Myanmar insurance to thrive with competition and free market

U Myo Min Thu is the Managing Director of AYA Myanmar Insur­ance (AMI), one of the top three private insurers in Myanmar. AMI was created in 2013 follow­ing the liberalization of economic policy which permitted private insur­ers to enter the market. AMI is the insurance arm of AYA Financial Group, a conglomerate which also owns AYA Bank and AYA Trust, a YSX traded secu­rities company. Myanmar Business Today’s Kyaw Lin Htoon sat down with U Myo Min Thu to discuss the development of the sec­tor and the emergence of foreign companies.

For the last half-century Myanmar Insurance has had a monopoly on the in­surance market. After economic liberalization four years ago, AMI and a few other private insur­ers were granted licenses. Out of the gate, we faced several sweeping obsta­cles, the most serious of which was a lack of indus­try expertise. As there is no insurance education or corresponding univer­sity programs available in Myanmar, it was very difficult to find qualified personnel needed to hit the ground running. We ended up having to recruit people, and retirees, from Myanma Insurance, the state insurance company that was founded in 1952.

Additionally, heavy regulation and market re­strictions stipulated that insurance pricing, pack­ages, and features must be strictly controlled. Regulations essentially stripped the insurance industry of free market principles and competi­tiveness, which made it impossible for one com­pany to differentiate it­self from the other. Three years ago, we became cognizant of this shortfall and planned, rather than fight tooth and nail for a foothold in a glass wall, to prepare the company and our employees for the day when the industry would be fully liberalized so we’d get to truly compete for a share of the market.

With this strategy in mind, we focused on 3 pillars: the development of human capital, inno­vation, and generating a broader insurance aware­ness. First and foremost was public perception. Most people in Myanmar look at the insurance in­dustry through lenses of doubt and skepticism and with a generally indiffer­ent, if not uninterested, point of view. So we have tried to make significant strides in educating the public about the benefits of having insurance and the importance it can of­fer a wide range of indi­viduals. How this market is the solution to an array of life’s problems.

In the 2012 and the early days of market liberaliza­tion, foreign companies Telenor and Ooredoo re­ceived licenses to operate mobile phone networks. MPT, which had long had a monopoly over the des­titute and undeveloped telephone market, realized their place would no longer be guaranteed and decided to become responsive to international standards in ways that would allow them to remain competi­tive in the market.

The problem then is sim­ilar to the one now. While an economy relies heav­ily on its government for proper legislation, market friendly policies, and sup­portive diplomacy abroad, the industry itself must be able adhere to interna­tional standards and be attractive to foreign inves­tors. Though Myanmar is a developing market, which carries potential for high, unprecedented growth, there is also inherently high risk, and to empha­size the former and attract FDI, we must mitigate and minimize the latter.

The most obstructive hurdles to growth at the moment is the lack of proper and effective leg­islation and lawmakers ability to craft it. Espe­cially in the insurance in­dustry, the doors must be opened to foreign players. There needs to be a uni­versal understanding that underlines the benefits of an open economy and open market. Foreign in­fluence and industry com­petition is how MPT was able to achieve the status they have today. If Oore­doo and Telanor hadn’t come to the market, we’d still be hidden behind the bamboo curtain using pay phones on street corners.

The national econo­my hasn’t developed or grown much year-over-year from the previous year, yet sectors like re­tail, tourism, and energy are opening up and prom­ise growth in the imme­diate future. The answer lies in legislation.

Foreign participants will bring confidence to an unstable national investment en­vironment. If the govern­ment matches their stated position of economic lib­eralization with concur­ring legislation, insurance and capital markets will have much to gain.

Another major problem with both the industry and the government is a lack of a coherent succes­sion plan, meaning that both contain an older population with no young people to take the place of an aging workforce. Most insurance employees, government ministers, and bureaucrats are all over a certain age, leav­ing a substantial gap in succession.

At AMI our average age is 25 years old. Myanmar’s lack of available education and skilled workers has deci­mated the capabilities of the younger population and left several industries without the labor they demand.

Foreign compa­nies investing and bring­ing business to Myanmar would substantially curb this issue by hiring and training local workers. This is this the best time to begin grooming the next generation.

Foreign insurance com­panies are expected to enter the market as early as next year. Many indus­tries take news like this as a threat. I don’t see it as a threat. I believe that competition enables ex­cellence. Through intra-industry competition companies can learn and excel and achieve more than they would have without formidable ad­versaries.

With threats, you thrive! 54.6 million people and insurance penetration is under one percent. Foreign par­ticipation will force the industry to change direc­tion, be more dynamic, innovate, and stay com­petitive on an interna­tional level. Opening the market to international companies is good for workers, good for the economy, and good for national development.

Source: Myanmar Business Today