Twelve private insurers were granted in-principle licences by Myanmar Insurance Business Supervisory Board (IBSB) in September 2012. Five insurers officially launched and begun their operations in June 2013. With the exception of a few, most of the 12 private insurers have been in operation for a year now. However, in the absence of publicly available data, the insurance market and how these new insurers are doing remain a mystery to many outsiders. Mr Thomas Kua of Pana Harrison (Asia) Pte Ltd provides a glimpse into the current development of Myanmar’s insurance market.
Current landscape
Players
The 12 private insurers and their respective holding companies are shown in Table 1. Of the 12 companies, three were granted mono-line life licences and the other nine were given composite licences.
As shown in Table 1, many of these private insurers belong to some of the largest conglomerates in Myanmar while others have link to the government or military. It is also noted that most of these conglomerates own a bank which can be an important distribution channel.
Market leaders
At the close of the 1st financial year, 31 March 2014, four companies emerged as the market leaders in terms of written premiums and performance graded by IBSB. They are:
• Aung Thitsar Oo Insurance;
• First National Insurance;
• Grand Guardian Insurance; and
• IKBZ Insurance.
Winning strategies
A closer look at these market leaders show that they exhibit some or all of the following attributes:
• Captive business: Other businesses within the conglomerate group provide a good platform for cross selling especially for motor, fire and group term life insurance.
• Distribution channel – Bank: Three out of the four market leaders have banks within their conglomerate groups. Though bancassurance does not really exist at this early stage, bank has proven to be a critical distribution channel for fire insurance. This is because under Myanmar law all property purchases financed through banks must be covered with fire insurance for the value of the property (not on the life of the mortgagor though).
• Advanced preparation: Preparatory work for these market leaders begun way before their official launch date in June 2013. This ranges from visiting overseas insurance companies, branding, recruitment, staff training, building IT systems (from scratch) to constructing a brand new building to house the new insurance company. Following Myanmar’s tradition, the official launch date is usually chosen by a religious leader coupled with the availability of top government officials (from IBSB in the case of insurance).
• Dedicated workforce: The degree of dedication from the young workforce in Myanmar is something you do not find in most markets in the region. The young workforce is mostly made up of university graduates, some with a few years of working experience in non-insurance related industry. They are hungry for knowledge and eager to learn. They would put in 50 to 60 hours per week; staying late on weekdays and worked on most Saturdays and sometimes on Sundays without much complaint.
• Lots of training: As Myanmar had been closed to the outside world for half-a-century and insurance is new to most people in Myanmar, the workforce first needs to be trained and educated about insurance and about the conduct of business world in general. Training ranging from personal grooming, time management and productivity to conversational English were given to staff at all levels.
Prescribed products
General insurance products
All private insurers sell the same products, at the same prices, with the same benefits and policy wordings prescribed by the IBSB. At the license application stage, five general insurance products are allowed to be sold by the private insurers and they are:
• Motor;
• Fire;
• Cash in safe;
• Cash in transit; and
• Fidelity insurance.
In May 2014, IBSB added another product to the list named Special Travel Insurance for Express Ways. Purchase of this insurance coverage is compulsory for Burmese and foreigners traveling more than 100 miles on Burma’s roads but this special travel insurance does not cover overseas travel.
Life insurance products
Similar to general insurance regulations, all private insurers sell the same products, at the same prices, with the same benefits and policy wordings prescribed by the IBSB. At the license application stage, four types of life insurance products are allowed to be sold by the private insurers and they are:
• Individual endowment;
• Group term life;
• Snake bite; and
• Sportsman insurance.
It is my understanding that IBSB is contemplating to add credit life insurance to the list in the very near future.
What are selling and what are not?
Sales results from the first year of operation show that of all the prescribed products, only motor and fire insurance are well-received by the general public in Myanmar. The sales of life insurance have unfortunately been disappointing. The following paragraph sheds light on why existing life insurance products are not selling well.
Challenges with existing products
General insurance
Product design and rating aside, the biggest challenge faced by the private insurers in their general insurance business is the accumulation of risks and lack of proper risk transfer mechanism under existing environment for motor and fire insurance.
The prescribed retention levels for motor and fire insurance are 300 million kyats (US$300,000) per risk and 500 million kyats (US$500,000) per risk, respectively. The excess is ceded to a coinsurance pool formed by all operating insurers including government insurer, Myanma Insurance. It is to be noted that the underwriting results from the coinsurance pool can be quite unprofitable.
Life insurance
Many may attribute the reason for poor showing of life insurance sales to lack of awareness and understanding of insurance from the general public.
However, some of the fundamental problems that underline the existing individual endowment product are worth having a closer look by the players and the regulator. These include: premium rates were developed nearly 60 years ago, a product without bonus and unattractive yield, maximum sum insured of 30 million kyats per life, and average workers (mid-manager and below) cannot afford the premium.
Challenges
Company’s challenges
Some of the more pressing challenges faced by most if not all private insurers are:
• Lack of experienced insurance professionals at all levels;
• Under-developed IT systems;
• Product restrictions;
• Lack of effective risk transfer mechanism;
• Lack of public awareness; and
• Not ready for foreign competition.
Industry’s challenges
The insurance industry as a whole on the other hand would need to tackle the following challenges:
• Absence of a robust regulatory framework;
• Absence of reserving standards and guidelines;
• Absence of insurance industry association;
• Absence of insurance statistics;
• Lack of public awareness;
• Lack of life insurance products that meet consumers’ needs; and
• Market not ready for foreign players.
Conclusion
Myanmar is coined as the last frontier in Asia that has great potential insurance market. After working in this golden land for a year, I do share the view that this country indeed has great potential to relive its glory and to become one of the most promising emerging markets in Asia.
The insurance market, however, will need time to grow before it opens up to foreign players. The local players will need time to build their infrastructures, capabilities and human capital before they face foreign competition or jump onto the joint-venture bandwagon.
Mr Thomas Kua is Actuary at Pana Harrison (Asia) Pte Ltd.