Insurance industry progressing at slow pace, foreign competition needed: AMI

It has been five years since the government first allowed private insurance businesses to offer their services in Myanmar in 2013. But further liberalisation is needed and the authorities have been saying they are close to allowing foreign insurance providers to operate domestically.

In August, U Zaw Naing, secretary of the Insurance Business Regulatory Board (IBRB), which was established by the Ministry of Planning and Finance in 2016, said the board will allow foreign insurance companies to provide life and general insurance policies in the country in 2018-19.

He said the board is now considering proposals by international consultants to help it screen and review foreign insurance providers before permitting them to compete in the local market.

Liberalising the insurance sector is important not just because penetration rates in Myanmar remain the lowest in the region. Allowing foreign insurance providers to operate here will help the country develop a deeper bond market, enabling the government to raise sovereign debt to plug the budget deficit.

Currently, state-owned Myanma Insurance dominates the domestic insurance industry, accounting for more than 45pc of total gross written premiums in 2017, according to the Central Bank.

Nevertheless, regulations paving the way for the needed range of products and to end state-controlled pricing over existing ones are still lacking. Meanwhile, a timeline on when an approved regulatory framework addressing how local insurance providers can work with foreign firms is still absent. And while interest has been rising, the majority of Myanmar people are still averse to the concept of insurance.

In an exclusive interview with The Myanmar Times, U Myo Min Thu, managing director at AYA Myanmar Insurance (AMI), a local private insurance provider, shares his views on the challenges and opportunities inherent in Myanmar’s fledgling insurance industry. Below are excerpts of the interview, which have been edited for brevity and clarity.

Why is establishing an insurance industry important for Myanmar?

Myanmar needs an insurance system, which is a financial pillar of developing economies. Whenever there is a loss of life or property as a result of an accident or natural disaster, if people have insurance policies, they can recover from their losses much faster.

Insurance can help people avoid falling into poverty. For example, say a family with two children in university loses its sole breadwinner. Now that there is no one to earn money to pay the school fees the children may have to quit school to support the rest of the family. So from becoming gradually richer, the family ends up becoming poorer.

However, if the breadwinner had bought life insurance, insurance would be able to cover the family’s expenses. So, insurance is necessary for both businesses and individuals.

How difficult has it been building up interest and confidence in insurance?

In Myanmar, insurance penetration is still just under 0.1pc of GDP, the lowest in this region. The main reason is the lack of choice available. There is still not many insurance products in the local market.

The second is reason is a lack of trust. Myanmar people are superstitious and view insurance from a negative perspective. Many believe buying insurance implies bad luck in the future. But accidents can happen anywhere and at anytime. If someone is caught in an accident without insurance it could drive him into poverty.

How has the industry overcome these challenges?

Things are improving gradually as people become more educated. Now, annual premium income has increased and so have claims.

In Myanmar, most people buy motor vehicle insurance followed by life insurance and then health insurance. This is the right progression for the economy but we need to quicken the pace of penetration. There will still be an overall negative impact if just a handful of the population have insurance coverage because floods will come and a fire could break out at anytime.

As such, the authorities, insurance providers and public must cooperate for the insurance industry to develop faster.

Can you talk about the regulatory hurdles in Myanmar?

There are two main things the regulator should do right now. One is to help the industry offer more insurance products. In other countries, there are different types of health insurance. People will express more interest if they have more options. A product targeted at a single class cannot attract everyone. We need to create products for the rich, middle-class and the poor.

Secondly, there must be channels to distribute these products. In foreign countries, insurance products are also sold in banks as the financial sector includes both banks and insurance providers. People trust the banks and as the products are offered there, they can easily buy them.

Myanmar has many banks with over hundreds of branches and they should be able to distribute insurance products as well. The regulator can play an important part in training agents to expand the market.

Is foreign competition a concern for AMI?

Foreign competition is needed in our business. We need more competition to be able to provide better services. Because we lack human resources and skills, foreign insurance providers can help to fill this gap with technical know-how. This will help us produce better quality products and distribution channels.

On the flipside, local providers are no match against foreign insurance companies, which have over 100 years of experience and strong investment portfolios. What’s more, they can provide their services online or through mobile applications. We are still using paper documents.

Against this backdrop, enabling joint ventures between local and foreign providers is the best way for our industry to move forward. The foreigners can enter a new market and the local firms can benefit from investments and the transfer of skills and knowledge. The government has a role to play in creating this environment.

How is AMI differentiating itself from the other insurance providers?

We’re trying provide our insurance services online to be better, quicker and more convenient. We’re also trying to handle claims digitally. And we’re preparing to offer insurance services at some branches of Ayeyarwady Bank. As human resource and talent is the important part of our business in Myanmar, we’ve also started providing training for all our employees.


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