Local insurers urged to shape up 

The industry pact forms part of the closer integration drive under the Asean Economic Community (AEC).
Chai said that following the implementation of free trade agreement for the insurance sector, foreign insurers with solid capital and know-how would be able to enter the Thai market. 
BKI has a presence in Cambodia and Laos and Chai’s company aims to resume operations in Vietnam this year.
“It should be noted that Malaysia’s insurance firms boast exceptional financial strengths. Their premium-retention rate is as high as 90 per cent. While Thailand-based firms’ retention rates, range between 60 and 70 per cent only,” he said.
Today, about 60 non-life insurance firms operate in Thailand. Most of them are relatively small and medium-sized enterprises. Of them, as many as 26 had direct-written premiums of less than Bt1 billion in 2015. Just 12 insurers in Thailand had direct-written premiums of over Bt5 billion that year. 
In other words, just one-fifth of non-life insurance firms in Thailand are large enterprises. 
Small insurers have apparently been at a disadvantage as they are not able to provide insurance coverage to big projects. A key constraint is that their capital is smaller than that of the large players.
The operating expense ratio of large insurers is usually about 30 per cent, but for small and medium-sized firms the ratio ranges between 35 and 43 per cent, according to the Insurance Premium Rating Bureau (IPRB).
On top of the challenges posed by the AEC trade deal, stricter government regulations also look set to nudge Thailand-based insurance firms towards boosting their strengths. Risk-based capital (RBC) rules, for example, are getting stricter. 
When the RBC requirements were introduced in 2011, insurance firms in the country had to keep the minimum capital adequacy ratio at 125 per cent. Today, the minimum requirement is at 140 per cent. This minimum ratio will likely soar further in the years ahead.
According to the Office of Insurance Commission’s new regulations, all insurers in Thailand must also operate as listed companies from this year. This means the listing of small and medium-sized insurers had to be completed before the end of 2016, Chai said. 
As most small and medium-sized insurers are usually family-owned businesses, their financial strengths are not that solid. If they are listed on the stock market, they will be able to raise additional funds from other investors or merge with other insurers to become stronger firms. 
In the face of intensifying competition and stricter rules from the regulatory body, many insurance firms in Thailand will very likely embrace mergers or go out of business. This means that only robust insurance firms will remain active in Thailand, but they will have a greater chance of competing at an international level. 
Chai said that motor insurance was the biggest source of premiums for Thailand’s insurance industry. Personal accident (PA) and health insurance have assumed an increasingly bigger role in the field as Thailand as becoming a full-fledged greying society. PA and health insurance accounted for 16.2 per cent and 15.6 per cent of total premiums at the end of 2015 and the end of June 2016, respectively. These figures mark a significant jump from 7.3 per cent in 2005. 
Currently, only 24.2 per cent of Thais have bought PA and health insurance, meaning that insurance companies still have opportunities to tap further into the market to sell property insurance as well as PA and health insurance particularly if incentives are made available to people. 
Insurance firms, therefore, have repeatedly proposed to the government that such insurance be made eligible for tax reduction. 
A growing public awareness of insurance benefits can be a favourable factor for Thailand’s insurance industry. Insurers have thus spent more marketing funds on promoting their brand awareness. Instead of using just traditional media, insurance companies have now been using digital media and sports marketing in their bid to better reach out to younger consumers. 
As public awareness of the importance of insurance grows, more people are interested in becoming underwriters. In the past, just a few universities in Thailand have conducted insurance programmes for their students. But today, nearly 10 universities have offered such courses. Insurers, as a result, have greater alternatives in recruiting their staff.