global industry.
There is scope for expanding the product offering in PNG, but potential growth is predicated on the maturity and capacity of the companies currently in the market. Cyber-insurance, for example, is probably the most topical insurance product on the market at present. Whether or not it would be feasible to write and offer this type of insurance in PNG is debatable, but it really comes down to a company’s willingness to take that risk on their books in a way that makes sense for the market in PNG. It is possible that there may be some consolidations on the horizon due to the fact that the market is small and overserviced.
What criteria must be met to successfully build the micro-insurance segment?
KEARNS: On the balance of probability, companies should be able to make money on insurance. Keeping in mind that companies exist to create profit for their shareholders, I think that with the regulator and the government we need to take a good hard look at the micro-insurance segment to improve the affordability and distribution of micro-insurance. There may need to be some kind of government incentive at first, such as a tax deduction. Micro-insurance is on the minds of institutions such as the World Bank, but the affordability and viability of offering these products all depends on reaching the informal sector, which can only be achieved through technological means.
Technology does play an important role, and insurers in the market need to start to adopt and implement technical solutions in PNG. This exercise will be capital intensive, but it is something that can ultimately foster growth in the insurance sector.
Understanding what is required from the segment is also important. In most cases, purchasers of micro-insurance are looking for a life product or a small medical product. As we have two regulators – one for life and one for general insurance – there must be some review of where micro-insurance products fall and how they will be regulated. PNG, which has a relatively small population compared to India or Indonesia, does not have a critical mass of people requesting or requiring micro-insurance. Since insurance penetration is still low in the country and people do not understand that it is a critical part of the financial system, the first thing that needs to be improved is education.
To what extent is growth in the insurance market dependent on national projects?
KEARNS: I think it is extremely dependent. Industry players have a huge responsibility to increase education and help build a more sustainable insurance sector. It is a project-based economy, therefore, we need to be mindful of the volatility there. The country did not foresee the impact of the global dip in commodity prices and every sector from mining to agriculture has been impacted by this global phenomenon. PNG is located in a very risk-prone area of the world, which would make you assume that insurance would be valued higher than in safer areas.
Read More from OBG
In Papua New Guinea
Ian Tarutia, CEO, National Superannuation Fund (nasfund)
In this Global Platform video, Ian Tarutia, CEO of the National Superannuation Fund (nasfund), discusses how super funds are helping the economy recover from the impact of the Covid-19 pandemic, especially as their investment plays an important role in preventing job losses, encouraging sustainable economic development and positioning Papua New Guinea as an attractive investment destination. In the coming years nasfund hopes to play a larger role in mobilising investment that capture a larger po…
In Financial Services
Safety net: New joint initiatives are catalysing action as the global insurance industry moves to mitigate environmental risk
With the launch of a new joint initiative to support the countries that are most vulnerable to climate change, the global insurance industry is evolving in ways that could carry important implications for business in emerging markets. One such initiative, the Global Shield against Climate Risks (GSCR) was announced by the ministers of finance of the so-called Vulnerable Twenty Group (V20) and the G7 after the COP27 UN Conference on Climate Change in Sharm El Sheikh Egypt in November 2022. It se…
Exploring Thailand's Tobacco Industry: A Comprehensive Economic Report
This Economic Impact Report presents a comprehensive analysis of Thailand's tobacco industry, shedding light on its wide-reaching value chain and contribution to the national economy. Notably, the industry directly or indirectly supports some 50,000 households, and contributed BT59.8bn to government revenue in 2022 through excise taxes, equivalent to some 12% of the country’s total excise revenue. The report explores the potential implications of a proposed full ban on tobacco additive…
“High-Level Discussions are Under Way to Identify How We Can Restructure Funding For Health Care Services”
Popular Sectors in Papua New Guinea
- Papua New Guinea Agriculture
- Papua New Guinea Construction
- Papua New Guinea Energy
- Papua New Guinea Industry
- Papua New Guinea Transport
Popular Countries in Financial Services
- Egypt Financial Services
- Gabon Financial Services
- Ghana Financial Services
- Myanmar Financial Services
- Papua New Guinea Financial Services
- The Philippines Financial Services
Recent Reports in Papua New Guinea