BANGKOK: 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).
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.
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.
