TGIA advises diversification
Non-life insurance companies are being urged to diversify their business lines to withstand the downward interest rate outlook, says the Thai General Insurance Association (TGIA).
The non-life insurance segment not only faces challenges from fiercer competition, but also a lower interest rate trajectory that is leading to lower investment returns, said TGIA executive director Kheedhej Anansiriprapha.
“Surviving amid lower interest rates means gaining a profit margin from the insurance business primarily and investment portfolios second,” said Mr Kheedhej.
With recurring volatility in the capital market, relying on revenue generated from portfolio investment and returns from deposit interest is difficult, he said.
Non-life companies should implement business diversification within insurance segments, not only focus on the motor insurance business.
“The major cause for closures for some non-life insurance companies in previous years the motor insurance business. Under existing conditions, this business should not be affected as the model is based on risk management and business diversification,” said Mr Kheedhej.
There are insurance companies focusing on motor insurance who are able to withstand current business conditions, such as Viriyah Insurance. The company has diversified its business and direct premiums of non-motor insurance make up 20% of Viriyah Insurance’s total direct premiums received, he said.
Other similar examples are Thanachart Insurance and Syn Mun Kong Insurance.
“The outlook for the motor insurance segment is difficult as the cost of doing business is high,” said Mr Kheedhej.
The combined net loss ratio in the motor insurance business stands at 107% for these 36 companies, while the ratio for non-motor business, such as fire, marine and miscellaneous insurance, was 81.5%, according to the TGIA.
In 2018, the majority of direct premiums and portfolio mix of non-life insurance was attributed to motor insurance, both compulsory and voluntary, at 59%, followed by personal accident (13%), all industrial risks (11%), fire insurance (4%), health insurance (4%), marine insurance (2%) and other miscellaneous insurances (7%).
The market share for personal accident insurance grew gradually from 3% in 2002 to 13% in 2018, while the market share of health insurance also rose from 2% in 2002 to 4% last year, according to the TGIA.
Personal accidents, especially travel insurance, saw considerable expansion over the past few years, in line with air travel through online booking.
Health insurance growth is attributed
to the government’s policy to provide up to 15,000 baht of annual tax deductions.
The means of survival for the non-life insurance business is not tantamount to migrating to personal accident insurance or health insurance since both insurance types are scopes for business diversification, said Mr Kheedhej.
Each company should find tailored solutions that fit each business model, he said.
The non-life insurance business is forecast to grow by 4-5% this year, with total direct premiums received anticipated at 241-243 billion baht from 53 non-life insurance companies and four health insurance firms, according to the TGIA.
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Surviving amid lower interest rates means gaining a profit margin from the insurance business primarily and investment portfolios second.
KHEEDHEJ ANANSIRIPRAPHA Executive director, TGIA