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
