Insurance industry expects declines this year
The Thai Insurance Brokers Association recently announced predictions that the overall market for insurance in the country is likely to grow at less than 11 percent for 2014.
The industry grew by 13 percent in 2013 to be worth 644 billion baht, but in 2014 this growth will be reduced, with the hardest hit segment of the overall market being in the car insurance sector.
Car insurance will be down simply because sales of new vehicles will drop by between 30 and 40 percent on last years’ 1.33 million vehicle sales. This, of course, is largely due to the poll-driven populist policy of the previous civilian government, which had introduced an ultimately flawed first-time vehicle buyer scheme.
Along with the motor vehicle sector, the property and casualty sectors of the insurance market are also expected to experience a drop in returns. The life insurance segment is not expected to be affected.
The Thai Insurance Brokers Association said the generally poor economic outlook for much of this year and overall weak demand will mean moderate growth in their sector, although it’s hardly a completely bleak landscape once the numbers are properly dissected.
The Association noted that new customers normally account for 20 percent of insurance premiums each year, but they are expecting this number to be much lower in 2014. This is only an expectation based on the numbers so far, so it is quite possible a surge in the last few months of the year could see the bottom line looking far better than expected.
Life insurance is expected to grow steadily on the back of an ageing population, tax incentives, and the fact that this sector has a lot of room to grow given the current level of policy penetration.
In recent years the insurance industry has begun linking with the major banks to push policies. Bancassurance, as it’s known, has been the key contributor to insurance growth in the past few years. Premiums written in 2013 were almost double those of 2010.
Those insurers linked with the key four banks in the country are able to benefit greatly because of the extensive network of branches, thereby allowing the insurers to reach areas they might have previously found difficult to penetrate.
Agencies are also a key factor in terms of geographic spread. Most agents concentrate on selling traditional style policies, which carry quite strong margins. Bancassurance tends to be associated more with investment products where the margins are much leaner.
Between them, agencies and bancassurance account for 95 percent of all insurance policies sold in Thailand. With the industries’ capitalization looking solid for the forseeable future, medium term growth is expected to remain essentially buoyant.