Interview: Nhon Luc Ly; Son Nguyen; Daw Zarchi Tin; Asit Rath
Where should insurers look to increase insurance penetration rates in the consumer market?
NHON LUC LY: Myanmar is one of the latest and fastest-growing countries to enter Asia’s consumer market. Now that we have received our licence, we are excited to work on raising awareness about life insurance and its benefits to the people of Myanmar. Our conversations with customers will be much broader than only life insurance products – they will also explore health and well-being. We are raising awareness and excitement about life insurance through activities and events that focus on health. We will leverage our global assets in sport to create an entry point and interest in insurance. In parallel, we are implementing a series of events in Myanmar, such as those centred around football, dancing and celebrities.
For a large market such as Myanmar, we have developed a diverse range of strategies to help increase penetration. For example, while urban areas might benefit from apps to encourage a healthy lifestyle, people in rural areas may be more interested in having strong in-person interactions. Having tailored and innovative product propositions will also help to increase insurance penetration. Our plan is to move forward with professional agents who will need to be in-house to ensure that they understand more than just the products and create responsible and long-term business. The distribution mix will also involve financial institutions – such as banking and microfinance establishments – and telecoms firms.
Myanmar is quickly entering the digital age, and these tools will soon be essential to the customer experience. Nevertheless, human contact is still important, so these two aspects will complement each other. This is our plan to increase insurance penetration rates in Myanmar.
DAW ZARCHI TIN: The most significant change in the consumer market is the formation of the middle class. In 2010 the landscape was very different, with very low per capita spending, but now there is a significant middle class. This, combined with a population with a median age of 28, makes Myanmar a favourable market. However, with five 100% foreign-owned life insurance firms entering around the same time, it is important to approach growth in a strategic way.
One way to achieve growth is to capitalise on Myanmar’s rapidly changing society. Increasing digital connectivity means that people can be reached in their home for the first time, even in rural areas. This technological revolution has brought with it many foreign firms and a number of drastic changes for the private sector. In this context, long-term commitment is extremely important, and partnership and consistency are valued in the country. However, it is necessary to understand the overall effects of income differences, education level and region.
Myanmar does not yet have a strong culture of saving, which we hope to change by promoting longterm planning. Due to income disparities, we are looking to target larger cities first, rather than immediate, all-out coverage. It is important to identify a target market and match this with the right staff.
People need to believe in the value of insurance products for their everyday life. At the moment there is low awareness of the need for life insurance and protection; however, at the same time there are also growing concerns about the costs associated with health care in the country.
ASIT RATH: The financial services system in general needs to be the focus, as it will help unlock latent growth across the economy. Myanmar can look to the experience of neighbouring countries such as Cambodia as its economy and financial services sectors continue to open and develop. However, as long as the industry continues to respond to the growing savings and protection needs of the Myanmar people, follow good practices in customer service and introduce the right products, there is indeed no reason why growth cannot be faster than we have seen elsewhere in the region. Compounding this is the fact that smartphone usage is widespread throughout the country across a wide range of demographics, which will also help support the ongoing liberalisation of the market.
What is unique in Myanmar is the way that consumers perceive financial institutions. Their attitude is generally shaped by a level of mistrust and a lack of understanding of financial planning. It is a priority for us to build trust in the whole sector, as well as educate about the benefits of insurance and the difference between life and general. Across the life and general segments, insurance penetration will be a good measure of the market’s success going forward. Currently, at just 0.07% of GDP, we believe the growth opportunity of the market is significant.
How do you evaluate the regulatory environment and your ability to scale in the market?
SON NGUYEN: Since entering Myanmar we have had frequent interaction with regulators. Regulations have been made available to stakeholders for comment before finalisation. Fortunately, most of these comments were received positively. Three key directives that will redefine the market – concerning agency, bancassurance and products – were made with industry consultation. The Insurance Business Law, which was developed with the help of international institutions such as the World Bank and the US Agency for International Development, was also released to the market, with each clause analysed at an industry workshop in the capital. These new laws significantly change the previous legislation, bringing it in line with international standards. We look forward to the prompt conclusion of the regulatory changes, as they will be positive for the industry.
One test will be the development of bancassurance, which is a very fast-moving segment of the market. The network for bancassurance is already in place in Myanmar and can be utilised to cover a wide territory in a matter of months. All domestic banks with a notable branch network will be able to provide an extended range of products to their customers if they have the ability to sell life insurance. However, the segment’s growth depends on the pace at which regulations can be released and enacted.
RATH: The new insurance reform addresses the majority of issues faced by the sector and will enable us to adopt an agile approach in operating a life insurance business in Myanmar. The development of a bancassurance framework will enable firms to scale relatively quickly. However, domestic players that have been in the market a long time should not be worried about the entry of new competition, as long as they are willing to upskill their operations. Notably, this will occur in areas such as in-house training, and the outcome will depend on the extent to which basic standards and guidelines are approved, and how professional the management structures are.
Ultimately, consumers will continue to look for the best services, so an increase in the number of players in the market will raise the bar. A focus on the customer and effective claims management will be vital for the market to grow. The main challenge for insurers is creating the distribution from where we can scale the customer base.
ZARCHI TIN: The regulatory environment is changing quickly. For example, in terms of product development, the types of insurance available were previously identical due to regulation, therefore competition among companies was limited. This led to a basic selection of products that were not reflective of individual needs across different customer segments. The previous approval process may also have been too conservative and limited. It did not allow companies to maximise their creativity to develop the necessary products in order to effectively address the changing needs of the market. These limitations have therefore contributed to the slow progress made within the industry.
In addition to the much-welcomed product liberalisation, regulatory changes in the sector appear to be moving towards a more direct route to product approval with the Financial Regulatory Department. One product can now be approved at a time, but the ability to approve multiple products concurrently could increase our ability to scale at speed.
The process – wherein approvals will take an appropriate length of around three months – allows the market time to react to new products, and seems to be a suitable soft-entry mechanism that will reduce the potential of shocks to the sector. As it stands, there is good alignment among insurers, which will help ensure that we introduce the right products at the right time as the sector continues to open up.
What role does staffing play in expansion plans?
LY: Building a team is key to being successful and allowing growth. Before entering the market in May 2019 we had limited knowledge of the available talent pool and the speed at which we would be able to implement our strategies. Luckily, we have been able to source a lot of talent in Myanmar that fits well with our culture – young talent that is smart, dynamic, engaged and enthusiastic about the life insurance industry. We aim to leverage our international training programmes and tailor them to the Myanmar market. The young talent in Myanmar is tech-savvy and entrepreneurial, and with new insurance markets opening up, they are well placed to lead the sector’s development in the years ahead.
NGUYEN: The first step we took was to find strong local talent. Life insurance is a new field in Myanmar, so there were limited pre-existing resources available. We have been using this opportunity to help develop and build knowledge and experience in the local market. While the direct experience may be limited, we have not found it difficult to source strong staff that will help drive the firm forward. This is a reflection of the talent pool that currently exists in Myanmar, considering that there are five foreign-owned insurance firms recruiting simultaneously in a new industry with very specific requirements. Nevertheless, a number of key positions – such as actuaries – must still be brought in from overseas, as there is currently a lack of technical talent in this area in the country.
Our plan is to first create a strong foundation in Yangon and then, once our staff have reached a certain level of competency, we will open satellite operations elsewhere in the country. For example, we are looking to expand into Mandalay, which will be our next major focus. In order to achieve this, education must be at the heart of our development. Life insurance is a challenging industry even in developed economies, and there are additional difficulties to be found in markets with low financial inclusion. We must be mindful of the diversity of the country and understand that technology can only go so far – indeed, human contact cannot be fully replaced.
In which ways can new technologies be applied to the life insurance segment?
RATH: Our strategy is to be digital-led and customer-centric, based on a seamless end-to-end customer experience. As an insurance company, we must be sensitive to the fact that consumers seeking claims may need to contact us at any time and from any location. Therefore, our services must be available 24/7 across all platforms. We are currently developing a digital platform to on-board service customers and handle customer claims through mobile applications. This is a fast-moving environment, and we must take care to abide by the evolving regulations when leveraging technology. Going further, there is no reason why the most advanced technology cannot be applied to the market as it continues to open up. Word of mouth is powerful in Myanmar, and Facebook is widely used to convey information. The path to successfully scaling up also involves improving our overall understanding of the market – a learning process that will continue as the industry keeps on transforming. Scaling to different cities is something that can take place quickly thanks to digitalisation. This is a trend we have seen taking place elsewhere in the world.
At the same time, firms must be cautious not to overextend, and to ensure that agent training and claims processes are consistent before expanding. It is important to ensure uniformity of services across a variety of different geographies and platforms.
NGUYEN: Although Myanmar is often considered the last frontier economy in Asia, the country’s telecoms infrastructure has seen phenomenal growth in the past few years, which has enabled advanced and emerging technologies to immediately play a part in our product offering. The penetration rate for insurance is 0.1% of GDP and life insurance is 0.01%. In light of this, a focus on mobile insurance is essential to leverage the high rate of smartphone ownership. There are many local life insurers in the country, but the entry of five foreign-owned firms has driven the segment to take more advantage of new technology. Part of the reason for this has been the lack of resources available. The new firms will bring their knowledge to the market and accelerate growth here and elsewhere in the region. Working closely with the Myanmar Insurance Association is central to respecting the market and enabling new entrants to grow together. The market is sufficiently large, with opportunities for all players. Competition is about raising standards and effectively leveraging technology, which continue to be shared goals.
LY: We are expecting to experience rapid progress in Myanmar: there is room to be creative and innovative. For example, we have the opportunity to raise awareness and understanding of life insurance in Myanmar. To aid in meeting our health-focused goals for our customers, we are implementing technology to help monitor and inspire everyone to be conscious about being active and prioritise their well-being. We have already integrated this technology into our life insurance products with great success. If physical activity reaches a certain level, the insurance holder’s premium could be reduced or their coverage could be increased. This is how we aim to connect awareness to real-life activity and create shared value with our customers using technology.
Do you foresee the insurance sector enabling the growth of the bond market? In what ways?
ZARCHI TIN: Life insurance products operate over a long timeframe, which naturally creates demand. The Asian Development Bank is helping the government develop a wider range of state-issued bonds, while the International Finance Corporation is supporting efforts to develop corporate bonds. This bodes well for the future of the sector; the question is how long the process will take. There is already demand for government bonds, so they appear likely to develop. However, Myanmar does not yet have a functioning credit rating system. This must first be created before international firms will buy domestic corporate bonds. The entire cycle is expected to take a minimum of three years to take off. The legislation and regulations are already established to a large extent, and as the market continues to become more mature, we must ensure that strong staff are in positions across the public and private sectors in order to successfully see it through. Regulators in the insurance sector have been very responsive and our experience has been broadly positive thus far; however, these new directives will nonetheless be a test of the market and its regulatory bodies.
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