There are still plenty of reasons to smile about for Thailand’s life insurance sector given its continued growth potential.
The Thai life insurance sector’s premium income is expected to grow by 9% in 2016, riding on the country’s 3.7% GDP growth forecast, according to a Thai Life Assurance Association (TLAA) statement released earlier this year.
The growth rate would be higher than 2015’s 6.7% and would take total life insurance premiums to THB585.7 billion (US$16.68 billion) for 2016.
While the Thai Finance ministry has since lowered its GDP growth forecast for the year to 3.3%, Mr Sara Lamsam, President of Thai Life Assurance Association and CEO of Muang Thai Life Assurance, remains positive on the development of the sector.
Growth drivers
Life insurance penetration remains low at 4%. There is thus room for growth given the 5-7% penetration rate seen in some of the more developed markets, said Mr Lamsam.
Mr Saloon Tham, CEO, AIA Thailand, is also bullish about the life sector. There are a lot of uninsured and under-insured people in the country and the Office of Insurance Commission and the industry are spending much effort promoting and educating the public about the importance of insurance. Together with the growing middle-class segment, there are tremendous opportunities, he said.
Mr Lamsam also said that given the kingdom is an ageing society, there is a growing need for insurance. Many of the products designed for seniors and retirement planning have been gaining popularity with more features added in the past 4-5 years, he said.
Much depends on government
Dr Apirak Thaipatanagul, CEO, Thai Life Insurance, concurred with the 9% forecast by TLAA, “which is in line with projected economic growth of approximately 2.8 to 3.8%” but added that much will depend on the government.
“Government spending is an important driver of the economy, bringing cash into the system from infrastructure projects and measures to stimulate consumption in the private sector, to give support in building confidence for the private sector to spend and invest. Tourism remains an important factor to support economic growth,” he said.
“Low energy prices and government stimulus measures reducing costs for the private sector to stimulate consumption will assist the target group of consumers to have more spending power. With interest rates looking to remain at low levels, this is expected to have a positive effect on the business,” he added.
Greater focus on health
As for a specific area of opportunity, Mr Lamsam cited health insurance. Consumers are becoming increasingly health conscious and more attention is being paid to prevention habits through lifestyle, diet and exercise, and at the same time protection through insurance.
In 2015, premiums for health and critical illness riders amounted to a total (life and non-life) of THB64 billion, with the life sector accounting for 89%, he said. The greater focus on health is resulting in greater demand for health products and riders, and with that, demand for life insurance, he added.
Unit-linked products set for boost
Another area of growth opportunity is in unit-linked products. Mr Tham said that among the Southeast Asian nations, Thailand’s life market has probably got one of the lowest proportion of unit-linked products.
And AIA is setting itself up to take full advantage of the opportunity. As at the end of last year, the number of licensed AIA agents qualified to distribute unit-linked products increased by 77% y-o-y, which accounted for around 80% of the total number of industry agents licensed to distribute these products.
“Our dominant position in the market and our pioneering effort in building a premier agency and getting them qualified to distribute unit-linked products will give us a tremendous edge,” he said.
Adapting to changing business environment
As for challenges, Dr Thaipatanagul said that the priority is to adapt to a changing business environment. “Changes include the dispersal of financial transactions caused by long-standing low rates which are forcing savers to consider other investment options, demographic restructuring to an older society, the ASEAN Economic Community (AEC), increasing urbanisation, changing consumer behaviour driven by technology, and strong business competition,” he said. “There will be more competitors from the marketing opportunities which will arise in the future, whether in distribution channels, products, systems or other areas.”
Getting digital right
An area which may be an opportunity or threat is in digital. Mr Lamsam said that the younger generation of Thais are tech savvy and rely heavily on their digital gadgets.
“They are more open-minded to sourcing and receiving useful information, including on insurance. But it needs to be in a way that they want. The behaviours of consumers are changing and it can be a positive for the insurance industry, but only if you can cope with their changing expectations,” he said.
Customer-centricity will be key. Consumers expect more personalised products and services that are based on their needs according to their life stages and life styles, rather than products for the masses, he said.
Whether the digital disruption is an opportunity or threat will depend on the willingness and ability of an insurer to cope, adapt, and invest in training and tools to support its people, said Mr Lamsam.
“In 2016, the company has policies for pro-active marketing though every channel, with projected minimum premium growth of 10%. This is predicated on a basis of continuous economic growth with the company’s management of policies, plans and strategies this year supporting growth in line with this target figure. This is in the aspects of increasing opportunities to access target groups with potential, developing products in line with target group demand, consumer demand and distribution channels.
The development of distribution channels to be more diverse and covering all segments will be in line with the business environment and changing consumer behaviour. Systems development for greater speed and convenience will underscore the company’s vision for growth in a comprehensive manner.
Creating a good corporate image will deal with strong competition and enable access to new target groups such as the AEC. This development will keep up with the industry’s mega-trends, whether technological development, urbanisation, or population restructuring.”
Dr Apirak Thaipatanagul, CEO, Thai Life Insurance