Asians spend more on insurance than the rest

Asians spend more on life insurance than the global average, but the lack of adequate social security systems presents a big opportunity for insurance firms, according to an insurance expert.

“There is a huge percentage of population above 60 years in Asia and this lack of adequate social security systems presents a big opportunity for insurance firms,” Bert Paterson, Managing Director, Aviva Life Insurance, India said at last week’s International Insurance Congress in Sri Lanka.

He explained that as an impact of opening up of the insurance sector across the world, the emerging markets, which constitute 85 percent of the world population and 25 percent of the global gross domestic product (GDP) is registering growth rates of over 100 percent, adding that Latin America, Central and eastern Europe and most Asian countries have emerged as ‘new opportunities’ for large international insurers.

“Although most countries are providing restricted access to their domestic markets, these markets are already reflecting major changes in terms of product innovation, distribution channels and technological know-how,” Patterson said.

He said that deregulation has led to the share of ‘foreign insurers increasing in Asia’. “Since the de-monopolisation in China and India, more than 30 players have started their operations in China, while India has already witnessed the entry of 14 private life insurance players in the last two years,” he explained.

Patterson predicted that globalisation of markets will also pave the way for consolidation in the insurance sector. “Economies of scale and need to access large distribution network especially in geographically large markets such as China and India will fuel consolidation,” he added.

He noted that Bancassurance has emerged as the major alternative channel because of its inherent benefits of wider customer reach, more cost effectiveness as compared to direct sales force, product familiarity and increasing customer sophistication. Speaking about the trends to note in Asia in the future, he said that the demand for private healthcare and health insurance is growing.

“There is also increased pressure to improve product transparency in developed markets,” he added.

Nivard Cabraal, Governor Central Bank speaking at the same conference, on an ambitious note said that it was possible to post a per capital income to US$ 2000 by 2009 and called insurance firms to seize the opportunities that will arise from this situation.

“This is not just a number- it opens up the potential of business in the retailing sector for an example, because purchasing power of the people will rise. This was evident when we witnessed that the cars imported this year was 35 percent more than last year,” he said.

He reiterated that as an industry transparency has to be improved in the insurance sector. “Because an insurance firm is owned by A, B or C, we cannot rely on the ownership structures to rely on good corporate governance anymore,” he said, adding that the companies have to improve corporate governance which is more tangible to rely on.