Strong potential for insurance growth, but competition expected to be rife: IKBZ

Aug 12, 2019

Strong potential for insurance growth, but competition expected to be rife: IKBZ

Naypyitaw (Myanmar) August 12: The insurance industry has come under the spotlight recently with the government announcing in April that five foreign insurers would be allowed to operate wholly-owned units for life insurance in the country. Shortly after, it liberalised further by allowing six joint ventures between local and foreign insurers in both the life and non-life/general segments of the market.
With the industry opening up for the first time, start-up hiccups are bound to occur. Just as soon as the announcement on the joint ventures was made on August 2, for example, the Nikkei Asian Review reported that three local insurers had pulled out of talks with two Thai insurers, Muang Thai Insurance and Muang Thai Life Assurance, and a South Korean insurer, DB Insurance, because of last-minute changes to the shareholding structure for the partnerships.
It was then reported that no such changes were made to the shareholding structure, instead three of the nine local insurers had not returned their requests for proposals on setting up the joint ventures by the deadline.
Competition, too, is expected to intensify in a market where insurance penetration is less than 1 percent and the concept of insurance coverage has yet to take off.
Nevertheless, local insurance providers and foreign investors see huge growth potential for the insurance sector in the country. According to a survey conducted by IKBZ Insurance last month, the insurance market could grow to K1.75 trillion in the next 12 months and to K4 trillion over the next 10 years.
IKBZ was one of the local insurers whose joint venture with Mitsui Sumitomo Insurance Group Holdings Inc was approved on August 2 for the general insurance segment that provides automobile and property coverage. It now has plans to raise the number of trained agents to 1,000 this year and 5,000 and sell insurance in 200 to 300 bank branches in the next three years
The Myanmar Times spoke to Yangon-based IKBZ Insurance Co Ltd deputy managing director Anil Mancham on issues affecting the local insurance industry:
Why the partnership with Mitsui Sumitomo Insurance for non-life insurance?
We thought over it and saw that our strength lay in non-life or general insurance. In the local market, general insurance dominates with 95 percent of policies. We'll have a joint venture for general insurance first as we have experience in this segment and it's easier to compare the strengths and weaknesses of our products with our foreign partner. For life insurance, we need to study the market before we enter it.
Does the company have plans to enter life insurance?
Typically, general insurance will pick up first before life insurance; it's the same in other markets as well. It will take some time before life insurance can surpass general insurance. There are few products in the life insurance that fits the local market, which inhibits its growth. We need to work with the Insurance Business Regulatory Board to see what the products that fit the Myanmar market are. Also, we need to have trained insurance agents and that is why we're investing in talent.
How do you think we can go about educating the public on insurance?
To put it bluntly, insurance is not popular in Myanmar. Even in developed markets, there's difficulty in convincing people that they need insurance. The best way to educate the public is to explain the benefits of insurance and its importance. Our recent survey showed that 60% of people who know the benefits and importance of insurance are more likely to get coverage. We're investing in marketing and communications to reach out more.
How do you overcome barriers such as local cultural beliefs like for example, people believing in fate over having insurance?
The education part is important, and explanation of the products needs to be simple and easy to understand.
Are five foreign insurers for the life insurance segment too many for Myanmar?
I've mixed feelings over their entry. Life insurance is a very small market in this country and many things need to be done before it can grow. Foreign insurers have experience for these life insurance products whereas local ones don't and there is not much time to catch up in terms of getting familiar with it. These foreign insurers may dominate the market with fewer opportunities for the local insurers.
Still, insurance is important for the economic development of any nation. For one thing, insurers buy government bonds that are issued to pay for both the daily operations of a government and long-term development plans. For people and businesses, it's to protect from risks. The development of the industry is important to the economy and the regulators have an important role to ensure that there is a level playing field for local as well as foreign insurers.
Source: Myanmar Times