Interview: David Korunic
What factors do you anticipate will act as drivers for further growth in life insurance premiums in Thailand during 2016?
DAVID KORUNIC: The year 2015 proved difficult overall for the insurance industry, mainly due to the rise in global economic fragility making people more cautious in their spending, which had an impact on life insurance and other investment vehicles. However, due to ongoing infrastructure and investment projects in the public sector, I believe that the first quarter of 2016 will exhibit greater excitement in the market. In the short term, growth in life insurance is expected to average 9-10% annually.
Distribution strategy is a crucial aspect of the Thai life insurance sector, and the market has shifted towards two important distribution channels: agents and bancassurance. As a life insurance representative you need to be strong in both to remain competitive, as agents remain the method of choice for reaching rural and up-country populations, while bancassurance pervades in Bangkok.
One of the major challenges is transparency. Traditionally, insurance companies in Thailand need to be multi-channeled in order to reach a greater percentage of the potential customers.
To what extent can innovation support growth, and what potential is there for expansion in the microinsurance market?
KORUNIC: The microinsurance segment mainly aims at lower-income populations, ultimately improving and increasing insurance access across the country. In my opinion, however, this line of business should be treated with caution, especially as it plays a bigger role in corporate social responsibility strategies rather than being a substantial business push, which limits its profitability for shareholders. We have therefore been very cautious about moving into this segment.
Innovation plays an important part in the growth of the sector, especially through the improvement of technological platforms. With positive growth rates expected in the medium and long term, companies have to develop ICT solutions and platforms, boosting access to digital tools for both distributors and customers, so as to handle this level of growth. Given the increasing numbers of technology and social media users in Thailand, especially among young people, the sector needs to position itself quickly by using such ICT platforms or risks being left behind.
As an important subject for discussion, there is still a lack of movement in investment-linked products and of public acceptance of variable insurance. The market will eventually have to begin moving into this field, including through education and boosting awareness among the Thai public, especially since past economic impacts have reduced public confidence in the financial sector.
What potential do you see for further market consolidation in the event of increased capital requirements brought in by future regulations?
KORUNIC: With the implementation of the second phase of the Office of Insurance Commission’s risk-based capital framework, there may be issues at the lower end of the spectrum as minimum capital requirements are raised. In addition, an increasing number of companies are adopting international standards and regulations, making the market more consistently well-regulated. It will be interesting to watch the market dynamics with the second phase coming. Regulators have been very cooperative about use of external consultants, who are in consultations with major firms and the Thai Life Assurance Association. With extensive discussion and the active involvement of major players, we anticipate a very positive outcome.
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