A total of 24 foreign insurers and brokers have set up representative offices in Myanmar, the least-insured economy in ASEAN. They continue to wait with hope and optimism for this
“last frontier market” of 55 million people.
Myanmar has a historic connection with the insurance industry. Almost 80 insurance companies operated in the market from the mid-19th century till the mid-20th century, and a large number of them were foreign companies.
But things changed in the 1960s when the industry was taken over by the government and all foreign insurers in the market were nationalised in 1963. In the mid-90s, a new phase of liberalisation was introduced, but it lacked clarity and direction and so the effort just fizzled out.
Liberalisation in 2012 only allowed domestic players
The change in the political landscape in 2010 saw more positive steps being taken to open up the insurance sector and in 2012, a total of 12 new domestic insurance licences were issued, ending the monopoly of state-owned insurer, Myanma Insurance Company.
“Within the five years since the market was opened up, private insurers have made a big impact by providing better services and creating awareness on insurance products,” said Mr Myo Naung, MD, Grand Guardian Insurance (GGI Insurance). He believes that there are huge opportunities for life insurers in Myanmar.
Of the 12, nine were composite and three were for life (see table below). These companies compete against each other with the same products and at the same price, and the only differentiator is in the services offered.
“Since we have to compete on the same tariffs, our differentiators are in the three pillars of innovation, capacity building and insurance awareness,” said Mr Myo Min Thu, MD, AYA Myanmar Insurance Company. His company runs innovative activities on social media and works closely with their promoter bank to reach out to the bank’s customers, which enables them to build capacity.
Mr Ba Tun, MD, Aung Thitsa Oo Insurance Company, feels that private players have increased awareness of insurance in the market and this has helped the market develop. “Private players are changing the perception of insurance among the general public and this is a good sign for the future,” he said.
Apart from these private domestic players, three Japanese insurers were granted licences to operate within the Thilawa Special Economic Zone (SEZ).They are Tokio Marine & Nichido Fire, Mitsui Sumitomo Insurance and Sompo Japan Nipponkoa Insurance.
The Thilawa SEZ is the flagship project of the Japan International Co-operation Agency (JICA) in cooperation with the Myanmar government and Japanese and Myanmar companies. The Japanese insurers are not allowed to operate outside the SEZ.
Patience is a virtue here!
Meanwhile, a total of 24 foreign representative offices have been opened in the country and these include some of the international big players like Metlife, Prudential, Manulife and Allianz (see table below).
Apart from the Japanese companies, some of the big names from Asia include AIA, Samsung Life, New India Assurance and Great Eastern.
A few international brokers like Marsh, Willis and JLT have also set up offices. “We are prepared to wait for the sector to open up, as we want to be part of the industry in Myanmar and see it grow and develop,” said Mr Tom Renny, Chief Representative, AIA. He feels that of late, there is a lot of optimism in the market and it is imminent that the market will open up soon.
Dr Moe Thauk, Chief Representative of MetLife, believes there are tremendous opportunities for life insurers in the market, which is expected to grow from US$1 million in 2012 to $1 billion by 2030. “We have a strong commitment to Myanmar and as a leading international player, we can create a safe social net for the market,” he said. MetLife has been conducting training programmes in the market and is also helping the government in framing regulations.
New India Assurance Company, India’s leading non-life insurer, has an historic connection with the market as it had operated there before the industry was nationalised in the early 60s. “This will be like homecoming for us as we had a very successful operation here in the past and we hope to contribute towards the orderly growth of the market,” said Mr Nirmalya Chanda, Chief Representative of the company. New India has offered to develop training facilities in the market and also develop insurance skills for the locals.
Government strongly backs opening of industry
Mr Htay Paing, Member, Insurance Business Regulatory Board (IBRB) believes that the opening up of the industry is just a matter of time, as this was part of the 12-point financial reforms plan in the election manifesto of the National League for Democracy (NLD) party government that was elected in late-2015.
“The new government is serious about liberalisation of the insurance sector as this is one of their promises to the people and the international community,” he said.
The government and the IBRB have been having regular consultations with the World Bank on how the liberalisation policy should be implemented. He feels that local players in the market are currently not in a position to compete with the big foreign insurers and so their interests have to be protected first before allowing the foreigners into the market. He has sought assistance from the international insurance community for the development of the regulatory framework in the country, as well as the devising of strategies for the growth and development of the market.
“The government would consult all stakeholders on whether to allow 100% foreign-owned insurers, or if it should be joint ventures with local firms,” said Mr Paing. A decision would also be made soon on the sectors in which foreign insurers would be allowed to participate. The government has also approved the establishment of an insurance association that will have a key role in speeding up the liberalisation process.
Myanma Insurance is also bracing itself for competition from the international insurers. “We hope many foreign insurers will come and invest in Myanmar as we have to learn from them on how to effectively use technology, develop new products, and tap into newer distribution channels for growth of the market,” said Mr Lwin Oo, Deputy General Manager, Myanma Insurance. He believes that there are huge opportunities in the motor, health and agriculture segments.
Insurance Association of Myanmar to bolster development
The Insurance Association of Myanmar is expected to be operational soon and will function as a key link between the industry and the government.
Mr Aung San, ex-MD, First National Insurance Company, believes that the market will be strengthened through the formation of this association. “The association can help educate the public on the benefits of insurance and collaborate with industry stakeholders to bolster the sector,” he said.
The Myanmar insurance industry is currently plagued with a shortage of experienced professionals, IT systems and a clear regulatory framework. Local insurers are aware of these weaknesses, but remain cautious about allowing international firms unfettered access to the nascent market.
“Most local private players do not have the expertise to develop products for the market, nor do they have the capacity to take on bigger risks,” said Mr Thaung Han, MD, Citizen Business Insurance Company. He feels that the insurance association will give a voice to the industry, which can now collectively approach the government for action in matters concerning the growth and development of the industry.
He added: “The industry needs to adopt the international best practices that the foreign players can bring in. So setting up JV partnerships is the best way forward for both locals and foreign investors, as it will be a win-win situation.”
Motor insurance is largely untapped
With the economy on an upward growth trajectory, personal wealth has increased across the board and this has resulted in increased sales of motor cars in Myanmar.
Currently, around 104,000 units of cars are sold annually in Myanmar and by 2020, the market is expected to grow to more than 150,000 units per year. The Road Transport Administration has made it mandatory that all registered vehicles in Myanmar should have third-party insurance cover.
“There are currently 5 million registered motor vehicles in Myanmar and only a small fraction of these have comprehensive insurance cover, as vehicle owners have not really understood the concept and benefits of insurance,” said Ms Hla Hla Mon, Deputy MD, GGI Insurance Company.She believes that the motor insurance segment itself offers tremendous opportunities for insurers, with the number of vehicles increasing yearly.
Currently, motor insurance premium is prescribed by the IBRB. Based on the value of the motor vehicle, the premium will be approximately 1% for personal vehicles and 2% for commercial vehicles, with third party liability capped at a maximum of MMK50 million (US$37,000).
Regulator needs to start regulating
Over the years, the work of the IBRB has been carried out by Myanma Insurance and so there was no separation between the regulator and the regulated. This changed in 2016 when Myanma Insurance was officially separated from the IBRB, and the Financial Regulatory Department under the Ministry of Finance was given the responsibility to oversee the functioning of the insurance sector.
Industry leaders feel that the time has now come for the IBRB to act and roll out new regulations for the industry to grow to its full potential. “This is a long-term business that is full of opportunities and so we need to know for sure when the regulations will be out, so that we have a road map in place for our business,” said Mr Renny.
Indian government offers support
The Indian government is ready to support the development of the financial sector, including the insurance industry in Myanmar.
Apart from New India, the Insurance Institute of India (III) has also signed a memorandum of understanding with the Financial Regulatory Department of Myanmar to design an academic and professional building programme for the insurance industry in Myanmar. The MoU was signed in the presence of Indian Prime Minister Narendra Modi and Myanmar State Counsellor Aung San Suu Kyi during her visit to India in October 2016. Officials of the Institute have done a preliminary study of the needs of the Myanmar industry and initiated specific
“Accordingly, we have made available to them insurance certification in the form of III’s Licentiate, Associate, Fellowship and Specialised Diploma Courses,” said Mr P Venugopal, Secretary General, III.
According to him, around 100 candidates have taken III exams in Yangon so far and a few have qualified as Licentiates of the III. The III has also provided specialised training to 14 senior practitioners of the Myanmar insurance industry and is also open to conducting examinations in the local language if the market so desires.
“We are essentially in the role of enabling and supporting the Myanmar government and the regulator in translating their vision for the industry into a reality and are willing to scale up our activities based on their needs,” said Mr Venugopal on the future role of the III in the Myanmar market.
Future depends on the “when” factor
The insurance industry in Myanmar, when opened to international players, will witness significant and sustained growth. The IBRB holds the keys to the growth of the industry for which it needs to speed up the liberalisation process and provide clarity on the way forward for the sector, especially in the area of competition, products and pricing.
Mr Renny feels that creating awareness on the benefits of insurance and having an effective regulatory framework will be critical to the future of the industry in Myanmar. “The regulator needs to look into the critical areas of investment opportunities, product development, distribution and pricing,” he said.
Mr Aung San summed up the current situation very well: The government is trying to develop the economy and the insurance industry is also a key component of that development agenda. A