Interview: Michael Plaxton
How can low growth rates in life insurance premiums be reversed in the short term?
MICHAEL PLAXTON: While the industry contracted by around 8% in 2016 and 2017 also looks to be a tough year, as with all averages, some players in the market will beat that figure while some will not. The key to growth in Thailand is looking for new opportunities and new ways to meet customers, and this can be done in several ways. Insurance is a rather cumbersome industry for the customer at the moment, and it is critical to take away as much of the worry as possible from the customer’s end. Examples of this include reducing the number of exclusions listed in contracts for personal accident claims while abiding by regulatory standards, as well as simplifying the jobs of distributors, sales agents and service staff to increase efficiency. Another possible avenue of growth stems from the fact that many large Thai corporates have strong customer bases and comprehensive loyalty programmes which they foster, so to that end corporate partnerships open up great opportunities for insurers.
In what ways are Thai insurers tackling customer education initiatives in a bid to boost the sector’s nationwide penetration rate?
PLAXTON: Customer education is key to penetrating Thailand’s relatively large domestic insurance market, but the initiative certainly needs to get more organised as a whole. When looking at health insurance as an example, huge potential exists given Thailand’s population of nearly 60m, yet penetration rates are relatively low. Some factors include the fact that a payment as low as BT30 ($0.85) per visit could give Thai people access to universal coverage and that customer education does not yet exist to convince the potentially insured that they could be receiving far better treatment. This example is comparable to case studies around the world, from both developed and emerging markets that utilise universal health care schemes and have relatively good provision. The key is to have people aspire to something more than the minimum, all the while making it affordable. Thailand is uniquely positioned in that it has excellent health facilities and high-quality doctors, and indeed many hospitals at the moment are building chains and striking regional partnerships. It is the task of insurers to sell the ideas, rather than focusing solely on insuring against remote critical illnesses to demonstrate the need to be insured.
In Thailand, the bulk of products being sold are essentially short-term savings plans. While the fact that the populace is savings-oriented is positive, insurance products are needed that are flexible and that will pay out well at critical times. The burden of customer education becomes especially strong given that Thailand has an ageing population and is set to face high retirement rates in the years to come, all of which necessitates long-term planning.
To what extent is the life insurance sector over-saturated with providers, and what cross-border opportunities exist to alleviate this?
PLAXTON: While competition is always good for the industry, Thailand currently has 24 life insurers, which most would consider too many. When considering both foreign insurers looking to enter Thailand and Thai insurers looking to expand abroad, both have upsides and downsides. In my opinion, there needs to be more stringent entry criteria and requirements for foreign insurers to enter Thailand, not solely for the purposes of stemming over-saturation, but chiefly to ensure high levels of service provision to the customer. Increased oversight of foreign companies that are now technically regulated abroad would thus be a positive step. However, foreign insurers undoubtedly bring with them new product ideas, which will benefit customers in the long run. These insurers currently target the high-end market over the low, but that fact remains. Insurers also relish the opportunity to be first entrants to any market.
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