Thailand touts ASEAN to allow insurance firms to cross border with policy offerings

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Malaysia‘s state news organization,  Bernama, last week reported that Thailand‘s Finance Minister, Kittirat, have touted to ASEAN, for the approval of ASEAN member countries located insurance firms, to issue insurance policies across each other’s borders.

Bernama said Kittirat saw the cross ASEAN border issuance of insurance, as important to ASEAN member states, as human resources in ASEAN member countries, are increasing becoming ASEAN situated, and not just individual country situated.

  • Concerning the insurance business current state in Asia, the Asian Insurance Congress 2012, under the banner; “The Insurer’s New World Order: Adapting to Changing Times” says the following:

 The Insurance sector is bracing itself for a historic roller-coast ride: from unpredictable economic debacles and reliefs, to hyper-growth industries in sluggish macroeconomic environments, and to Europe‘s stubborn debt crisis and a slowdown in the twin powerhouses of China and India. While the Asian insurance sector may have emerged relatively unscathed compared to its banking counterparts, we know the industry is not entirely de-coupled from the challenges of global financial services worldwide.

As the cycles of uncertainties proceed, life and non-life insurers are facing rising costs to cope with regulatory standards, and are increasingly pressured to manage their complex risk profiles and loss control measures. Uncannily, the unpredictable conditions have also provided a window of opportunity for some players to capture market share, enter new markets, or introduce product innovation.

Additionally, insurers are challenged to improvise and redesign their customer engagement process to cater to the multi-faceted requirements of ‘Generation C’ (the Connected Generation of consumers who are digital natives and exceptionally tech-savvy). Individuals in this segment are extremely socially linked via their mobile devices, are turning to alternative channels for opinions and advice, and demanding more transparent pricing from their insurers.

  • Global wise, Wikipedia says:

Global insurance premiums grew by 2.7% in inflation-adjusted terms in 2010 to $4.3 trillion, climbing above pre-crisis levels. The return to growth and record premiums generated during the year followed two years of decline in real terms. Life insurance premiums increased by 3.2% in 2010 and non-life premiums by 2.1%.

While industrialised countries saw an increase in premiums of around 1.4%, insurance markets in emerging economies saw rapid expansion with 11% growth in premium income. The global insurance industry was sufficiently capitalised to withstand the financial crisis of 2008 and 2009 and most insurance companies restored their capital to pre-crisis levels by the end of 2010. With the continuation of the gradual recovery of the global economy, it is likely the insurance industry will continue to see growth in premium income both in industrialised countries and emerging markets in 2011.

Advanced economies account for the bulk of global insurance. With premium income of $1,620bn, Europe was the most important region in 2010, followed by North America $1,409bn and Asia $1,161bn. Europe has however seen a decline in premium income during the year in contrast to the growth seen in North America and Asia.

The top four countries generated more than a half of premiums. The US and Japan alone accounted for 40% of world insurance, much higher than their 7% share of the global population. Emerging economies accounted for over 85% of the world’s population but only around 15% of premiums.

Their markets are however growing at a quicker pace. [30] The country expected to have the biggest impact on the insurance share distribution across the world is China. According to Sam Radwan of Enhance International, low premium penetration (insurance premium as a % of GDP), an ageing population and the largest car market in terms of new sales, premium growth has averaged 15–20% in the past five years, and China is expected to be the largest insurance market in the next decade or two.[31]

  • ASEAN Population:

Population wise, the total population of ASEAN is estimated to be 600 million with a large young population aged between 15 and 60 years.

The literacy rate of the young population in Singapore, Malaysia, Brunei and Vietnam is high averaging more then 90%, while that in Thailand and Indonesia is more then 80%. The other countries have relatively high literacy rates and education policies within these countries would bring them to the level of the advanced economies in the near future. Governments in the region have attached importance to education with the provision of free education at the primary and secondary level being available to all children. In Singapore, Malaysia, Brunei and Thailand education has become compulsory. Expenditure on universal education in these countries constitutes a major proportion of the social expenditure.

The provision of universal health services to the population is another important human development program. The health facilities and services provided differ both by country and within the individual countries. The virtual free immunization programs in all these countries have resulted in positive health outcomes. The total fertility rate, defined in terms of children per woman, in 2000-2005 period (medium variant) was higher than the replacement rate of 2.15 in countries like Indonesia (2.37), Malaysia (2.93), Laos and Philippines (3.22); and below in Singapore (1.35) and Thailand (1.93).(Source United Nations Population Statistics, 2005)

Individual ageing refers to increased life expectancy in the period 2000-2005. They are relatively high in Indonesia (8.4 percent), Thailand (10.25 percent); Singapore (12.2 percent); and Vietnam (7.4).

As women live longer than men on average, but usually have lower exposure to employment in the formal sector and earn wages that are lower than men on average, women become more exposed to the risk of poverty in old age and this issue becomes very important in social security protection.

As ASEAN is developing economically, most of the population is still in rural areas and supported by agriculture. There are issues of urban migration or migration to centres of economic development in most ASEAN countries. As most of the population presently relies on agriculture, this traditionally based economic structure supports the extended family and has generally hindered the growth of national or regional social protection systems. However, Singapore virtually has no agricultural sector while Brunei has a very small agricultural sector. The other member countries rely on the large agricultural sector, which comprises a large portion of the informal sector, to provide economic opportunity to a major section of the population. The labour force employed in this sector is large especially in Indonesia, Thailand, Philippines, Cambodia, Vietnam, Laos and Myanmar. Malaysia has acquired a balance due to economic development in past decades. The informal sector covers a substantial proportion of the economy of many Southeast Asian countries. In 2000, more than half of the labour force was engaged in the informal sector in Thailand (52.6 percent), while in Malaysia and Philippines it was relatively lower at 31.1 percent and 43.4 percent respectively. Singapore’s informal sector is small, and therefore only 13.1 percent of the labour force was engaged in the informal sector. In the other countries especially Laos, Cambodia, Vietnam and Myanmar the rate exceeds 65%.

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