Increasing demand on the back of an expanding middle class and growing awareness of services will drive growth in Thailand’s insurance sector, though short-term prospects may be muted by a cooling of the economy.
Strong potential for growth in Thailand’s insurance sector stems from low rates of insurance penetration, which is 4.1% for life insurance and 1.7% for non-life insurance, according to the Thai General Insurance Association (TGIA).
Bright spot for Thailand’s insurance sector
Penetration rates have stayed low, even though the market has a relatively high number of players; some 57 insurers operate in the non-life segment, 90% of which are local.
The 10 leading companies account for more than 60% of total market share, with five players comprising roughly 45%.
In the life segment, meanwhile, 24 operators are members of the Thai Life Assurance Association, with a slightly higher foreign presence.
The number of insurers could fall if local market regulator Office of Insurance Commission (OIC) follows through with a proposal to further enforce its capital adequacy ratios, already the fourth highest among ASEAN countries.
An increase in risk-based capital requirements could see some smaller operators subject to mergers or acquisitions by larger companies, or face difficulties competing in the market.
Favourable demographics and Demand on the rise
A Fitch Ratings report released at the end of last year found that the medium- to long-term prospects for the Thai insurance sector were strong, supported by increasing demand for coverage from an ageing population and rising levels of household wealth.
Favourable demographics and the sector’s distribution platform provide a solid foundation for life insurers, while companies in the non-life segment will likely see steady expansion in the medium and long term, although expansion this year could be muted due to a slowing of economic growth, Fitch said.
Thailand’s GDP expanded by 2.5% last year, coming in below the government’s revised 2015 forecast of 3.9%.
With the World Bank expecting growth of around 2% in 2016, there could be less enthusiasm for life insurance and other non-compulsory services if disposable incomes flatten.
Changing demographics will become increasingly important to bolster premiums in the insurance sector, according to Kheedhej Anansiriprapha, executive director of the TGIA.
“The insurance sector will have to adapt to Thailand’s ageing population to move forward,” he told OBG. “Seniors accounted for about 14.2% of the national population in 2015 and are expected to reach 25.1% by 2023.”
The greying population should not only drive the expansion of life policies but also increase prospects for health and medical insurance. Higher life expectancy in Thailand could also prompt more citizens to take out coverage, spurring growth in premiums.
Some Thai insurers are also looking to expand their footprint to neighbouring countries
A number of underwriters, such as state-owned Dhipaya Insurance and private firm Muang Thai Life Assurance, have opted to set up branches in Myanmar, Cambodia, Vietnam and Laos or have indicated an interest in extending their operations beyond their home market.
In addition to obtaining a licence to operate with a local partner in the Cambodian market, Muang Thai has formed a joint venture to establish a presence in Vietnam and opened a representative office in Myanmar.
Allianz Ayudhya is also looking further afield towards Laos, Cambodia and Myanmar. The firm has already formed a joint venture with the Ministry of Finance in Laos and aims to enter the Cambodian and Myanmar markets in the near future.
Much of this overseas expansion is linked to growing bancassurance ties in the domestic industry, according to Kheedhej.
“Insurers expand to neighbouring countries often in tandem with their associated banks,” he told OBG. “Dhipaya Insurance has followed Krung Thai Bank into Laos and Myanmar, while Bangkok Insurance is tied to Bangkok Bank and Muang Thai Insurance to Kasikornbank.”
Large Shopping Malls in Bangkok Will Be Closed until July 25th
Shopping malls under the Mall Group, including all branches of The Mall, the Emporium, Emquartier and Paragon Department Store, are also closed for 14 days, from today, except for supermarkets, food courts, pharmacy shops, eateries (take-out and delivery only), banks, mobile phone shops and vaccination sites.
Downside risks loom for Thai economy due to Prolonged COVID-19 Outbreak
The most important issue for the Thai economy at present would be the procurement and distribution of appropriate vaccines adequately and timely.
The Bank of Thailand (BoT) has revealed that Thailand’s economy faces significant downside risks, because a prolonged COVID-19 outbreak could cause the economy to underperform the baseline projection, squeezing business liquidity and slowing employment.(more…)
Subscribe via Email
Asia’s slow rate of vaccination is a thorn in the region’s economic recovery
Southeast Asia has been hit badly. Daily infections for Indonesia, Thailand, Vietnam are at their worst, on a seven-day moving...
TAT expects 850 billion baht ($25.7 bln) in tourism revenue after successful reopening
The Tourism Authority of Thailand (TAT) has set this year’s revenue target at 850 billion baht, 300 billion of which...
Download 1xBet mobile and play all over the world
Placing profitable bets or playing in a casino is now possible comfortably even without being tied to a computer. It...
3 ways Asia can recover from the COVID-19 pandemic faster
Countries in the East Asia and Pacific region will benefit from cooperation in three major areas: vaccine deployment, reviving sectors...
Thailand’s Vaccine Strategy: What went wrong?
Questions are being asked, and not answered, over the decision to rely almost entirely on Siam Bioscience, a local, palace-owned...