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Asia-Pacic

Insurance promises Asia much more than peace of mind

Expanding coverage would keep countries economic wheels turning
Nikkei Asian Review

One of Cambodia's crowded public hospitals. Ken Kobayashi

11 HOURS AGO by: Shotaro Tani, Nikkei sta writer

TrinhPham,a25yearoldofficeworkerinHoChiMinhCity,vividlyremembersthedayshe
decidedtojoinaninsuranceprogramme.

Mycolleaguesuddenlypassedawaythreemonthsagowithcolorectalcancer,shesaid.Ifeltso
sorryforhimandhismother,whomhehadbeentakingcareof.Butfortunatelythelifeinsurance
schemethathewasenrolledinleft100mdong($4,390)forherenoughforhertostarther
ownsmallbusinesstomakeendsmeet.

MsTrinhisnowpreparingthedocumentstobuybothhealthandlifeinsuranceforherself.If
somethinghappenstome,Icanleavemoneybehindformyelderlyparents.Ifnothinghappens,
shesaidwithasmile,thenitsthesameassavingupforthefuture.
CasessuchasMsTrinhsarenolongerararityinAsia,wheretheinsuranceindustryhasgrown
rapidlyinthepastfewyears.InIndonesia,Thailand,thePhilippines,VietnamandMalaysia,the
marketasmeasuredbygrosswrittenpremiumsgrewacombined41.9percentbetween2010and
2015to$59.5bn,accordingtoreinsurancecompanySwissRe.

Inthesameperiod,theChinesemarketalonegrewby80percentto$386.5bnmuchfaster
thanthoseofJapanortheUS.

Thetrendisexpectedtocontinue.BostonConsultingGroupestimatesthecompoundannual
growthrateofthelifeinsurancemarketinemergingSoutheastAsiancountriestobearound8
percentto13percentthrough2020.Itprojectsa7percentto11percentgrowthrateforthe
nonlifesegment.

Theindustrysrisehasimplicationsfarbeyondhelpingindividuals.TheUnitedNations
considersinsuranceakeyingredientforacountryseconomicgrowth.Asfarbackas1964,aUN
ConferenceonTradeandDevelopmentreportstatedthatasoundnationalinsuranceand
reinsurancemarketisanessentialcharacteristicofeconomicgrowth.
 Streets in Phnom Penh, as in many other Asian cities, are congested with motorbikes, tuk-tuk and cars. Ken Kobayashi

InaregionasdiverseasAsia,eachcountryhasdistinctivefeaturesdrivingthegrowthofthe
insurancesector,butthereareafewcommonthemes.

Thenumberofpeoplewhosignuptoinsuranceprogrammestendstoriseintandemwitha
nationseconomicgrowth.Risinghouseholdincomesallowpeopletoputasidemoneyforthe
future,someofwhichgoesintoinsurance.Householdsalsobecomemorelikelytobuyexpensive
items,suchascars,onwhichtheytakeoutnonlifepolicies.

Socialchangeslinkedtoeconomicgrowthaffectthelifeinsurancesector,too.AreportbyPwC,
theaccountingfirm,pointsoutthaturbanisationislikelytoincreasepurchasesoflife,annuities
andpensionsproductsaspeoplemigratingintocitieshavetomakeindividualprovisionforthe
futureratherthanrelyingonextendedfamilysupport.

WorldBankdatashowthatinIndonesia,forexample,theurbanpopulationgrewalmost15per
centfrom2010to2015thelifeinsurancemarketexpanded32percentinthesameperiod.In
Thailand,theurbanpopulationgrewabout16percent,whilethelifeinsurancemarketswelled
66percent.
 The early morning wait for treatment at Kantha Bopha children's hospital in Phnom Penh. Ken Kobayashi

Moreover,inaregionwherethe1997financialcrisishasleftalegacyofdistrusttowardsbanks,
insuranceisseenasaninvestmentvehicleratherthanjustprotectionforarainyday.Products
combininginsurancewithinvestmentaregainingpopularityinSoutheastAsiancountriessuch
asIndonesia,forexample,eventhoughsomeofferlowerreturnsthanbankdeposits.Theyoffer
warysaversanalternativeplacetostowawaytheircash.

Theindustryarguesthatitcanhelpaddresstheregionschronicsocialandeconomicproblems.
Inmanyofourcountries,publicsystemsofsocialprotectionareunderdeveloped,saidMichael
FRellosa,chairmanoftheAseanInsuranceCouncil,atanindustrygatheringinIndonesialast
November.Insurancecancomplementbasicsafetynetsinhealthcare,postretirementincome
orevendisasterrecoveryplanning.

InCambodia,statesocialsecurityprogrammesoftenfailthoseinneed.Publichospitals,in
principle,providelowincomepatientswithfreemedicaltreatment.However,food,certain
specialistmedicinesandtravelthebetterpublichospitalsareinthecapital,PhnomPenhare
notcovered.
Wehadtomovetothepublichospitalbecausetheprivateonewasjusttooexpensive,said
Sarath,whosefamilymakesalivingdeliveringvegetablestorestaurantsinthecapital.Sarath,
whogaveonlyherfirstname,explainedthathersoninlawhadbeenseriouslyinjuredwhenhis
motorbikecrashedwithatuktuktaxi.Theprivatehospitaltowhichhewasinitiallyadmitted
cost$120anight,includingambulancefees.Cambodiasnominalmonthlywagewas642,000
riel($160)in2014.

Sincethefamilyisnotdefinedaspoor,thepublichospitalischarging$10anight.Expenses
havepiledupto$2,000inthethreeweekssincetheaccident.Weveusedupallthemoneywe
hadbeensavingforemergencies,saidSarath,52,whohadnoideahowmuchlongerthe
treatmentcouldtake.[Insurance]mighthavehelped.

Onamacroeconomiclevel,insurancecompanieshavethepotentialtohelptackleoneofAsias
mostpressingproblems:alackofinfrastructure.

TheAsianDevelopmentBankestimatesthat,tomaintaineconomicgrowth,theregionneeds
investmentof$26tninbigprojectsby2030.Withitslongtermfinancingpower,theinsurance
sectorcouldactasanimportantsourceoffundingespeciallywhere,asBambang
Brodjonegoro,Indonesiasnationaldevelopmentplanningminister,saidatlastyearsAsean
insuranceconference,fiscalconstraintleavesthegovernmentwithlittleroomforpublic
investment.But,withtroubledanddelayedprojectsscatteredacrosstheregion,theindustryis
wary.
InChina,theregionsfastestgrowingmarket,problemscausedbytherapidexpansionofthe
marketarestartingtosurface.Followingarelaxationofrulesabouttheguaranteedratestheycan
offeronlifeinsurancepolicies,insurersespeciallyneweroneshavetriedtolurecustomers
withthepromiseofgenerousreturnsthroughinvestmentlinkedpolicies.Theeasingof
investmentruleshasalsoencouragedambitiouscompaniestopursueriskierassets.

Withthepremiumscollectedonhighyieldpoliciessoldbyitsaffiliate,ForeseaLifeInsurance,
privateconglomerateBaonengGroupstagedahostiletakeoverbidforChinaVanke,thecountrys
leadingpropertycompany,bysnappingupsharesworthbillionsofdollars.YaoZhenhua,Chinas
fourthrichestmanandthechairmanofBaonengGrouplabelledabarbarianbyVankes
chairmanwasinFebruarybannedfor10years(http://next.ft.com/content/37d43dcefa7d11e
695162d969e0d3b65)fromtheinsurancesector.

AnbangInsuranceGroup,too,hasusedsalesofinvestmentstylepoliciestofundoutbound
investments.ThepremiumscollectedbytheBeijingbasedbusinesshavedoubledto114.19bn
yuaninthepasttwoyears.AmongthemanytrophyassetsthegrouphasboughtisNewYorks
WaldorfAstoriahotel.Itwasrumouredtobenegotiatingapurchaseofa$400mstakeinaFifth
AvenueskyscraperwithacompanyownedbythefamilyofUSPresidentDonaldTrumpssonin
law,JaredKushner,thoughAnbanghasdeniedthis.

Analystssaythatamismatchbetweenshortdatedmaturitiesontheirpoliciesandarangeof
longterm,illiquidinvestmentscouldposeathreattothestabilityofinsurers.TheChina
InsuranceRegulatoryCommissionsteppedinlastyear,proposingtotightenregulationofnew
entrantsandproductofferings.
Despiteitsrecentexpansion,theAsianinsurancesectorremainscomparativelyunderdeveloped.
ThecombinedmarketsizeofIndonesia,Thailand,thePhilippines,VietnamandMalaysiain2015
wasonly13percentofJapansand4.5percentofthatintheUSintermsofgrosswritten
premiums.Thesocalledpenetrationrateforlifeandnonlifeinsurancecombinedstandsat
about1percentto5.5percentforthesefivenations,asopposedtoabout11percentforJapan
and7percentfortheUS.Penetrationratesarecalculatedasthetotalvalueofinsurance
premiumsasaproportionofGDP.
Anoptimisticviewonetakenbymanyintheindustryisthatthisgaprepresentsan
opportunity.InternationalinsurerssuchasAXA,Prudential,AllianzandManulifearebuilding
strongfootholdsintheregion,withJapaneseinsurerslikeDaiichiLifeInsuranceandNippon
LifeInsurancebitingattheirheels.

Governmentsareloathtoletinsurersambitionsgounfulfilled.InMyanmar,forexample,where
thestateruninsurerlongenjoyedamonopoly,theindustryhasbeenopeneduptodomestic
businesses,with12newcompanieslicensedin2012.Forforeignrivals,accessislimitedbutthe
governmentiscontemplatingfurtherliberalisationthisyear.

Thespreadofdigitalaccesshelps.Utilisingdigitaltechnologytosellinsuranceproductsisa
topicthatinsurersinthisregionareworkingon,saidYasushiSasaki,apartneratBoston
ConsultingGroup.Chinaleadsthetrend,witharound330mpeoplebuyinginsuranceproducts
online,accordingtoa2016reportbyAntFinancialServicesGroup,anaffiliateofChinese
internetgiantAlibabaGroupHolding.

At Bangkok Life Assurance's oice in Bangkok, agents' sales are represented by paper ornaments. Ken Kobayashi

Meanwhile,BangkokLifeAssurance,aleadingThailifeinsurerpartlyownedbyJapansNippon
Life,isgoingoldschoolinpursuitofbusiness.Ithasemployed40salesagentswhovisit
designatedofficesaroundthecapital,buildingtrustbyholdingseminarsanddistributingleaflets
printedwiththeircontactdetailsjusthowJapaneseinsurershavebeencultivatingcustomers
foryears.EachagentssalesarerepresentedbypaperornamentsbackattheBangkokLifeoffices.
In2016,policiessoldbytheteamincreased80percentyearonyear.

Yetthesectorisstillgrapplingwithlonglastingreputationproblems.InthePhilippines,the
preneedindustrywhichcoversthingslikefutureeducationandfuneralneedsnearly
collapsedin2005aftermanyinsurerssankintofinancialtrouble.Manyparentswereleftwithout
fundingfortheirchildrenseducation,leavingastainonthecredibilityofthecountrysinsurance
sector.

And,formanyconsumers,theproblemsofdealingwiththeindustryarethesameasever.
Reportsofdifficultysecuringpayoutsarewidespread.Itiseasytogivetheinsurersmoney,said
ThuyChau,afinancialadviserinHoChiMinhCitywhoneededapayouttotreataliverproblem.
Butitisverydifficulttogetitout.Herrequestwasrejectedbyherinsurer,whichsaidshewas
toonewtotheprogramme.

Despiteitsshortfalls,thereisnodenyingthatinsuranceenablesriskstobeminimisedand
managed,thusdrivingacountryforward.Byhavinginsurance,onecantakethenextrisk,which
turnstheeconomicwheels[ofacountry],saidMrSasakiatBCG.Itstruethatthepresenceof
theinsurancesectorisincreasing,andIthinkAsiancountriesareenteringavirtuouscircle
wherebythesectorhelpseconomicactivitiesinthosecountries.

NikkeistaffwritersYukakoOnoinBangkok,JoyceHoinHongKong,andCliffVenzonin
Manilacontributedtothisstory.

Aversionofthisarticle(http://asia.nikkei.com/Features/RunningforCoverage/Insurancepr
omisesAsiamuchmorethanpeaceofmind)wasfirstpublishedbytheNikkeiAsianReview
onMarch23.Website(http://asia.nikkei.com/?n_cid=NARAN212&utm_source=FTwebsite&ut
m_medium=bottom&utm_content=textlink&utm_campaign=FTwebpromo)|Subscribe(http
s://regist.asia.nikkei.com/member/register/?n_cid=NARAN213&utm_source=FTwebsite&utm
_medium=bottom&utm_content=textlink&utm_campaign=FTwebpromo_subs).2016Nikkei
Inc.Allrightsreserved.

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Printasinglecopyofthisarticleforpersonaluse.Contactusifyouwishtoprintmoreto
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