Development of Insurance Market in Asia and Oceania Countries Aminda Methsila Perera [PhD] Senior Lecturer Wayamba University of Sri Lanka
Nov 28, 2014
Development of Insurance Market in Asia and Oceania Countries
Aminda Methsila Perera [PhD]Senior Lecturer
Wayamba University of Sri Lanka
Developments in Asia and Oceania
• Asia is said to be the biggest market worldwide
• 3 Asian countries are among the 10 largest economies
• India, China, and Japan contribute 26.6 % of
the World GDP [US $ 23,163.4 Billion]
Developments in Asia and Oceania
• Average growth rate in Asia and Oceania 3.9% exceeds the that of the World (2.8%)
• 23 countries reported greater than 5%(Average 7.01)
• 3 countries exceeds 10% (Mongolia 11.7%)
• HDI of Asia 0.656 and Oceania 0.857
Developments in Asia and Oceania
• Global economic growth will stand at 3% in 2014 and over 3.4% in 2015.
Micro-insurance in Asia and Oceania
• Rapid-growth markets are essential to the expansion strategies of global insurers
• Micro-insurance outreach in Asia and Oceania is
outstanding, more than 172 million low-income
individuals covered by micro-insurance (GIZ RFPI Asia)
Micro-insurance in Asia and Oceania
• 2010 to 2012, MII expanded
• by 30% - number of people covered, and
• by 47% - premiums generated [GIZ RFPI Asia]
• India is leading the market at over 111 million
[almost 65% of total coverage in Asia and Oceania]
• 2012 India alone generated 66% of all MI premium
of the Asian market.
10 Biggest Micro-insurance Countries [in terms of coverage - millions]
111.1
19.911.9 9.4 9.3
5.3 2.5 1.3 1.1 0.3
Micro-insurance in Asia and Oceania
• In total, ten top outreach countries’ cover
approximately 99% of total micro-insurance
coverage in Asia and Oceania.
• In terms of contribution to the overall MI growth,
India has been main driver, contributing up to 70%
Contributing the Growth by the Countries
India China Philippines Mongolia Indonesia Bangaladesh Others'
India 70%China 15%
Philippines 8%Mongolia 3%
Indonesia 2%Bangaladesh 1%Others' 1%
Micro-insurance in Asia and Oceania
• Due to its massive market size, India contributes to
80% of growth in premiums in the region.
• India also registers the highest number of products offered and the highest number of micro-insurance providers.
Micro-insurance in Asia and Oceania
• Compound annual growth rate in coverage (2010-2012) - Malaysia (185%) and Indonesia (103%) emerged as having the most vibrant micro insurance markets
• Malaysia and Mongolia, since they registered a more
than 50% annual growth rate both in terms of
coverage and premium.
Micro-insurance in Asia and Oceania
• Bangladesh, Fiji, Nepal, Pakistan China, Cambodia, and Sri Lanka also have shown impressive growth.
• Sri Lanka, Cambodia and Pakistan have attained high (>50%) annual premium growth over the last two years
Micro-insurance in Asia and Oceania
• Yet, micro-insurance sector today covers less than 5% of the people living in Asia and Oceana.
• Compared with 4.4% in Africa and 7.6% in Latin
America, Asia just covers 4.3%,
• Philippines [20.6%]
• Thailand [13.9%]
• India [09%]
Top 10 Countries on Micro-insurance Coverage Ratio
21.3
14
9.2
6.2
3.8 3.5 3.12.1 1.8 1.5
Micro-insurance in Sri Lanka
• Started as a service to support the Microfinancesector
• Eventually, it developed and now offer wider range of insurance services
• Commercial insurance companies also have started to operate micro-insurance businesses.
Micro-insurance in Sri Lanka
• The Agriculture and Agrarian Insurance Boardprovides micro-insurance services to small-scale paddy cultivators and livestock farmers.
• The Social Security Board of Sri Lanka provides pension and social security benefits to its members.
• Several insurers registered under the RII Act offer micro-insurance products
Micro-insurance in Sri Lanka
• It is a US$ 700 million worth sector with a 10
percent annual growth.
• Recorded a remarkable Gross Written Premium (GWP) and asset growth
• Yet, its contribution to the GDP is 2% due to the low
penetration level in the market.
Micro-insurance in Sri Lanka
• In 2013 the Industry had penetration of 1.1% of
GDP, [1.15% in 2012 and 1.2% in 2011].
• Insurance penetration in most South Asian countries is less than 10%, leaving over 90% of the market untapped.
• The penetration as a % of GDP is on declining trend, and promoting micro-insurance to the rural masses is noted to be an even bigger challenge.
Micro-insurance in Sri Lanka
• Sri Lanka has a massive market potential in micro-
insurance, as more than 80% of the population are
in low-income sector.
• Sri Lanka should focus on giving insurance to this sector.
Challenges in Micro-insurance Industry
There are several challenges for insurance companies going down market.
• Lower literacy levels and a lack of awareness about how insurance works.
• The moral hazard, especially in agricultural insurance.
• Widespread confusion about the investment motive and security motive of insurance.
Challenges in Micro-insurance Industry
• Most commercial insurance companies are unwilling to step into the micro insurance
• The market for micro insurance in India is estimated to be between 342 million dollars to 448 million dollars for life insurance.
• A mismatch between the priorities of the potential client population and the traditional thinking of trained insurers.
Challenges in Micro-insurance Industry
• Low income people unable to manage their risk
• The variable income of the poor and Low capacity of to pay premiums [needs to be complemented by schemes with governmental involvement]
• Convincing insurance companies that insuring the poor could be a win-win situation is an uphill task.
Challenges in Micro-insurance Industry
• No special regulatory provisions for micro-insurance in Sri Lanka.
• High administrative costs
• The unprecedented tragedy, such as Cyclone or Tornado, [which was experienced by Philippines]
• Reputational damage
• Attracting and retaining top talent
• Emerging technologies
Developing Micro-insurance Industry
• There is still considerable scope for expanding the outreach of micro-insurance.
• Without insurance, the poor may be inclined to engage in activities and invest in asset portfolios with low risk but low returns, which may affect their long-term income and their ability to rise out of poverty.
Developing Micro-insurance Industry
• There is money in the rural sector and it is time to focus on this missing market
• Most insurance products have to be sold. Except for health and motor insurance, they are rarely bought or demanded.
• While insurance is hard to sell among the better off, it is even harder to convince the poor.
Developing Micro-insurance Industry
Sri Lanka is an emerging market in the region,
• Need to introduce new products to the market to attract new customers.
• Therefore, micro insurance is another important area which it has huge market potential in the country.
Thank You!
Aminda Methsila Perera [PhD]
Senior LecturerWayamba University of Sri Lanka
• Reference:
• The Landscape of Miroinsurance in Asia and Oceania 2013 by Munich Re Foundation (incorporated with GIZ)
• Insurance Market Outlook - May 2014, Munich Re Economic Research
• 2014 Insurance Market Outlook - Wells Fargo Insurance Services USA
• Annual Report 2013 - Insurance Board of Sri Lanka