Author: Ashton Wenborn

The insurance sector in Myanmar has been active for quite some time, perhaps surprisingly so for those not familiar with the market. Following the signing of the peace treaty of Yandabo in 1826, which ended the First Anglo-Burmese War, many English insurance companies came to Burma to buy life insurance.

The Burma National Insurance Company and the Burma (Government Security) Insurance Company, owned by local companies, entered the insurance market in 1940 before the Second World War. By nationalising a local insurance company, the state-owned Union Insurance Board was established in 1952. All life insurance businesses were state-monopolised under the Union Insurance Board in 1959, and by 1964, the socialist government abolished all private insurance companies. From late 1969 to 1976, all insurance business activities were centralised under the Insurance Division of the People’s Bank of the Union of Burma. Under the Union Bank Law (1975), the insurance business was outsourced to the newly formed Myanmar Insurance (MI). It was in 1993 when the Myanmar insurance law empowered the MI enterprise to engage in all insurance business activities. The enactment of the insurance business law took place in 1996.

Although the market will likely prove lucrative for foreign insurers, regulatory risks loom large

The Insurance Business Supervisory Board launched a license application process for private insurance companies in November 2012 to diversify the provision of insurance services and to modernise the sector. However, it was 2013 that proved a landmark year in the history of the country’s insurance sector, marking the commencement in operation of 12 domestic insurers. We take immense pride that IKBZ Insurance was the first private insurer in Myanmar to get registered as a company bearing the registration number 001 on 25 May, 2013.

The present day
Myanmar’s underpenetrated insurance market was recently opened up to domestic private players, after decades of state monopoly. With an opening to foreign investment expected to follow, the country offers plenty of opportunities to multinational insurers.

The country is on the path of economic development and notable transformations have been witnessed in all sectors. IKBZ is proud to have been a part of this metamorphosis.

The year 2014 saw some eminent multinational insurers begin establishing their representative offices so as to be ideally positioned to enter the Myanmar insurance market as soon as it is opened to foreign investment. These companies include AIA, ACE, MetLife and Prudential, to name a few to have obtained authorisation from the insurance regulator.

Currently, there are 15 foreign insurance companies that have representative offices in Myanmar, and, among those, companies who have been in Myanmar for over three years were allowed to provide insurance within Myanmar’s special economic zone (SEZ).

Through these representative offices they can provide training and consultancy services to both domestic insurers and the country’s insurance regulator. This process will allow these multinationals to gain key strategic insights and contacts in the Myanmar insurance industry, and grant them an early-mover advantage that could be worth hundreds of millions in dollars once the market opens to foreign insurers.

Although the market will likely prove lucrative for foreign insurers, regulatory risks loom large. The existing Japanese firms, which have had representative offices in the country for over two decades, are only allowed to operate inside the SEZ and can’t operate in any other region. They will have to pay an annual fee of $30,000 to the government for their licenses, and are allowed to issue marine cargo, building risk, and cash transfer insurance policies.

Initially, the private insurers were only permitted to underwrite business in six of the 48 recognised insurance categories in Myanmar, while MI retained its monopoly over the remaining 42 categories. However with changing times, after having reviewed the performance of these private companies over the last two years, the insurance regulatory board jointly with MI decided to liberalise and allow these private insurers to do business with two more products – health insurance and inland marine cargo insurance.

For the masses
Next to the KBZ bank, IKBZ is the second largest business conglomerate within the KBZ group, catering to a wider customer base. Moreover, being associated with the KBZ Bank, we have the privilege of expanding our insurance business using the bank as one of the major marketing channels for selling the fire insurance products, which are a compulsory buy for any landed property loan offered to its customers in Myanmar.

Within a short span of time, we have earned a good reputation for our excellent performance and services delivered. We, as a company, dominate the largest market share in Myanmar with the highest amount of premium income compared to those of all other private insurance companies in Myanmar (see Fig. 1). Our diverse platform and strong capitalisation provide a stable market to our business partners across all lines of business.

Through our growing network and by using wider branches of KBZ Bank to reach out to our customers, we are within the reach of the majority of the population of Myanmar. The extensive knowledge and experience of IKBZ befitted many of our customers. Hassle free onboarding, media presence, promoting awareness, public seminars and word of mouth from our existing customers, all contribute towards our high customer acquisition rate which currently stands at around 72.5 percent. Currently with no price competition existing in the insurance market in Myanmar, we as a company can only compete for the client’s acquisition and retention through the efficient and excellent services we provide.

As an underwriting company, we make sure we follow simple yet effective underwriting process to address the needs of our customers. Only after proper risk assessment, the premium is charged, followed by the final step of the issuance of the policy to our customers. Attaining minimum turn-around time to issue policies is our key deliverable at the underwriting stage. This is achievable due to the in-house robust IT infrastructure, which helps smooth the operations of real time business by connecting all 14 branches with our head office in Yangon.

Catering to the service industry, effective claims management is yet another significant step. Claim settlement is integral to establishing an insurer’s relationship with its policyholders. With strong commitment to our customers, IKBZ responds effectively to every claim intimation. Our surveyors undertake due diligence to avoid fraudulent claims. Policyholders are indemnified, complying with the contractual promises in the policy. IKBZ’s reputation is built upon fast and fair claims handling.

What makes us a trustworthy brand is our efficient claim settlement, proactive customer support, and regular interactions with existing policy holders. This has helped us gain the confidence in our policy holders, who are pleased to continue their businesses with us. We have achieved a near-perfect customer retention rate of 98.5 percent, abiding by the three pillars of customer retention: keeping customers happy, reducing customer’s effort and delivering excellent and proactive customer service.

In times to come, we expect the insurance regulatory body of Myanmar to liberalise the market further and allow private insurers to have bancassurance as a preferred distribution channel, which may act as a boon for us, as we are associated with the country’s largest private bank. We also hope and foresee that the Insurance Business Regulatory Body will open the market further, having monitored the phenomenal progressive performance of the private insurance companies in the last two years and therefore, eventually allow them with more premium insurance products going forward.

As the consultancy giant McKinsey & Company predicts, Myanmar’s economy could more than quadruple in size to more than $200bn by 2030. Having said so, we believe that opportunities and huge potential in the insurance industry will also accelerate for private insurers in the near future.

Emerging risk
Growing business gives rise to an increase in risk appetite, exposing the insurers to a sharp rise in losses. With the evolving risk environment, insurers must be prepared to merge proactive measures of risk management with the traditional standard protocols and approaches, to counter the losses. Risk education, co-insurance, re-insurance and a well-informed task force – the pillars of insurance – will help the insurers to develop innovative, customer-centric and market-penetrating customised insurance solutions.

With the advent of technology, insurers can now interact more closely with its customers, and are able to understand their needs. Insurance companies should shift the focus from risk, ratings and products to understanding customer data analytics, and offer risk advice and prevention services to customer, and customised solution to the customer.

New talents must be introduced into the business periodically to build a diverse workforce, promoting fresh ideas and innovation. These are the key to performance enhancement of the business and providing a better customer satisfaction.

Success doesn’t make us rest on our laurels. As a key contributor to the Myanmar insurance industry we must scale greater heights by providing products and services that exceed customer expectations. Quality has always been our watchword and will remain so forever.

Opportunities in the Bangladesh insurance industry are as vast and undertapped as they were a half century ago, that’s according to Farzana Chowdhury, Managing Director and CEO of Green Delta Insurance Company (GDIC). Irrespective of the country’s political and economic challenges, the industry boasts much in the way of potential, and it shows no signs of slowing up in the years ahead. We spoke to Chowdhury about the country’s changing insurance industry and GDIC’s place within it.

How has the insurance industry developed in Bangladesh?
Despite being among the most populous countries in the world, with a population density (individuals per sq km) of about 1,200, insurance penetration is a mere one percent or so. However what gives us the confidence that the scenario is changing much faster today than in the past is that structural long-term drivers are firmly in place, including the demographic dividend, sustained economic performance, rising household incomes and an easing of monetary policy. The Bangladeshi insurance sector continues to evolve as it adapts to the ongoing regulatory, socio-economic and political changes.

Most of the population, especially at the grassroots level, do not even know there is something
called insurance

Why is there a general lack of awareness regarding insurance in the country?
The insurance industry is at a very nascent stage. Most of the population, especially at the grassroots level, do not even know there is something called insurance. Concurrent with this challenge are the facts that formal social security is almost non-existent, quality healthcare costs are extremely high and typically out of reach of the masses, and, in the case of corporate contingencies, especially in the small- to medium-sized segments, they tend to lose almost everything without any hope of getting back on their feet.

The reason lies in the mindset of the population. Most consider this product as something that’s good to have rather than a necessity. In Bangladesh, the number of insurance companies is more than the necessity, meaning that companies indulge in unethical business practices, which has triggered a negative perception in consumers’ minds.

How do you intend to address this issue?
Having been in this market for the past three decades, we understand the value of insurance and realise its immense contribution towards providing financial, as well as social security. So when we say that our intent is to provide insurance for all, what we’re really saying is that we are focused on safeguarding not just the interests of the citizens of our country but ringfencing the interests of the nation too.

Over the past decade or so, we were in the institution-building mode and focused on growing awareness on the potential benefits of insurance for our countrymen. In doing so, our topline grew substantially from BDT 515.30m in 2004 to BDT 2681.37m in 2014, positioning us as the largest and most trusted non-life insurance enterprise in Bangladesh.

In the next phase of our evolution, which began sometime in early 2013, we’re focusing on controlled growth with a concurrent focus on profitability. I am happy to state that this overarching objective is already bearing results. Hence, 2014 can be summarised as the year during which we focused on the quality of our portfolio and, coupled with a tight control on our operating costs, we recorded a 4.46 percent growth in our net profit after tax to BDT 239.25m.

Could you tell us how Green Delta has developed and grown over the years?
GDIC is one of the leading private non-life insurance companies in Bangladesh. Incorporated in 1985 as a public limited company, under the Companies’ Act 1913, business started in 1986, with a paid up capital of BDT 30m. Now, GDIC has amassed about BDT 807m with a credit rating of AAA and ST1. GDIC holds the proud distinction of being the first ever company to raise its paid up capital to such a level.

Under the charismatic leadership of Nasir A Choudhury and myself, GDIC has been leading the winds of change in the insurance industry of the country in terms of service standard, innovative products and legislative restructuring. After a glorious journey of three decades in the insurance sector, GDIC has now become a big family of visionary board members, 600 plus committed staff, numerous valued clients and thousands of esteemed shareholders. By now, Green Delta has been able to uphold the brand image as a prompt claim settler, superior service provider, and diversified product supplier – almost like a one-stop solution provider in the non-life insurance sector in the country.

You aim to provide insurance for everyone. How do you deliver on this promise?
To offer one example, women constitute around 52 percent of our population and to cater to this large and growing segment, the time was just right to launch a product exclusively for them. Nibedita is the first such product in the non-life insurance industry of Bangladesh focused on providing comprehensive coverage exclusively to women (with trauma allowance). Hence, bundled with the product, we also provide counselling and therapy sessions for their holistic well-being. Nibedita is also not just a standalone comprehensive insurance product but an assurance that women can cope with the crisis at hand and are able to restore their confidence.

To give another, Shudin is a health insurance programme exclusively covering workers in the ready-made garments (RMG) sector. This product is clearly in response to the Rana Plaza tragedy of 2013 where over 1,100 workers were killed and several others injured when the building, largely comprising RMG factories, collapsed. We are also actively working with the Bangladesh Garments Manufacturers Association and the International Labour Organisation to co-develop a policy that is truly effective for the target segment and help them realise the underlying value of insurance.

Thus we address national issues and come up with new and innovative products to cater to the Insurance need of people from all walks of life.

What does the future hold for Green Delta?
Despite a politically and economically challenging environment, the Bangladeshi economy has consistently reported an average of six percent growth over the past few years, making it among the fastest growing economies in the world (see Fig. 1). Given the high growth and increasing income levels, the household income flowing into insurance is expected to continue to increase in the future. One demographic advantage in Bangladesh is that the working population is expected to rise in the coming years, translating into an increasing customer base for the industry.

For the coming financial year, growth is now projected at 6.4 percent, slightly higher than earlier forecast, as a revival in worker remittances is expected to bolster private consumption, while private sector investment will pick up on greater political stability. Moreover, the government will continue its efforts to step up project implementation. Currently we are seeing a consistent 13-15 percent growth every year in the insurance industry. The consistency of the growth gives us hope regarding a brighter future of the industry. However, if the growth in the sector reaches 20 percent every year, that will be remarkable. We are determined to play a vital role in helping this industry reach the desired growth. The market penetration of insurance is currently less than one percent. With our flagship project ‘insurance for everyone’ and the government’s recent praiseworthy initiatives related to safety net insurance to give coverage to the bottom of the pyramid group, we are hopeful regarding the possibilities of a five percent market penetration within five to 10 years’ timeframe.

GDCI holds 13-14 percent of the market share of the insurance industry and is the leader of the non-life insurance sector in the country. In the decade ahead, if our projections work out properly, we will be more aggressive in the market and aim to capture the 22-25 percent of the market share. But we don’t want to grow alone; we want the whole industry and the other insurance companies to grow with us. That will eventually help us realise the concept ‘insurance for everyone’.

Bill Gross, known often as the ‘Bond King’, has sued Pimco – the company he helped found in 1971 – for its part in driving him out the firm last September. The suit, filed on October 8 in Orange County, alleges that younger executives at the firm ousted him in order to cash in on his 20 percent stake in a $1.3bn bonus pool.

Since his departure, investors have pulled billions of dollars out of Pimco funds

According to the lawsuit, Pimco “wrongly and illegally” withheld hundreds of millions of dollars in compensation owed to Gross. “Driven by a lust for power, greed, and a desire to improve their own financial position and reputation at the expense of investors and decency,” the document goes on, “a cabal” of “managing directors plotted to drive founder Bill Gross out of Pimco,” according to documents seen by The Wall Street Journal.

Since his departure, investors have pulled billions of dollars out of Pimco funds – although the scale of the outflows has diminished in recent months. Assets held by the firm’s flagship fund have slumped to $100bn, down from a 2013 high of $300bn.

Gross’ case marks an attempt on his part to restore his damaged reputation. In the time since his departure, the former executive has been portrayed as a disruptive influence on the firm he helped create, although the lawsuit, if successful, could clear some of the marks against his name.

Gross’ version of events are that Mohamed El-Erian, chief executive at the time of his departure, and he were at odds over the direction of the firm – with Gross opposed to El-Erian’s intentions to pursue riskier investments, away from its core bonds business. The suit also claims Gross was set to receive $250m in bonus payments last year, adding that the firm denied him an $80m bonus for the third quarter, despite him leaving a matter of days before the quarter’s end.