Interview: Riza Mantaring
What measures are necessary to increase the insurance penetration rate in the country?
RIZA MANTARING: Financial literacy is quite low, and people do not realise the value of insurance and its role in protecting them and their families against life’s uncertainties, such as illness, accidents and death. It also helps to protect their retirement. Efforts must be made to increase financial literacy so people understand that insurance is not an optional product, but a necessity.
It would be great if the industry could band together to run a financial literacy campaign to educate the populace. It would also help if training on practical financial matters could be integrated into the school curriculum, so that people coming out of school have a basic understanding of money matters in general.
Distribution channels must be developed and improved in order to reach customers where they are and in a manner that suits them. These efforts should include more agents and advisors, as well as the use of alternative channels, such as bank and affinity partners, telemarketing, and the internet and social media.
Infrastructure must be improved to make the system viable, including necessary improvements to the postal network so that documents such as billing notices are not lost, and enhancements to financial systems to allow easy collection and transfer of money. Additionally, some measures must be legislated. The Insurance Code is antiquated and needs to be revised, and taxes on insurance products require revision. Our insurance industry is amongst the most heavily taxed in the region.
All of these efforts would result in greater efficiency and more affordable products, which would make them more attractive to prospective clients and would hopefully work to increase penetration in the country.
How can regulatory changes help the insurance market in the country to grow?
MANTARING: Revision of the Insurance Code is critical. The code has been in existence since 1974, and many of its provisions have not kept up with developments in the financial markets. Many asset classes which are now common are not recognised as assets, as they did not even exist when the code was written. This restricts an insurance company's ability to optimise returns on its assets or hedge them properly.
Regulations must be issued or modified to level the playing field in the potentially huge retirement market. Currently, only retirement plans administered by duly-licensed trustees are qualified to be given tax incentives, but it is difficult from a regulatory standpoint for an insurance company to obtain a trust licence. In other jurisdictions, insurance companies are major participants in offering retirement products as these are a natural fit with an insurer’s actuarial competencies.
In what ways can foreign insurance companies play a part in developing the local industry?
MANTARING: It is generally acknowledged that financial markets are more advanced elsewhere. Foreign companies bring in expertise not yet present in the domestic market. Particularly in the areas of risk management, governance and product development, the practices and capabilities of foreign players are significantly more advanced. By working with domestic players through industry associations and with regulators, foreign insurance companies can help advance the practices of the industry and its capacity to withstand shocks in the market, protect customers, and offer products and services which deliver true value.
What is your outlook for growth in the life insurance industry in the near and medium term?
MANTARING: After a decade of very slow growth, the industry appears poised to take off. It has seen two successive years of excellent growth, with increases of more than 30% in weighted first-year premiums. We are expecting a slower but more sustained rise, particularly given the financial difficulties experienced in the US and Europe. However, we anticipate an upward trend to match the country’s improving economic climate.
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