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Thailand Insurance Report Q4 2011
Business Monitor International, Oct 2011, Pages: 87
For the time being, Thailand’s insurance sector appears to be booming. Life insurance premiums could rise by almost 20% this year.
It appears non-life penetration will rise quite sharply this year. However, there is no obvious catalyst for it to rise further in 2012-2015. The historical development of non-life insurance in Thailand indicates that long periods of stagnant/contracting penetration may be the norm. Over the longer-term, development of non-life insurance in Thailand will depend almost entirely on the trajectory of GDP growth.
As is the case in the rest of Asia, life insurance is an important and growing channel for organised savings. AIA is the dominant player, accounting for over one third of the premiums written.
There are various challenges. The non-life segment consists of dozens of sub-scale, mainly local operators. We suspect that there has not been discipline in pricing of risks. In the life segment, the local groups may find that lack of capital becomes a challenge.
The latest reports from the regulator and other commentators highlight how both the non-life and the life insurance segments are growing strongly through H111.
As far as we can see, the growth is coming mainly from increased sales to the fairly wealthy minority Thais (many of whom are ethnic Chinese and almost all of whom live in or near Bangkok). In some cases, the growth is through the purchase of new products; in others, the result of particular life insurers emphasising bancassurance or other new distribution channels. Interestingly, AIA is focusing on boosting the productivity and efficiency of its network of agents.
For all the excitement, however, Thailand is not a market that all the multi-nationals active in the region necessarily feel that they must have a substantial presence in. New York Life, for instance, has sold out of Siam Commercial New York Life to Siam Commercial Bank. The local operations of Prudential plc and Manulife are (very) small relative to their other businesses in the region. Sun Life Financial does not have a presence.
The life segment appears to be more dynamic than the non-life. Competitive pressures appear to be tough for non-life insurers – in that penetration (ie: premiums as a percentage of GDP) scarcely changed over the last five years to 2010. Consolidation is likely.
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