Twelve privately run local firms were allowed to open an insurance business starting in June, breaking a 61-year-long monopoly over the market by state-run Myanma Insurance.
Now, with global insurers such as MetLife, Prudential, Manulife Financial and AIA Group waiting in the wings – having recently won bids to open representative offices – local firms with less than six months of experience are trying to win over customers in the hopes of making a lasting impression on the market.
“We are trying our best and need to be patient because we have to reach out and explain the value of our business to people in order to get their attention. But we also need feedback, which has been hard to get so far,” said U Soe Win Thant, general manager of Global World Insurance.
While understanding the market and educating potential customers about the benefits of insurance are among the top priorities for local firms, U Soe Win Thant said that they would also need to draw from the experience of foreign experts, who can give them advice on how to succeed in a frontier market.
He also said the upstart local providers need to band together, even as they compete with one another.
“We also need an association to happen as soon as possible, as well as to keep working the market before they [foreign firms] come,” he said.
Each company was required to deposit K46 billion in capital to Myanma Economic Bank in order to establish an operation. Of the 12 private firms that were given approval in April to open branches two months later, 11 have since opened their doors.
U Soe Win Thant said that his firm has earned K30 million in life, fire and motor insurance premiums since opening in July.
U Pe Myint, managing director at Co-operative Bank, which operates Citizen Business Insurance, also expressed caution for the infant insurance market in the face of global competition, but said without a date in place to open the market it would be too difficult to anticipate the outcome.
“It is too early to think about because domestic companies have not really made any progress yet,” he said. “I would think that the government would not open the market immediately before our local businesses have time to grow.”
“I don’t think the insurance sector will be open to foreign insurance firms just yet,” said Aung Thura, CEO at local consulting firm Thura Swiss Ltd. “It’s not the same as the banking sector which is more advanced and better protected. It wouldn’t make sense. Local companies put in a lot of capital and would have no chance against global insurers at this stage.”
Though it is too early to know when the market would open to foreign firms, some local insurance companies say they could be enticed to enter into partnerships.
“We would like to cooperate in a joint venture if a company was to extend the opportunity,” said U Yan Pai, managing director of Capital Life Insurance. “It would allow us to widen the market [with new products], but the laws need to be amended first.”
Indeed, in order for foreign insurers to do business in Myanmar, the 1993 Insurance Law would need to be amended in line with the passing in November last year of the Foreign Investment Law, U Sein Min, general manager of Myanma Insurance, told The Myanmar Times last month.
“Hopefully it would be come out in early 2014, when our market would be wider and more open,” he said, adding that although the Insurance Business Law governs business conducted by insurance investors, nothing in Myanmar law currently allows for either joint ventures or wholly owned foreign entities in the insurance sector.
“Foreign companies and agents are approaching our market, but this is a transaction period. The private companies don’t know the insurance business thoroughly. They’re just taking it on for a year or more before the outsiders come.”
In the 2012-13 fiscal year, Myanma Insurance posted earnings of about US$47 million, up from $25 million in 2011-2012, U Sein Min said. Of its total portfolio, property insurance represents nearly 45pc, while marine and motor insurance comprise make up 32pc and 18pc respectively.
Total claim ratio, meanwhile, was less than 15pc in the last fiscal year.
“The domestic insurance is very young and not mature,” U Sein Min said. “We could not compete in capital [with foreign firms]. I think that’s the main reason Myanma Insurance will not allow foreign investors to operate just yet.”
U Lwin Oo, assistant manager of Myanma Insurance’s Marine and Aviation Insurance Department, said they are gearing up for the formation of an insurance broker association, currently slated for 2014. Once all 12 private companies are operating, they will all participate in the association, U Lwin Oo said.
“Officials are currently preparing policy, rules and regulations according to member consensus,” he said, adding the next step is to register for an association licence with the Ministry of Home Affairs.
source: The Myanmar Times
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