Insurance business sees overhaul after last year's flood experience

The structural change mostly hit the non-motor risk insurance, particularly flood insurance, which will be capped by insurance conditions, risk coverage and increased insurance premium. 

However, consumers and property owners are taking risk protection seriously. They have walked in, particularly home-owners, to purchase risk coverage while earlier it was hard to convince them to buy insurance products. 

“It is the first time in the industry that we [insurers] can’t predict any situation and that has prompted us to seek higher premium,” said Thaisri Insurance’s chief executive officer Natee Panichewa.

Natee pointed out that the increase in insurance premium would not boost the company’s profit but only cover higher risk. Customers may be shocked by the steep hike in premium and they might not accept the price and restrictive conditions.

However, the company has to adjust risk coverage to bring down premium cost, depending on the customer’s need. The strategy has attracted customers to further purchase insurance. 

The company is one of the local insurers managing many affected global accounts, including Padaeng Industry, The Thai Dairy Industry, Saha Pattana Pibul, McKey Food Services (Thailand), Nestle (Thai) and Diageo Moet Hennessy (Thailand). 

The company’s estimated gross loss from the flood crisis is forecast at Bt10 billion. So far, the company has already paid claims of Bt1.5 billion. Major policyholders have been paid 50 per cent of the loss while the remaining amount will have to wait for the assessment result of surveyors. However, of the company’s car insurance portfolio, which manages 600 units, 80-90 per cent of flood victims had been paid.

Natee said the government’s initiative in setting up a Disaster Insurance Promotion Fund will support not only insurance companies but also provide risk coverage to consumers. The fund will provide risk coverage both to consumers and big corporates as insurers can’t bear all the risks for them. 

“Having the fund is a good starting point to encourage Thailand to rely more on its capacity for risk-taking instead of foreign reinsurers, as the fund will allow Thai insurers and the government to manage risks in the country. Moreover, it will strengthen the Kingdom’s bargaining power,” said Natee.

According to Natee, the government is enforcing the law as compulsory insurance to diversify risks by pooling funds to cover risks during a disaster. 

So far, only 20 per cent of Thai home-owners have purchased risk insurance. If insurance companies can expand their market to 70 per cent it would compensate for loss of revenue from big corporates.

The company reported that its total premium grew 22 per cent during the past two months of this year. It plans to achieve 28-per-cent growth to Bt23 billion by the end of this year. Of the total, motor insurance accounts for 60-65 per cent followed by non-motor for 30 per cent and remaining for other risks. 

Thaisri plans to balance its portfolio by focusing more on retail and niche customers rather than big corporations. As a result, new products to be launched will focus on consumer lifestyle such as collecting classic cars, yachts and motorcycles. In addition, health products also have high business opportunity due to rising medical treatment cost. 

In a bid to access more regional markets under the Asean Economic Community (AEC), the company is studying the insurance market in neighbouring countries. It has already conducted surveys in Laos and Cambodia. 

Natee said it has many business opportunities to access AEC in the form of joint venture, network linkage and will apply for licence in targeted countries.