Insurers urged to tap digital technology amid challenges faced by industry
The slowing pace of economic growth and a decline in auto sales over the past two years gave the insurance industry a critical lesson that it must shift its business by leveraging digital technology to realise underwriting profits.
For the non-life sector, auto insurance plays a critical role. The sector enjoyed premium-income growth of 28 per cent in 2012 and 13.15 per cent in 2013 thanks to the previous elected government’s first-car-buyer tax-break scheme.
Auto sales in 2014 and 2015 fell sharply because of the market saturation resulting from the scheme. The non-life insurance industry during those years witnessed growth of 1.13 and 2 per cent respectively.
The industry was able to maintain premium-income growth because some insurance companies cut prices and increased commission fees for their agents.
Arnon Vangvasu, president of the Thai General Insurance Association, said non-life insurance was nearing a turning point because the economy was no longer growing as quickly as in the past.
The competition in the insurance industry must change, and pricing with high commissions should not be raised as a strategy for operators, he warned.
The Thai insurance industry is also facing new regulations forcing operators to increase their capital against the risk, which will have an impact on profits. Therefore, insurers should seek innovations to lessen the impact.
High operating costs
The non-life insurance industry has high operating costs and loss ratios from claims. The loss ratio in Thailand is 62 per cent. In developed countriesit is 72 per cent, but insurers in those markets enjoy high profits because they rely more on technology than human resources.
Buying insurance, collecting premiums and processing claims should all be done on digital platforms, especially smartphones, to reduce expenses, the association says. It will be at the centre of laying down a digital system for non-life insurers, first for motor and personal accident insurance plans.
Digital processes will help reduce operating costs, so even if the loss ratio stays at 62 per cent, they can remain profitable, Arnon said.
To help manage the cost of insurance claims, the association will ask the Office of the Insurance Commission to reorganise motor-insurance premium formulas to reflect the actual cost of auto parts, which have increased every year while premiums have not kept pace.
