Insurance industry 'slow to prepare' as AEC nears

Pravej Ongartsittigul, secretary-general of the Office of the Insurance Commission (OIC), said the industry was responding slowly to the approach of the AEC compared with the Federation of Thai Capital Market Organisations. Fetco has already drawn up a road map for capital-market development to deal with regional integration, he said yesterday at a seminar hosted by the Economic Reporters Association and the Thai Life Assurance Association. 

The OIC is now working on its own road map, which is expected to be finalised by end of the year.

“We need to shape [the industry’s] business direction before the AEC is implemented because Asia has become a key driver of the global economy, and Thailand must cash in on this economic trend,” he said.

More Thais have woken up to the need for insurance after witnessing the flood last year, so this is a good time for insurance companies to develop products and services to strengthen the industry, he said.

Thai Life Assurance Association chairman Sutthi Rajitrangsan said the road map would help the insurance industry move rapidly.

“Local insurers have been too slow developing their business strategies in terms of defensive and offensive plans,” he said.

Sutthi said the AEC was a window of foreign investment, and foreigners wanted 100-per-cent stakes in Thai insurance businesses. Under current regulations, foreign stakeholders are allowed to hold no more than 49 per cent in local insurance companies, up from 25 per cent earlier.

“Singapore has an advantage over other countries in Asean in terms of regulations and financial prowess. If Singaporean insurance companies do business in Thailand, local companies will lose some market share, because Singapore will promote life protection along with financial investment and charge lower premiums.” 

He said tax relief for policyholders was the advantage enjoyed by Thai companies, and the state should not expand this privilege to foreign firms’ customers.

Sutthi added that Thai insurers looking at investing overseas should expand into countries that were less developed than Thailand, such as Myanmar, Cambodia and Laos, and should do so through joint ventures.

Pravej said that even though the AEC will attract several foreign insurers, it would not be easy for them to acquire 100-per-cent stakes in new operations or establish a company without local partners.

Three factors for success in the insurance business are strong distribution channels, local market knowledge and economy of scale, he said. 

Ketsuda Supradit, director of the Asean Fiscal and Financial Policy Bureau, said Thai insurers and regulators should increase their roles in helping the bureau formulate standard rules under the Asean context. Singapore and Malaysia are the only two countries that are moving ahead on such standardisation.