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.
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.