The general insurance market is a major force in Thailand’s growing economy – helping to drive it forward, while also providing invaluable social and business assurance. The industry is an integral aspect of economic development for the country by providing a platform for financial stability, as well as facilitating opportunities for business expansion. Recent political and economic conditions in Thailand however, have restricted the country’s GDP growth, as well as the level of contribution achievable by major industries.
Following various setbacks in recent years, it seems that the country is returning to its former promising route of development and stability. Once again, playing a pivotal role in the country’s growing financial strength is the insurance industry. One company that stands out in particular for its contribution to the Thai economy and society is Viriyah Insurance, winner of the World Finance award for Best General Insurance Company, Thailand every year since 2011 to date. World Finance spoke with Pravit Suksantisuwan, Deputy Managing Director at Viriyah Insurance about Thailand’s insurance sector, and the various opportunities that are now arising in it.
Following various setbacks in recent years, it seems that [Thailand] is returning to its former promising route of development and stability
How has Thailand’s non-life insurance industry evolved?
The general insurance industry plays a very important role in Thailand’s economic development and enhancing the population’s social wellbeing. To put this into perspective, general insurance in Thailand has a consistent average growth that is double the rate of GDP growth. Direct premiums are a major factor in this continued growth as Thailand’s insurance penetration is still relatively low at only 5.9 percent of the GDP.
Despite its success, the general insurance industry in Thailand has slowed during the past two years to one percent growth, with the average direct premium valued at only 205bn Thai baht ($5.7bn) (see Fig. 1). This is due to various negative factors that have transpired in the aforementioned period. The economic situation, political climate and declining automobile sales have all directly affected auto insurance premiums, which are the main revenue stream in Thailand’s general insurance industry. That being said, direct premiums are expected to increase to 223bn Thai baht ($6.2bn) in 2015, with an estimated business expansion of five percent during the second half of the year. As a result of increasing stability, automobile producers are planning to manufacture new models as they predict an increasing number of orders in the coming months.
What are the biggest challenges and opportunities for the Thai non-life insurance industry?
The liberalisation of the ASEAN and the Asean Economic Community (AEC) is both a challenge and an opportunity for Thailand’s general insurance business. While it presents a far broader customer base, Thai insurers will now have to compete with strong foreign insurers, as well as domestic rivals. As such, it is crucial for industry players to make preparations in terms of their human resources and operation systems. It is also important that insurance companies encourage the development of innovative insurance products that correspond to the public’s risks, needs and preferences.
Are there any recent reforms that we should be aware of?
The Office of Insurance Commission (OIC) has been closely regulating Thailand’s insurance market for many years and now aims to bring it in line with international standards. In order to raise Thai awareness about the benefits of insurance, the OIC has introduced the Third Insurance Development Plan, which will come into effect from 2015 to 2019. This plan is expected to contribute significantly to Thailand’s economic growth and will allow the market to benefit from the continued economic integration of the Asian region, which includes the Greater Mekong Sub-region (GMS).
The plan involves enhancing industry standards, enforcing greater corporate governance and increasing transparency. Making the qualifications needed for an insurer to operate more stringently is another important step in the plan, which entails increasing the minimum capital levels and foreign ownership participation. The OIC also aims to make the industry more competitive by encouraging the introduction of innovative products, as well as the de-tariffication of premium and commission rates. Finally, the plan will help the industry to attract better talent by raising greater public awareness and establishing a new image.
How has the company led developments in the non-life insurance market?
In order to improve the quality of our claim services we are adopting new technologies for car accident inspection and repair, which will increase customer satisfaction and reduce unnecessary costs. This will also encourage innovation in Thailand’s competitive non-life insurance industry to the benefit of both providers and consumers.
Examples of innovative services that we have recently introduced include the Viriyah Smart Claim, which uses mobile devices and Google map technology to provide the precise location of an accident. This allows our claim inspection staff to reach the accident scene promptly. We have also developed a zoning strategy with assigned accident inspectors to ensure that all areas are covered when an accident occurs.
Given that the number of cars in Thailand has risen significantly in recent years, Viriyah Insurance has implemented ‘Fast Track Repair’ to assure our customers that minor damages will be fixed within 24 hours. We also control the quality of repairs in our approved garages through live video conference technology, which allows us to track repair progress and provide approval remotely.
How does the insurance industry contribute to the country’s overall economic development?
Receiving a small advanced premium in exchange for the promise to cover losses from unexpected events in the future offers peace of mind to both individuals and businesses. Insurance also enables families and businesses to remain financially stable when unexpected events do actually occur.
The insurance industry also promotes economic growth as it is a major investor – insurers invest some of the premium funds they receive to generate profit, which ensures that they have sufficient capital to cover operating costs and future losses. In addition, the industry is a major employer for marketing, underwriting, accounting, investing and claims. Therefore, insurance companies provide many job opportunities for unemployed people, which also help to promote economic growth.
Another way that the industry contributes to the overall economy is by acting as a source of credit as it helps people and businesses to receive loans more easily by providing protection to their goods or properties. This allows them to acquire more capital to either spend or invest back into the economy. Finally, the industry reduces the government’s burden by encouraging individuals to take care of themselves through purchasing insurance and enabling the government to use state funds more efficiently.
How does Thailand’s non-life insurance market compare to neighbouring nations?
In the ASEAN, the nature of insurance companies varies from state-owned or captive insurers of government corporations in Vietnam, to family-controlled companies in Thailand, conglomerates in Indonesia and banking groups in Singapore and Malaysia. There are differences in the maturity of insurance from country to country, which can be classified into three groups: matured, developing and beginning insurance systems.
Non-life premium growth is expected to remain strong in emerging Asia in 2015, driven by solid economic performance and favourable government policies. For instance, Indonesia’s new government is carrying out pro-growth structural reforms, including increased spending on infrastructure, which should boost the demand for non-life insurance.
While Thailand’s economy has been suffering from the political landscape, we can now expect premium growth as the situation becomes more stable. On the other hand, regulators in Malaysia are introducing a full de-tariffication of motor insurance in 2016, which could erode the margins for non-life insurers as competition increases.
In terms of solvency regulation, only half of the ASEAN countries, including Singapore, Malaysia, Thailand, Indonesia and the Philippines, have applied Risk Base Capital (RBC), while capital based regulation is still applied in the other countries.
How important is technology in boosting performance and customer satisfaction?
We strongly believe that technology plays an important role in doing business in the modern world. New technologies have been integrated into our core services, such as underwriting, car accident inspection services and back office claim functions. As a result, policies can now be purchased and renewed much more quickly through our newly established online channels.
New technology creates faster, friendlier and more reliable services for our customers and enhances their level of satisfaction. We have found that exceeding customer expectations reinforces customer loyalty, which is crucial for Viriyah Insurance to maintain its leading position in Thailand’s non-life insurance market.
What are your ambitions for the future of the company and the industry as a whole?
We will continue to adhere to the principles of good governance and transparency, while always giving careful consideration to the interests of all stakeholders in line with our businesses management philosophy: ‘fairness is our policy’. We have won the first prize as non-life insurer with best management for three years in a row, and we will continue to uphold our reputation, perform our duties with excellence and provide security and sustainable prosperity for Thai society.