Ngern Tid Lor aims for bigger slice of insurance business

The Thai auto-title loan market of today is very different from that of seven years ago, with a host of operators – including some listed companies – having poured into the market, managing director Piyasak Ukritnukun said last week.
He said it was in fact Ngern Tid Lor that had effectively caused such a red-ocean surge of competitors, having built its product into a well-known form of auto lending in the domestic market over a period of 10 years.
However, while he believes the market still offers room for further growth, the method of achieving continued expansion must be different from that used when Ngern Tid Lor set out on the wide-open blue ocean a decade ago.
The company had seen the market develop into an intensely highly competitive state in the past three to four years, a change that forced it to expand its business operation to non-life insurance brokering, an area in which its competitors were not active and one in which insurance products could strengthen the auto-title loan business, Piyasak explained.
“We cannot build up loans in districts where we don’t have branches, so what we have to do is take market share from local players and develop products alongside non-car title loans, in order to be able to offer something more varied to customers,” he added.
As to non-life insurance brokering, the managing director said that while his company had run such a business for three years, it had not done enough in this field when compared with the provision of auto loans.
By network coverage, Ngern Tid Lor is the largest non-life brokerage business with 481 branches nationwide, with around 1,000 of its 2,700 employees operating as single-licence brokers, but it only generated premiums totalling some Bt350 million last year – while its car-title loan portfolio was Bt21 billion.
Ngern Tid Lor ranks No 1 in terms of loan portfolio among non-banks in terms of auto-title lending, but only third by network, he said.
The company’s productivity is the highest among its peers, with each branch generating average annual lending of Bt50 million, versus about Bt20 million per branch for its competitors, he stressed.
Piyasak said that as part of its strategic shift, the company had initiated free personal-accident coverage to all motorcycle-title loan borrowers in order to make its brokerage business more widely known among target customers.
The MD acknowledged, however, that having such a strong auto-title loan brand was in one sense a barrier to pursuing premiums among general customers, who would normally only visit one of its branches for the purpose of borrowing. 
As many people intending to buy insurance products might not be comfortable about going to Ngern Tid Lor branches, seeing the business solely as a lender, the company has to improve its communications and better execute its broader message, he said.

TV ad campaign
The company therefore plans to launch an ad on commercial television in order to communicate its insurance products at branches.
“We target our premiums growing by 100 per cent to Bt700 million this year,” he said.
Ngern Tid Lor’s 2017 loan growth, meanwhile, is targeted at 20 per cent, compared with growth of 26 per cent last year.
The scale of its business and low operating cost enable the company to pass on lower interest rates to borrowers than other local players are able to do, which will help Ngern Tid Lor to maintain double-digit loan growth this year, he said.
The size of the car-title loan market is around Bt150 billion, with more than 100 operators in the overcrowded sector, including the banks.
 With nearly 100 of them of Thai operators, gaining share from local players is the main target for Ngern Tid Lor, he said.

Financial literacy
Another key goal is for the company to educate consumers about financial literacy and the importance of the National Credit Bureau, after finding that many people have the wrong perception of the bureau, Piyasak added.
Last year, Ngern Tid Lor’s non-performing loans edged up from 1.3 per cent from 1.4 per cent of outstanding lending, but the company is not unduly concerned by the rise as it can afford an NPL ratio of up 1.8 per cent, due to its aggressive loan growth, the managing director pointed out.
As to the company’s expansion from microfinance into nano-finance, for which it received a licence from the Finance Ministry, he emphasised that building up such an operation would take time because of the high operating cost involved, and it was a matter of finding the right formula to balance operating expenditure and the interest rate charged to nano-borrowers.
When it adjusted the frequency of debt collection from daily to monthly, it found that while operating costs for this segment of the business fell, its nano-NPLs rose. 
The loan portfolio for Ngern Tid Lor’s nano-finance is Bt70 million, a level that is expected to be maintained until the company finds a formula enabling it to maintain the right balance between lending growth, low operating expenditure and low NPLs, he explained.