Private Insurance Industry Finds its Feet
By Kyaw Hsu Mon 15 November 2013
YANGON — Private insurance in Myanmar is still in its infancy and will need time to fully develop after more than half a century of domination by a government-owned company, say some of those now hoping to transform the industry.
Earlier this year, Myanma Insurance, the sole insurer in the country since 1952, took the dramatic step of ending its monopoly by allowing private companies to enter the market. Since then, 12 companies have been authorized to sell insurance, including some owned by the country’s biggest banks and conglomerates.
Under the new rules, which are due to be enacted as legislation later in the year, private companies can offer nine categories of life and general insurance, out of 48 categories recognized by the government. These include life insurance policies for athletes and victims of snake bite, and general insurance covering fire damage to property and comprehensive vehicle insurance.
Insurers are also required to show six billion kyat (US $6.2 million) in capital before they are allowed to offer life insurance policies and 40 billion kyat ($41.5 million) if they want to provide general insurance. In effect, this means that only the largest companies in the country are able to enter the industry.
AIA, Asia’s third-largest insurer, is the only international company to establish a presence in Myanmar so far, although others are expected to follow. However, Mark Tucker, the company’s chief executive, said in February that AIA’s operations in the country wouldn’t be allowed to conduct business until 2015, and wouldn’t “become material for at least five to 15 years.”
So far, three of the 12 newly formed insurance companies—IKBZ Insurance Public Company (owned by Kanbawza Bank), Grand Guardian Insurance Public Company (owned by the Shwe Taung Group of Companies), and Citizen Business Company (owned by the Co-Operative Bank)—have taken the lead in promoting their services through advertising campaigns that started in June.
Most agree, however, that attracting customers will be an uphill battle.
“There hasn’t been private insurance in Myanmar for more than 50 years, so most people have no idea of what its advantages are. That’s why interest is still very low,” said a spokesperson for Grand Guardian who asked not to be identified.
Even the former general manager of Myanma Insurance, Deputy Finance Minister Dr. Maung Mg Thein, has acknowledged that few people in the country have any understanding of how insurance works. Many, he said, are averse to it because they believe that it will invite ill fortune.
But superstition aside, many in the industry believe that it has a real future as the economy grows and more people begin to feel a greater need to protect themselves and their assets.
So far, the strongest demand in Yangon has been for fire insurance—reflecting, perhaps, fears about the shoddy electrical wiring in many of the city’s buildings. Comprehensive vehicle insurance has also shown steady growth, as the number of cars on the road continues to climb since import licenses were made easier to get two years ago.
Even as demand looks set to expand, however, other market forces remain constrained by the government’s continuing role in the industry. According to U Aung Soe Oo, the general manager of IKBZ, premium, commission and compensation rates are all set by Myanma Insurance.
“For example for a snake-bite insurance, we can only charge 500 kyat per policy, and if the policyholder dies of a snake bite, we have to pay 500,000 kyat in compensation,” he said, adding that the government appeared intent on preventing competition among private insurers.
Meanwhile, other rules seem designed to ensure that Myanma Insurance retains its competitive edge. Unlike the private insurers, which will only be allowed to issue kyat-denominated policies, the state-run insurance company will be allowed to sell policies that provide compensation in foreign currencies to investors from overseas.
Far from feeling that this would give the state insurer an unfair advantage, U Aung Soe Oo accepted the measure as necessary until the private companies were ready to play in the big leagues. “I think that the government can be allowed to take the foreign-currency business while the private insurance sector has a chance to grow,” he said.
Other private insurers appeared to share this sentiment, accepting restrictions as the price that had to be paid for stable growth of the industry. “By following the regulations, we will be able to improve our industry instead of fighting each other,” said the Grand Guardian spokesperson.
While acknowledging that many challenges lie ahead—not the least being that few people in Myanmar can afford insurance—he added that the future still holds immense promise.
“I believe that the private insurance companies can be very optimistic about our long-term prospects, but for now we have to be patient and give the industry time to develop,” he said.
This story was first published in the November 2013 print issue of The Irrawaddy magazine.