Low interest rates pressure insurers to provide alternatives to savings
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THE downturn in interest rates is dimming the appeal of savings-oriented insurance, as the insurers might cut the internal rate of return (IRR) and seek alternatives to retain customers.
Adisorn Sernchaiwong, senior execu-tive vice president of CIMB Thai Bank, said yesterday that as a life-insurance agency, the bank believed the pricing of savings policies might be adjusted in line with |the actual interest rate, so the IRR from |new savings products was expected to decline.
The average IRR of savings insurance is more than 2 per cent.
The cut in the central bank’s policy rate has had a side effect on savings insurance.
Over the last six to seven years, the IRR of savings insurance was 1 per cent. The IRR could go further down if the policy rate is lowered again.
Savings policies account for 80-90 per cent of CIMBT’s total insurance premiums, followed by protection and retirement policies.
The bank’s customer base is mainly the wealthy. They are concerned about the inheritance tax and have asked the bank about an investment programme to help them keep their estates intact. The bank has launched legacy insurance policies – CIMB Flexi 99/1, 99/5, 99/10 and CIMB Flexi Protection 99/5 and 99/10 – for rich customers.
Bank branches are a familiar channel for customers. They go there to deposit money or make investments. The bank hopes that legacy premiums will become a significant income stream in the near future.
This year, CIMBT targets premium income of Bt1.5 billion.
The bank has seen growth in protection insurance, purchased by younger customers, Adisorn said.
Bangkok Life
Bangkok Life Assurance will focus more on health protection and long-term savings insurance this year to help diversify risk from the slide in interest rates, president Chone Sophonpanich said.
The insurer is also boosting its investment in debentures and infrastructure funds, as those instruments generate a certain return with lower risk than stocks and government bonds.
Yesterday, the company launched “Reimbursement for Elders”,an insurance scheme for those aged 50-70 that does not require a medical check-up.
The company has also introduced direct-response TV as another channel to promote the new insurance scheme and enhance the sales of its products and services.
The new scheme is targeted to draw 7,500 customers this year.
Thailand will officially become an ageing society by 2025, with one elderly person for every five people, or an elderly population of 14.4 million.
“Addressing healthcare for elders will be crucial, and healthcare costs will continue to rise. Reimbursement for Elders is the first old-age and survivors’ insurance to fill a gap in the market providing similar kinds of products,” Chone said.
