LIFE SIGNS
New mortality table clouds 2018 forecast
The Thai Life Assurance Association sees 4-6% growth in life insurance premiums this year, driven by lower costs.
The Thai Life Assurance Association (TLAA) forecasts 4-6% growth in life insurance premiums this year, driven by 5-30% lower costs for premiums after the recent implementation of a new mortality table.
2018 is the first year that the association is giving a range for the forecast of premium growth as the TLAA cannot estimate the impact from the new mortality table, said chairwoman Nusara Assakul.
The new mortality table took effect from Sept 30, 2017 and has led to cheaper life insurance premiums for three products: term life, whole life and credit life.
Savings insurance products do not reap any benefit from the new mortality table, Mrs Nusara said, but they face the challenge of offering a high return to policyholders amid a low-interestrate environment.
“The first response of life insurance companies is to cut costs to increase efficiency,” she said. “But if they are unable to cancel out the impact from lower-cost premiums, insurers could cut down expenses related to distribution and marketing, and this could take a toll on insurance sales.”
Even in the worst-case scenario, however, the industry’s premium growth shouldn’t dip below 4% this year, she said.
The industry is also challenged by the new regulatory framework, including International Financial Reporting Standard 9 and 17 (IFRS 9 and 17), Thailand’s greying population and the rise of digitisation.
Mrs Nusara said Thailand will be the first ageing society in Asean, and the loss ratio of senior customers will then increase.
“However, the industry still keeps growing on the back of tax privileges, the digital marketing channel, and TLAA and regulator supports,” she said.
The government late last year agreed to let policyholders deduct health insurance premiums worth up to 15,000 baht a year from taxable income, but the amount must not exceed 100,000 baht when combined with life insurance premiums.
Life insurance premium rose by 5.9% to 602 billion baht in 2017, of which 434 billion was contributed by renewals, 103 billion was from first-year premiums and the rest derived from single-premium insurance.
“The insurance penetration rate last year was steady at 3.89% of GDP, while insurance density slightly increased by 5.48% to 9,091 baht per person,” Mrs Nusara said.
Insurance agents remained the core distribution channel at 49.2%, followed by bancassurance at 44.9%.
The top five life insurance firms in 2017 were AIA (21% of total premiums), Muang Thai Life Assurance (17.1%), Thai Life Insurance (13.7%), Krungthai Axa Life Insurance (10.5%) and SCB Life Assurance (8.2%).