RAM Ratings expects general insurance premiums to stay stagnant due to the progressive impact of tariff liberalisation and as the country
KUALA LUMPUR: Growth prospects for insurance in six major Asean markets are supported by strong socio-economic fundamentals, but the pace and quality of growth will vary by geography, Moody's Investors Service says.
The strong fundamentals include urbanization, a growing middle class, low insurance penetration, and the lack of a sufficiently funded welfare system, says Frank Yuen, a Moody's assistant vice president and analyst.
"However, the pace and quality of such growth will vary to reflect differences in market maturity, financial depth, demographics and policies, and the insurance industry in these countries are finding different ways to overcome common growth bottlenecks," he says in a report issued on Thursday.
The report "Insurers – Asean: Growth comes through new policies and innovations" covers the markets of Singapore, Thailand, Malaysia, Indonesia, Vietnam and the Philippines.
The bottlenecks include difficulties in expanding and enhancing distribution capabilities, low protection content in mainstream products, shallow bond markets that limit investment options, and an increasing need to improve the capacity of industries to withstand shocks and support growth through tightening risk-based capital (RBC) regimes.
The report states Asean governments are also aware of the widening protection gaps in the region, in particular among underserved segments, and have addressed these concerns through policies.
Economic incentives for insurance coverage are emerging throughout the region, particularly in medical and retirement coverage.
The markets examined provide some health coverage, but their ability to sustain such coverage varies, leading to opportunities for commercial insurers to fill gaps.
“In that regard, Thailand and Malaysia have witnessed strong premium growth for critical illness and medical products, while Singapore's aging working population supports the steady growth in retirement annuity policies,” says Moody’s.
Similarly, economic developments in the region will continue to support the growth of non-life premiums.
Rising infrastructure investment in Indonesia supports demand for property and fire insurance, while the Philippines' high exposure to natural disasters has fueled its demand for catastrophic loss coverage.
In Vietnam, the continued economic development and increasing risk management awareness would support premium growth.
Throughout Asean, insurance distribution is dominated by agencies and brokers, which are uneven in quality, coverage and geographical reach.
To address the limited pools of qualified agents, for example, Singapore has been increasingly relying on financial advisers as an important channel, while Malaysia has launched tools, such as the balanced scorecard, to increase productivity for agents and bank staff selling insurance products.
There has also been a growing number of regional bank partnerships to expand client reach.
Nonetheless, Moody's expects that it will still take time and investment for insurers to strengthen the distribution capabilities of their banking partners to offer higher value products.
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