Thanks to a latest liberalization, the insurance industry is about to experience fast development, but competition will be fierce and it could be difficult to attract
clients to fresh, unfamiliar goods.WHEN THE government announced a roadmap to open up the nascent life and general insurance industries to overseas businesses in
January, the move was commonly applauded as a major economic reform.
Growth potential is enormous; in a nation of about 54 million, according to statistics from the Ministry of Planning and Finance, only 2 million individuals have any type
of insurance cover.Growth potential is enormous ; in a nation of about 54 million, according to statistics from the Ministry of Planning and Finance, only 2 million
individuals have any type of insurance cover.
Just 0.01 percent of individuals in 2017 have life insurance and ministry statistics demonstrate that only $13 million in premiums. While third-party insurance is
compulsory for vehicles, in 2016, only 10 percent of the approximately 600,000 cars in the country had any extra cover.
According to Nikkei Asian Review, the Japanese insurance company Dai-Ichi has predicted that the industry will grow 100 times over the next century to $1.3 billion. It
would still be comparatively low even then ; last year, Vietnam’s insurance premiums were estimated at $5.75 billion.The liberalization process has been implemented
at a speed. In April, approval was provided to five overseas insurers–UK-based Prudential, Japanese Dai-Ichi Life Holdings, Canadian Manuvie, Hong Kong-based AIA,
and US-based Chubb–to establish fully owned subsidiary companies to compete in the life insurance industry. Initially, the state had said it would grant up to three
licenses.Foreign and local insurers have also suggested nine joint ventures, four for life insurance and five for general insurance, according to Nikkei Asian Review, and
are anticipated to obtain regulatory approval in July.
A process-involved public official who spoke on condition of anonymity informed Frontier that he was expecting life insurers to be able to start activities by the end of
the year.The insurance business development is anticipated to bring advantages to customers as well as to the economy. Insurers need secure assets to suit their
liabilities, especially in the life industry, in order to provide a fresh market for government bonds.
U Kyaw Soe Min, AYA bank’s chief operating officer, defined insurance as the “banking sector’s spare wheel.” “Liberalization will have a beneficial effect on a broad
spectrum of financial industries,” he said.
“I hope the fresh insurance companies will provide a better service and it would be good if they were also able to give reduced premiums than we do now,” he said.
U Pe Myint, a senior CB Bank advisor, said the sector’s development would partly rely on the wider economic growth of the country.
He informed Frontier that the amount of fresh players entering the industry at the same moment would generate strong customer competition, but demand may not be
as big as these businesses anticipate.
“Our Myanmar cultural norms, particularly the influence of Buddhism, doesn’t really encourage the purchase of insurance,” he said. “That could be a major barrier that
foreign investors will have to overcome.” But U Myo Min Thu, the managing director of AMI, said the competition would be good for the industry. He confirmed that AMI
has submitted an application to form a joint venture with a foreign company, but did not reveal the identity of the partner.
“By working with[ foreign companies] or competing with them, we will gain more experience,” he told Frontier. “These foreign insurers can introduce more products
and practices into the local market.”
The present low insurance coverage rate reflects a general absence of insurance benefits knowledge and comprehension, sector sources said.
Mr Tom Renny, Chief Representative for Foreign Insurer AIA, who was one of five companies awarded a life insurance license in April, said that foreign insurers
entering Myanmar need to create products that are suitable for the market and then launch “enormous” awareness programs.
“At the nitty-gritty stage, it has to begin by stating, what is life insurance?”He was telling Frontier.
Ko Tayote Lay, managing director of Power Eleven, said he was pleased with the prospect of more competition in the sector. He operates 250 busses on Yangon Bus
Service lines 21, 39 and 41. Everyone is insured with AYA Myanmar Insurance at a cost of about K500,000 a month for each vehicle. While Tayote Lay said he was
pleased with AMI’s service, he understood that some bus companies had other problems with insurers.
“Some insurers, for example, don’t remind the bus holders that their policy is about to expire, and they only know that it’s expired when they have an accident and go
to make a declaration,” he said.
For life insurers, this method will be most essential as their goods are more abstract than vehicle or fire insurance, he said. “It’s about saving for a need, whether it’s
education, retirement –you need to look at the long-term situation.”
“You also have to have a very well-trained distribution channel. They need to understand their goods, they need to be confident in selling them, they need to be able to
gain customer confidence… then you have to create it simple for individuals to do company, “he said.
One risk–particularly while the market is still in an early stage of development–is that customers will be sold the wrong insurance product, Renny said. “If there is any
mis-selling, you have lost the momentum to grow the industry.”
Ref : https://frontiermyanmar.net