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Asia-Pacific | Autumn 2007
Inside Issue 13 (July to Sep 2008)
Welcome to the 13th edition of distribution debrief – our quarterly
Market statistics roundup of news reports around the region.
China
Hong Kong Much of the news around the current financial crisis occurred towards the end
India of the quarter covered by this newsletter, however, it is only natural to give the
Indonesia situation due prominence based on our perspective of the market.
Malaysia
Singapore Certainly, these are “extraordinary times” (we have heard a number of other
South Korea descriptions that are not so neutral) and present a situation with which many
Taiwan are not familiar or comfortable in addressing.
Thailand
Vietnam As I write, many of our clients are on a freeze of some sort – be it headcount,
travel or discretionary spend. Some are even faced with having to reduce
headcount and budgets.
Market
At the same time, confidence in many institutions has been badly hit and fear
developments seems to be the dominant emotion among many consumers and distributors.
Asia Region Never has there been a greater need for leadership, visibility and
China communication.
Hong Kong
India Given the current situation, it is timely to look at what we can learn from what
Indonesia has happened so far.
Malaysia
Singapore The basics do work
South Korea
Taiwan The providers and distributors who are faring best – even prospering – this far
Thailand into the downturn are those that have built proper financial planning processes.
Vietnam Their customers are much less likely to complain about the products they have
bought (as opposed to having been sold). In the same way, many of those
working to a long-term financial plan and benefiting from regular reviews of
Regulatory updates their plan see the benefits of continuing to save/invest through the downturn.
China
Hong Kong By contrast the biggest problems both for customers themselves and for their
India product providers have generally arisen when investment products have been
Malaysia sold in an ad-hoc manner, without the buyer fully understanding where they fit
Taiwan in a sensible long-term plan.
Thailand
Communicate, communicate, communicate
The number one complaint we hear from consumers, distributors and
employees alike, is the lack of adequate and timely communication. Staff and
distributors need ongoing reassurance about the direction of the company and
the importance of the role they are playing – they need confidence in
themselves and their organisation. They also need help in a variety of new
communication and related skills:
How to allay fears, particularly how to deal with the emotional aspects of fear rather than just receiving
factual information on the financial strength of their institution to pass on.
How to rebuild customers’ confidence and enable them to look beyond the present circumstances.
How to deal with repetitive complaints and even verbal bullying by unhappy customers.
How to maintain a positive attitude and belief in the value of what they are doing.
And customers should be regularly and proactively contacted. Few large organisations (it’s where small advisory
firms so often win) have the kind of Customer Contact Management to ensure that the right messages are getting
to the right people at the right time, and that their customer contact staff, whether sales or support staff, are
regularly picking up the phone to every one of their customers. Good relationships built now will last through to
the good times that will come.
Learn the lessons
Protect your brand: there is no shortcut to instilling good quality practices in your sales people. It’s a
combination of having the right people with the right tools, knowledge, attitude and skills, and the motivation,
appropriately rewarded, to do the right things. Many insurers have had to learn this painful lesson in the past;
now Private and Retail banks are having to learn it too.
Protect your people: there will be a lot of change in the industry and change makes most people uncomfortable,
so make sure you have effective change management processes, including the ability to take your team along with
you and an understanding of what additional skills and capabilities you need to bring into your organisation.
Protect your customers: not just by dealing with their current issues and ensuring you retain them, but by
protecting their future too. The recent and perhaps ongoing turmoil has emphasised – as nothing else could – the
need for sensible, long-term financial planning and the role that quality organisations can play in helping people
to reach their goals. Product risk also needs to be reassessed: investments that have the potential to be wiped out
because of issues with a single entity are not inherently low risk even if the type of investment and quality of the
entity appear to make them so. Risk is a function both of the product and the circumstances of the investor.
Protect your sales force: whilst the approaching year-end bonus payment may temporarily halt any major
defections, there have been some signs of a flight to quality. Now is the time to look at how you can support your
top performers in terms of providing some form of income support, temporarily reduced validation levels, more
coaching and mentoring, etc. It’s also a time when earning an income becomes extremely tough for poor
performers or new recruits – a good opportunity to weed out the former but not to neglect the latter so that your
“stock” is strong and ready to go once the climate improves.
Finally, be a driver not a passenger. Most organisations need to adapt to the new realities and develop new
distribution strategies, instil new behaviours and embed new skills. Taking a leading role in these initiatives will
greatly increase your chances of success.
So, whether you feel these are “extraordinary times” or perhaps have one of the stronger adjectives in mind,
now’s the time to focus on distribution with a combination of care, maintenance and “getting your house in order”.
No one can guarantee when things will start to get back to normal but we can guarantee that when it does, those
who have spent the time wisely will be quickest off the mark to take advantage.
It will certainly be interesting to watch developments over the current quarter as the situation around some high
profile M&A activity becomes clearer. The next issue of debrief should be an interesting read for sure!
John O’Rorke
Managing Director – Distribution Consulting Practice
Watson Wyatt has also added a special section “Financial Crisis” to our home page, which looks at some of the broader
human and financial issues. It’s available at http://watsonwyatt.com/topics/htrender.asp?ID=19787 . If you have any
distribution-specific issues, please don’t hesitate to call us – contact numbers are on the final page.
2
MARKET STATISTICS fall in premium income to RMB5.53 billion (USD807
million).
China
Source: CIRC
The Chinese insurance industry generated gross
written premium of RMB794 billion (USD116 Hong Kong
billion) in the first three quarters of 2008, up 49%
compared with the same period last year. Gross general insurance premiums amounted to
HKD14.2 billion (USD1.8 billion) for the first half of
The contribution of life premium to total premium 2008, a more than 10% rise on 2007 statistics.
was RMB545.6 billion (USD80 billion) in the first Underwriting profit however, did not fair so well and
three quarters of 2008, up 63% compared with the fell by over HKD200 million (USD25.7 million) to
corresponding period in 2007. Personal accident and HKD826 million (USD106 million).
healthcare contributed RMB64.3 billion (USD9.3
billion) and non-life RMB184 billion (USD26.8 Long-term in-force business reached HKD91.9 billion
billion), up 7.8% and 18.7% respectively over the (USD11.8 billion), nearly 20% up on the same period
same period last year. in 2007.
Domestic life insurers’ unweighted premium grew by Individual Life and Annuity (Linked and Non-linked)
67.1% and stood at RMB572.5 billion (USD83.5 premiums progressed well in the first half of 2008.
billion) in the first three quarters of 2008, accounting Non-linked increased by 21.4% to HKD42.4 billion
for 95.3% of total unweighted premium received (USD5.4 billion) and linked by 21.3% to HKD35.9
nationally. Foreign companies’ total unweighted billion (USD4.5 billion).
premium reached RMB28.1 billion (USD4 billion),
representing a slight year-on-year growth of 0.93%. The chart below shows the top ten life insurers’
However, foreign insurers’ market share has market share by total individual business (single and
decreased to 6.4% from 7.5% in the same period last non single) over the same period. AIA maintained its
year. position with 15%, with Prudential and HSBC Life
close behind with 12% each.
Although domestic insurers collectively showed a
67.1% growth in the first three quarters of 2008, their
performance varied substantially. PICC Group, being Others AIA (Bermuda)
27% 15% Prudential (UK)
PICC Life and PICC Health in particular, achieved ING Life
12%
951% growth rate and stood at RMB37.3 billion 2%
(USD5.4 billion), making it the sixth largest company
China Life
by premium income. Meanwhile, Minsheng Life and 3%
Taikang Life also achieved substantial growth of HSBC Life
Sun Life Hong Kong 12%
177% and 102% respectively. 3% Hang Seng
BOC Group Life Manulife (Int'l) Insurance
AXA China 9%
6% 8%
(Bermuda)
The market concentration, measured in terms of the 3%
top three insurers, of the Chinese life insurance
market has decreased slightly to 63.4% from 68.5% at
the end of September last year, due to the strong
Source: Office of the Commissioner of Insurance
growth of other companies.
India
Of the foreign companies, ING Capital achieved
significant growth of 211% compared with the same
Gross premium income in the life insurance industry
period last year. Heng An Standard Life and
for the period April to September 2008 amounted to
AEGON-CNOOC Life also achieved growth of over
INR345.99 billion (USD7.32 billion), representing
70%. However, a few companies experienced falling
modest growth of 4.34% over the same period in
premium income. Skandia BSAM saw an 80% fall in
2007. While the private insurance companies have
premium income in the first three quarters this year
registered a growth of 49%, the state run insurer LIC
compared with the same period last year, standing at
witnessed a fall in premium income of about 16%.
RMB309 million (USD45 million). United MetLife,
Private players now account for over 44% of the
CIGNA-CMC, and AXA-Minmetals all experienced
market share in terms of gross new business premium.
an over 30% drop in premium income. AIA, the top
foreign insurer in terms of market share, saw an 11%
3
ICICI Prudential retains the number one position Malaysia
amongst the private life insurance players. However,
its growth rate fell from about 50% in the first half of The first half of 2008 saw new business premiums for
2007 to 32% in 2008. life insurers total MYR3.4 billion (USD984 million),
down 11% from 2007. The most significant fall was
again investment linked policies with premiums down
Market share of private life insurers as on September 2008
over 37% against the same period in 2007.
Group Policies (YoY % change) 1H2007
1H2008
Kotak Mahindra
TATA AIG Others
Old Mutual ICICI Prudential 600
3% 10% 22%
4%
500
MYR Millions
Max New York
6% 400
300
HDFC Standard SBI Life
200
8% 16%
Birla Sunlife Bajaj Allianz
Reliance Life 100
8% 13%
10%
0
Annualised Single Premium Single Premium Single Premium
Premium Total (- (New Business) (- (Renewal) (Others) (26.2%)
10.38%) 14.0%) (41.1%)
SBI Life, Reliance Life and Birla Sun Life have all Singapore
shown significant growth with the former two
recording over 100% growth in premiums, compared There was strong growth in the first half of 2008 with
to the same period last year, as shown below (purple total life premiums growing 16% against 2007 to
represents current year figures). SGD5.48 billion (USD3.8 billion). Both single and
annual premium grew strongly with the former
INR Millions growing 14% and the latter 44%.
YoY growth for private life insurers
New Business (SGD Billion) 1H2007
40000
1H2008
35000
6
30000
25000 5
20000
4
15000
10000 3
5000
2
0
Bajaj Allianz
Birla Sunlife
Reliance Life
Kotak Mahindra Old
ICICI Prudential
SBI Life
Max New York
TATA AIG
HDFC Standard
Others
1
Mutual
0
Single Premium (14%) Annual Premium Total Premium (16%) Total Premium
(44%) (weighted) (27%)
In terms of distribution, the biggest contributor was
Source: IRDA the tied agency channel accounting for 61% of new
business sales on a weighted basis in the first 6
Indonesia months of the year. Once again there was a
significant increase in bancassurance, with sales
Income for the Indonesian life industry increased 44% through banks up 11% on last year and now
to IDR26.3 trillion (USD2.7 billion) in quarter 2 2008 responsible for 29% of sales. The Financial Advisers
against that of quarter 2 2007. New life insurance channel was down at 7%.
sales produced roughly IDR18.7 trillion (USD1.96
billion) an increase of 57% over last year. The Net earned premiums for general insurance increased
increase was put down to an improved awareness by by 9.4% to SGD904 million (USD631 million) from
the public of life insurance product innovation and the first six months of this year over last.
distribution. Underwriting profit, however, fell by 47% mainly due
to a significant fall in motor profits, due to higher
Source: Indonesia Life Insurance Association (AAJI) claims. The increase in claims is blamed on the new
4
regulations regarding the Motor Insurance Framework Life Jan to Jun 2008
encouraging people to report claims earlier.
Individual Group Life Group Health
South Korea Annuity 0% 0%
18% Group
Life insurance new business premiums (group Accident
Individual 0%
account) for April to July 2008 grew 12.2% to Accident
KRW127.9 trillion (USD107 billion) from 2%
KRW114.2 trillion (USD96 billion) in the same
period last year.
Individual
Health Individual Life
Of note, as shown in the graph below, was that 9% 71%
Samsung increased its share of new business
premiums over the period and now holds over 16%.
Tongyang also overtook Kyobo to gain third spot.
Non-life insurance for the first half of 2008 totalled
Kumho, 3.29% Others, 14.77% Samsung, nearly TWD57 billion (USD1.77 billion) down 3% on
16.13%
Shinhan,
Korea, January to June 2007 with the biggest drop coming
13.81%
4.01% from vehicle insurance.
MiraeAsset,
4.13% Non-life Jan to Jun 2008
Tongyang,
Misc subtotal Fire
AIG,
4.80%
13.52% 22% 20%
ING, 5.53% Kyobo, 13.19%
Hungkuk, 6.82% Marine
Aviation
1% 9%
Bancassurance increased its share of first collected Automobile
premiums from 44% in April to July 2007 to nearly 48%
48% in 2008. Most of this increase came at the
expense of the solicitor channel with agency staying
much the same.
Source: Taiwan Insurance Institute
Bancassurance, Others, 0.10%
Direct, 2.99% The average insured sum for first-year life cover has
47.92% reversed in trend and gone down in the first half of
2008. The new amount is NTD737,100 (USD23,000)
- 25% less than in 2007.
Thailand
Solicitor, 39.41% For the first seven months of the year the Thailand life
Agencies, 9.59% market took in THB122 billion (USD3.5 billion), a
10% increase from 2007. Single premium sales
Source: Korea Life Assurance Association showed the biggest growth, increasing 13% year-on-
year.
Taiwan
The life industry as a whole is predicted to only grow
Life premiums reached over TWD1 billion (USD30.1 10% next year in comparison to an estimated 15% this
billion) for the first six months of 2008, 9% more than year. The TLAA cites recent events, particularly
those of the same period in 2007. The 150% year-on- political instability, as a main cause of the likely fall.
year increase in individual annuity premiums is the
most striking improvement and now accounts for 18% The following chart shows the breakdown of market
of total premiums. However, largely due to the fall in share by the top 10 life insurance companies based on
the stock market, life insurers reported losses of gross premiums over January to July 2008. AIA
NTD58.8 billion (USD1.8 billion) over that period. remains dominant holding a 38% share with TLI
second with 14%.
5
ING, 3% TLA, 3% Others, 7% AIA, 38%
It is reported that French reinsurance company SCOR
KTAL, 4% will open a new branch in China, two years after
OLIC, 5% receiving its reinsurance license. It is the fifth foreign
reinsurance company in China after Munich Re, Swiss
AACP, 6%
Re, Cologne Re and Lloyd’s. The Beijing branch will
be focused on agricultural, liability, and construction
BLA, 6%
SCNYL, 7% MTL, 8%
TLI, 14% quality related insurance.
Source: Thai Life Assurance Association Shin Kong & HNA Life Insurance Co., Ltd, a new
joint venture between Shin Kong Life Insurance and
Vietnam Hainan Airlines Group, has been approved by the
CIRC to make its debut. The Beijing-based venture,
In the first half of 2008, the total life insurance with registered capital of RMB500 million (USD72.9
premiums exceeded VND5 trillion (USD296 million), million), is a 50/50 joint venture between the two
up 14% over the same period last year. partners.
Vietnamese non-life premiums also grew strongly State Grid Corporation of China was approved to set
during the first half of 2008, increasing 41% over up its own general insurance subsidiary Yingda
those of first half 2007. The industry gained total Taihe General Insurance. The company will be
premiums of nearly VND5.5 trillion (USD326 headquartered in Beijing with registered capital of
million). Local companies are still way ahead of RMB1.2 billion (USD175 million).
foreign insurers with the biggest non-life insurer, Bao
Viet, producing VND1.68 trillion (USD99.5 million), ALLTRUST signed a comprehensive cooperation
50% more than over the same period last year. PVI agreement with China Merchant Bank in August in
was second, up 6.5% with VND1.1 trillion (USD65 Shanghai. The cooperation will be in various aspects
million). Bao Minh and PJICO made positive strides including insurance agency service, financing service,
improving by 23.6% and 44%, respectively. and bank card business lines. ALLTRUST has also
signed a strategic cooperation agreement with Jiang
The outlook is seen as positive for both life and non- Tai Insurance Brokers in Shanghai. The cooperation
life sectors in Vietnam to continue their high annual will be in various areas including product
rates of growth. The Vietnam Insurance Association development, risk management and business
expects non-life insurance to achieve a growth rate of operations.
30% in 2008. General economic growth
improvements are cited by the Vietnam Insurance AXA-Minmetals announced it is partnering with
Association as the reason the market will continue to Citibank in Guangzhou and Shenzhen to launch a
develop. retirement planning service for Citi clients. AXA has
been actively involved in the Chinese market for
nearly two decades, and has been strengthening its
MARKET DEVELOPMENTS footprint in recent years via mergers and acquisitions.
In December 2006, AXA successfully acquired
Asia Region Winterthur Insurance with 12.3 billion Swiss Francs
(USD11.2 billion) from Credit Suisse, and has, since
The insurance industry throughout the region is then, taken over Winterthur’s property insurance
expected to plough more and more funds into IT business in China.
services in a bid to improve sales and efficiency.
Spending is predicted to reach USD5 billion in 2011 China Life has outlined a strategy aimed at
from USD3.2 billion in 2007. Improving sales by consolidating its market position at the county level
way of more efficient distribution is marked as a key with plans to also boost its micro-insurance business
factor to move forward over the coming years. in the nation’s rural areas. Liu Yingqi, Vice President
of China Life, says that the insurer will expand its
China sales network and set up around 19,000 field offices
in the countryside. It plans to have a pool of 500,000
Cathay Insurance Company Limited was approved salespersons in rural counties by the end of 2010.
to open for business in Shanghai with registered
capital of RMB400 million (USD58.3 million). The China Re is eyeing acquisitions to boost its business
company was sponsored by Cathay Century Insurance ahead of a proposed initial public offering. Mr. Liu
and Cathay Life Insurance, each taking a 50% stake. Feng, the newly appointed Chairman of China Re,
6
confirmed that the company is planning to diversify Shenzhen stock exchange.
its portfolio of financial services through mergers and
acquisitions. Mr. Liu confirmed that China Re would Skandia BSAM, long known to focus on unit-linked
aim to grow into an insurance group and expand to business, finally introduced universal life products in
overseas markets. It is also reported that China Re mid July this year. The two universal life products
had scrapped plans to sell shares in Hong Kong, as will be sold through bank counters and brokers
mainland regulators push companies to list in respectively. Both products provide the option to
Shanghai to develop the domestic stock market. transfer to the corresponding unit-linked products
from the second policy year. This is the first time the
Manulife-Sinochem plans to focus on pension company has launched a non unit-linked product
products to cater for China’s ageing population, during its 4 years’ operation in China. According to
indicated Yao Bin, Vice President of Manulife- Dean Richards, CEO of the venture, Skandia BSAM
Sinochem. He also called for more senior citizens to is actively looking for partners to establish an asset
apply for pension products so as to bring down the management company and is interested to apply for a
average cost of such products QDII licence, marking an important step in its goal to
become one of the top ten life insurance companies
New China Life achieved gross written premiums of within the next ten years.
RMB44.6 billion (USD6.5 billion) in the first three
quarters this year, up 94.8% compared with the same SunShine Life achieved written premium of over
period last year. The Insurance Guarantee Fund RMB2.6 billion (USD380 million) by the end of
intends to sell 38.8% of the New China Life shares it September this year (since its establishment). The
holds. The new shareholder will be disclosed as early company now has a presence in 11 provinces
as the end of November this year. Both China Re and including Beijing, Hubei, Hunan, and Guangdong.
PICC Group have the possibility to acquire the shares.
Taikang Life has adopted a tight policy to control its
Ping An Life announced a rights issue to raise RMB5 sales volume, especially via bancassurance, as the
billion (USD729 million). Shares were issued at a company is worried about the risk attributed to rapid
ratio of 1 for every 0.76 shares held. Ping An premium income growth. Premium income of
Insurance Group, which holds 99% stake in Ping An Taikang Life reached RMB35.9 billion (USD5.2
Life, has taken up most of the placement. It is billion) during the first six months in 2008, achieving
believed that this will lift Ping An Life’s solvency a growth rate of 128% over the same period of 2007.
margin to around 150%, just above the adequate All distribution channels saw a favourable increase,
solvency category II benchmark required by the new especially bancassurance which achieved a 100%
solvency regulations. growth rate. It is stated that, due to the tight policy,
the premium growth rate of the third quarter is
Ping An Insurance Group announced it has dropped slowing down.
the acquisition of 50% in Fortis Investment. At the
same time, the company will book an RMB15.7 Bank of China and China Minsheng Banking Corp.
billion (USD2.3 billion) loss due to its equity were approved by the CIRC to launch bancassurance
investment in Fortis in its third-quarter report. Ping business in July.
An Insurance Group is expected to suffer a loss of
between RMB2 billion (USD291 million) and RMB6 China Life introduced a bancassurance product with
billion (USD875 million) for the first nine months due uniform premium that does not vary with inception
to the equity investment loss. The group has decided age. According to the policy, premiums paid will be
to inject another RMB20 billion (USD2.9 billion) into refunded during a defined period. Benefit of death
Ping An Life after a RMB5 billion (USD729 billion) from illness, accident, and catastrophe is twice or
capital injection in August. triple the premium paid. This product also provides a
loan function, with the maximum loan amount 70% of
Sino Life is moving its headquarter from Shanghai to the cash value.
Shenzhen. The main reason is reported to be an
RMB20 million (USD2.9 million) cash supplement Postal Savings Bank of China has been approved by
promised by the Shenzhen government. In order to the CIRC to develop bancassurance business in the
attract financial institutions, Shenzhen government rural market. Due to its extensive rural network, the
has been promoting a policy which offers benefits Bank is expected by regulators to further explore
such as tax discount and cash supplementary since bancassurance in its core market.
2007. It is also reported that Sino Life would stay in
Shenzhen until after its successful IPO on the
7
China Continent Property & Casualty Insurance Hong Kong’s central bank also acted in the crisis by
Company has been promoting telemarketing and has injecting HK$1.55 billion (USD199 million) in the
established a presence in 23 cities in the Country as at middle of September to the interbank market to ensure
the end of June this year. sufficient liquidity as credit tightened.
China Life is approved to launch pilot micro-
HSBC Insurance’s solvency margin remains adequate
insurance products in the rural areas of nine provinces,
including Shanxi, Heilongjiang, Jiangxi, Henan, although the stand-alone risk-adjusted capitalization,
Hubei, Guangxi, Sichuan, Gansu, and Qinghai. The as reflected by Best’s Capital Adequacy Ratio
pilot products, including personal accident, can be (BCAR), has declined. The management said the
sold on either individual or group terms. financial position of the company will be
continuously monitored to ensure its capital adequacy.
PICC Health recently launched a long-term care
product sold through agents. This product is an India
upgrade of a previous similar product sold through
bank counters and covers risks caused by accidental Life Insurance Corporation (LIC) is increasing
damage or disease. focus on bancassurance and other alternative channels
– a departure from its traditional agency focus. LIC
Taiping Life and Munich Re Group introduced an has targeted in 2008-09 to double its first premium
integrated insurance plan especially for medium and income from bancassurance to INR16 billion
high income customers. The benefit is RMB1 million (USD338 million) bringing an overall 20% increase in
(USD146,000) minimum, with no upper limits. The projected business growth to INR525 billion
product is a flexible combination of one basic (USD11.11 million). LIC also aims to boost its
protection product and four riders. agency strength by over 30% by delegating power to
its senior insurance agents in recruitment, expecting to
John Joseph Carey has been appointed General recruit 360,000 new agents this year with the doubling
Manager of AIG General Insurance Company China. of the agent base in three years. LIC also decided
against tying up with GE Money for its proposed
Lin Fan has replaced Feng Xiaozeng to become credit card business.
Chairman of the Board of Directors of China
Insurance Group. Song Shuguang, the former deputy ICICI Prudential has put in place a series of new
manager of the Group, has been appointed General service delivery mechanisms in rural areas, partnering
Manager of China Insurance Group. with services of the state government of Rajasthan
and Andra Pradesh, such as APOnline. It further
Liu Feng, former Director of the Shenyang Office of entered into an agreement with Suvidha Infoserve, to
the CIRC, has replaced Liu Jingsheng to become enable its customers pay their insurance premiums
Chairman of the Board of Directors of China Re through Suvidha outlets.
Group.
Bajaj Allianz, with a presence in 950 cities and towns
Zhang Jun has been appointed Chairman of the and 22 distribution partners has decided to change
Board of Directors of Sino Life Insurance. focus towards productivity and profitability rather
than growth through expanding offices and sales
Hong Kong people. It has also announced an MoU with a
financial services firm in the state of Kerala, M M
American International Group (AIG) has stated Financial Services Private Limited, to distribute life
that their Asia and Hong Kong insurance assets, such insurance to customers.
as AIU, would not be transferred to the parent
Reliance Life plans to double its branch network in
company. AIG has had a number of policies
the next quarter from 745 branches, primarily in
terminated by those worried about the current crisis.
smaller towns. Almost 200 offices have staff
The company said it would allow reinstatement of dedicated to smaller and rural areas, which is an
these policies with no charge. Hong Kong’s emerging marketing channel with special products
insurance regulator moved to protect the crisis ridden having premiums as low as INR100 (USD2.12) per
insurer. month.
8
MAX New York Life plans to expand its distribution extended presence in the state through the
network by opening more than 250 new offices every Relationship Centres (“ARCs”) of the telephone
year for the next three years and increasing the operator Airtel, which is present with over 30 ARCs
number of agent advisors from the current 46,800 to in the state and 350 across India.
300,000. The growth in agency distribution will be
complemented by strong growth in partnership Future Generali, the insurance venture of Indian
distribution such as the new tie-up with IndianOil Future Group and Italian Generali Group, acquired
Corporation with 2,000 Agricultural Service Centres 100,000 customers through its Mallassurance
(“Kisan Seva Kendras”). The company has set a initiative. It also announced the launch of its first
target of selling more than 150,000 of its recently unit-linked plan, Future Sanjeevani.
launched product targeted at the bottom of the
pyramid population “Max Vijay” through a tie-up During the five months of its operation, IDBI Fortis
with 150 non-government organisations. As of Life Insurance has collected premium of over INR1
September 2008, Max New York Life had over billion (USD21.16 million). The company launched
14,000 employees, with a presence in 277 cities operations in March 2008, leading with distribution of
through 443 offices. its product Wealthsurance through its JV partners,
IDBI Bank and Federal Bank and agency channel. Its
Tata AIG Life and the state-owned United Bank of agent force is planned to rise from the current 3,000 to
India (UBI) jointly launched a scheme branded 25,000 by March 2009.
United Retirement Solutions, offering a package of
three retirement products for customers of UBI. Tata Indonesia
AIG Life has also tied-up with Societe Generale
Consumer Finance that has 35 branches in India. Toyota Tsusho Corp. has announced plans to
Through this partnership, Tata AIG Life will provide strengthen its Asian non-life and
personal loan insurance via a group insurance package life insurance brokerage business. The firm, under the
for its low income customers. Tata AIG has also wing of Toyota Motor Corp., will enter the Indonesian
expanded its advisor network from 24,769 to 70,245
market in FY2008 and the Vietnamese market in
over the past year. Additionally, to provide its
customers with emergency healthcare support free of FY2009, selling mainly to Japanese firms operating in
cost, the company has tied-up with “1298 Dial for the two countries.
Ambulance”.
PT Prudential Life Assurance posted IDR3.7 trillion
Aviva Life is increasing its agent force this year. It (USD389 million) in premium income in the first half
plans to increase to 90,000 in 2009 from its current of 2008, 76% year-on-year increase from the same
33,000 agents. Aviva has 221 branches and over 30 period last year. New business was a major
bancassurance partnerships. The company plans to contributor growing 71%. Assets of the company also
add around 60 more branches by next year, taking its
expanded 38% in the same period and now amount to
network strength to 280 branches. Picking up on the
shift in consumer preferences, Aviva also launched IDR10.8 trillion (USD1.1 billion).
for a limited period a new product, IndiaBond, a
single premium plan with a guaranteed maturity Bumiputra-Commerce Holdings Berhad (BCHB)
value. and PT Bank CIMB Niaga Tbk, has completed its
takeover of life insurer PT Asuransi Jiwa John
ING Vysya Life Insurance has plans to enhance tie- Hancock Indonesia (JHI) having paid IDR76.4 billion
ups with cooperative banks to reach out to more (USD8.3 million) for the acquisition.
people. It currently has tie-ups with 159 cooperative
banks across the country.
Allianz Life blames its recent decline in profit on
lower investment returns, as opposed to an increase in
The recent entrant, Aegon Religare Life Insurance,
has set up 38 branches in 14 states and plans to spending. Claims paid by the company surged 51% to
expand presence to 51 locations by March 2009, IDR380 billion (USD40 million) from IDR252 billion
initially with a focus on the southern markets. (USD26.5 million). Meanwhile, PT Allianz Utama, a
loss insurance company also recorded a decline in pre
Bharti AXA Life Insurance announced the launch of tax profit to IDR27.3 billion (USD2.8 million) from
its operations in Tirupati in the state of Andhra IDR30.3 billion (USD3.1 million) in the same period
Pradesh where it has presence in five cities. In citing an 87% increase in its claim payments as the
addition to the branch expansion, the company has main reason.
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PT Jaminan Sosial Tenaga Kerja (Jamsostek) has Prudential Assurance Malaysia is looking to
plans to acquire up to 10% of PT Bank Tabungan significantly reduce costs by 20–30% through moving
Negara (BTN) when the state bank launches its initial to e-commerce. Prudential has a 10,000 strong
public offering, but stated it had no intention of agency force in the Malaysia and the company hopes
acquiring direct control. BTN is expected to launch that 3,000 wealth planners will be using the new
its IPO in November this year hoping to raise around system by next year with 50% of all business carried
IDR1.9 trillion (USD199 million) to help strengthen out this way in the future.
its working capital.
Singapore
Indonesian life insurance company PT Asuransi Jiwa
Bakrie (Bakrie Life) has enjoyed better than Axis Specialty (subsidiary of Axis Capital Holdings),
expected performance in the first six months of the has received regulatory approval from the Monetary
year and has raised its targets accordingly. By 30 Authority of Singapore to operate as a branch insurer
June, the company posted IDR400 billion (USD42 underwriting general insurance business in Singapore.
million) in premium income against the year’s target The company hopes to provide customised coverage
of IDR700 billion (USD73.6 million) and has, solutions for local and foreign clients.
therefore, raised its premium income target to IDR1
trillion (USD105 million). Prudential Assurance and Great Eastern Holdings
are poised to launch insurance products aimed at high
PT Asuransi Jiwa Manulife Indonesia enjoyed a net worth clients. Manulife Singapore also showed
148% increase in premium income in the first half its interest in the segment by setting up a dedicated
year over the same period last year. The office in Great World City in June to target the
life insurance company recorded IDR666 billion affluent Asian baby boomers. Swiss Life, has also
(USD70 million) in premium income, up from recently opened an office in Singapore, hoping to tap
IDR269 billion (USD28 million) in the same period into this profitable segment. Insurers are vying with
last year. Increased sales of individual insurance both each other to catch the eye of affluent Asians who
through agents and bancassurance were the main want to preserve their wealth and also ensure that it is
contributors. properly distributed among their children. AIA
Singapore was the first to set up a specialist HNW
Malaysia centre in 2004.
Malayan Banking Berhad (Maybank) has South Korea
abandoned plans to form a joint venture partnership
with Indonesia’s PT Panin Life. Bancassurance sales for non-life business totalled
over KRW10 trillion (USD8.4 billion) for the fiscal
American International Assurance Berhad, has year ending March 2008. The FSS noted that the
been granted the first international takaful operator growth was 35% over the previous year and
license from Malaysia’s central bank, Bank Negara accounted for around 10% of total income from life
Malaysia. The company is now allowed to offer and non-life. There are now over 100 financial
family and general takaful and companies that have deals with insurers to sell
retakaful insurance business in international bancassurance in Korea.
currencies.
South Korea’s state-run deposit insurance agency,
Both Malaysian insurance associations, The National Korea Deposit Insurance Corp., wants to sell its
Association of Malaysian Life Insurance and 16% stake in Korea Life Insurance Co. to Hanwha
Financial Advisors (Namlifa) and the Malaysian Group. The move will raise the stake holding of
Financial Planning Council (MFPC), have given their Hanwha in Korea Life to 67% from a current 51%.
support to the industry and assurance that the
local insurance industry remains resilient to the
financial crisis.
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Ergo and AXA are reported to be interested in Krungthai AXA Insurance wants to expand its
Kumho Life, the South Korean life assurance distribution channels to include government
company. A 70% stake is reported to be available for organisations, state enterprises and corporations to
sale. avoid being left behind by competitors. It plans to
deal with 20 organisations this year, four of which
Kumho Asiana Group and Kookmin Bank are have already agreed to join with the company.
looking to fend off the current crisis and secure
liquidity by selling their life insurance units. Siam Commercial New York Life Insurance is
shifting its attention more towards offering short-term
Several companies in Korea are beginning to cut saving plans for consumers seeking fixed guaranteed
motor premiums in the wake of the rising oil prices returns and life protection in a bid to increase sales.
resulting in motorists leaving their vehicles at home. New Muang Thai Insurance (MTI), fresh from its
Samsung has already lowered rates by up to 3.8%. merger with Phatra Insurance, has reported
unexpectedly high written direct premium growth of
Taiwan 25% helped by a more balanced portfolio and better
diversification between motor and other products. As
Shin Kong Life is to sell overseas assets in order to of 30 June, the company produced a total of THB2.14
raise NTD100 billion (USD3.1 billion) in total assets billion (USD62.5 million) in direct premiums.
and improve its situation following its losses from the
Lehman collapse. This is in addition to the sale of Ocean Life Insurance announced it would sell a 24%
some real estate by the parent company to improve stake to Dai-Ichi Mutual Life Insurance, one of
the books. Japan’s top three insurers, in order to help strengthen
competitiveness and expand its customer base.
Cathay Life Insurance Co., Taiwan’s largest life
insurer by assets, is planning to conduct similar Vietnam
moves overseas given current conditions. Meanwhile
its sister, Cathay Insurance Co., Ltd., a property Vietnam is still seen as a country with attractive
insurer, started formal operations in Shanghai in potential for foreign investment despite recent
September. difficulties in the economy. ACE Life Vietnam, in
particular, noted that the local life insurance market
Fubon has announced its intention to begin insurance had great potential for development especially given
operations in China in the near future, in an attempt to its growth of 131% in premiums during the first half
expand operations overseas. of this year.
Mark O’Dell, formally of AIA, has been appointed as Samsung Life opened its first office in Vietnam in
the new head of Manulife Financial’s Taiwan Hanoi and is keen to look for strategies to expand its
operations. Mr. O’Dell resigned from his post as operations further. The Hanwha Group is also
executive vice-president and general manager of AIA reported as looking to set up a representative office in
Singapore to take the post. the country in the near future.
Thailand Cathay Life, the Taiwanese leader, said the time was
right to invest in life, accident, annual allowance,
Bangkok Life Assurance Plc, remains committed to health and investment-risk insurance. The company
continuing on with an initial public offering this year, has just opened a subsidiary in Vietnam with a charter
despite the unfavourable economic conditions and capital of VND600 billion (USD35.5 million).
political unrest. The plan is to offer 200 million new Cathay will provide insurance products for customers
shares to the public, representing just over 16% of the such as life, accident, annuity, health and risk-linked
company’s total paid-up shares at THB1 par each. investments.
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AIA Vietnam, well known in the local life insurance The Administrative Provisions on the Solvency of
market has changed its name to AIG Life Vietnam. Insurance Companies, which were adopted at the
executive meeting of the CIRC on 30 June 2008, were
The country’s largest insurer Bao Viet recorded half promulgated on the 10th of July and came into force as
of 1 September 2008. The CIRC has classified
year pre-tax profit of VND312 billion (USD18.4
insurance companies into the following three
million). Insurance premiums amounted to VND3.55 categories:
trillion (USD210 million) accounting for 77% of total
revenue. Inadequate solvency – solvency ratio below
100%.
REGULATORY UPDATES
Adequate solvency category I – solvency ratio
between 100% and 150%.
China
Adequate solvency category II – solvency ratio
The CIRC submitted the draft of revised insurance above 150%.
law to the Standing Committee of the National
People’s Congress which took place between the 25th The CIRC will conduct discriminate supervision over
and 29th of August, and solicited opinions from the above three categories. The Provisions also
insurance companies and general public. The draft brought in the concept of the establishment of
proposed the following: solvency management mechanism, which will
integrate all factors that may exert an impact on a
Broadening investment channels – The company’s solvency capability, including asset
investment channels of insurance companies management, liabilities management, management of
would be widened to marketable securities such matches between assets and liabilities, and capital
as bonds, stocks, funds and real estate. The
current law only allows insurance companies to management.
invest in government bonds and financial bonds.
The CIRC has released a new guideline for the
The removal of the compulsory cession to general insurance market, which intends to fight
domestic reinsurance companies – insurance against illegal or anti-regulation behaviours of general
companies within the territory of China are no insurers, such as deliberate manipulation of premium
longer given the priority to assume ceded income data, fraudulent reporting of expenses,
businesses of contract reinsurance and temporary
reinsurance. deliberate claim scale-up and anti-regulation reserving.
The punishments include stopping new business for at
Provisions on premium rate – Insurance least six months, replacing the person(s) directly
companies may be required by regulatory responsible in top management or even revoking
authorities to make amendments or even stop business certificate.
sales, were their premium rates considered
illegitimate. The CIRC would also place more The CIRC has carried out a nation-wide investigation
punitive impositions on those who do not meet
solvency requirements. to insurance agencies and will sanction those who
violate the law. The audit, started in late August,
Room for insurers’ operations in banking and aims to crack down on unlawful selling of life
securities – Insurers are currently not allowed to insurance products. The audit was carried out by
directly operate business other than property local bureaus of the CIRC.
insurance, life insurance and reinsurance. The
draft proposed to validate insurers’ operations in
banking and securities, and in particular called Chen Wenhui, Assistant to Chairman of the CIRC,
for an information sharing system between the has pointed out a few unlawful practices in the
three financial regulators (CBRC, CIRC and insurance agency market, while emphasizing the
CSRC) and the People’s Bank of China. urgency and importance of market regulation.
Unlawful practices included deceivable marketing,
The draft extended CIRC’s regulatory power to multi-level selling (or pyramid selling), issuing
oversee asset management companies owned by fraudulent invoice to claim expenses, making
insurance companies, insurance agencies, brokers,
surveyors & adjusters and branches set up by deceitful claims, and other unlawful operations of
foreign insurers in mainland China. The CIRC insurance business on behalf of the company.
will also overlook overseas activities of domestic
insurers.
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The CIRC has also begun checking on agency Some of the changes made to the regulation include:
services provided by banks and postal savings
organisations for life insurance companies. The focus Exposure norms of public and private insurers
of the checks covers five areas. These are whether or have been aligned, ending a special higher
not: individual investment limit enjoyed by the
erstwhile state-owned monopoly player LIC.
The insurance sales agents of banks and postal
savings outlets have the related qualification
certificates. Insurers provided greater leeway in their
investments in mutual funds and venture funds.
Insurers have provided related professional
training to the insurance sales agents of banks and The investment basket has also been widened to
postal savings outlets.
include rated mortgage backed securities (MBS).
Customers have been misled during the sale of
life insurance products by banks and postal Insurers are now allowed to invest in an IPO of a
savings outlets on agency. private or a public company if the minimum issue
size is INR2 billion (USD42.32 million).
The life insurers pay commissions appropriately
to the banks and postal savings outlets that
provide agency services for them. The government is in the process of making
comprehensive amendments to the Insurance Act,
The life insurance companies have sound client which among others, would provide authority to raise
confirmation systems and how they implement or lower the upper limit of distribution commission
the systems. rate 15% fixed for brokers in keeping with the
prevailing market conditions and industry
Hong Kong requirement. These and several other changes to the
Insurance legislation have been approved by the
The Hong Kong insurance industry is looking into Cabinet, and a formal amendment bill will be placed
setting up a fund to protect policyholders. The fund before the Parliament soon.
would allow policyholders to get back part of their
premium or transfer to another company in the case of IRDA has also rationalised the insurance commission
a bankruptcy. rates for non-life insurance companies, effective from
1 October 2008. The commission rate for “mega
India risks” has been capped at 6.5%.
Recent volatility in the stock market has prompted the IRDA has also favoured the combination of life and
Insurance Regulatory and Development Authority non-life insurance policies in order to tap the grossly
(IRDA) to set up a committee to suggest ways to slow under-covered rural market.
down the rapid growth of sale of unit-linked products
by life insurance companies. IRDA is examining a Malaysia
view that there should be a minimum quota for
The Malaysian Insurance and Takaful Brokers
traditional products that any insurer has to sell.
Association is working towards becoming a self
regulatory organisation (SRO). Working with the
Additionally, IRDA has constituted a 12 member
central bank a new taskforce will aim to complete a
committee, headed by Dr. R Kannan, Member
framework by late 2009. As an SRO, Mitba will act
(Actuary), to examine the requirements of
as an autonomous body that regulates professional
International Financial Reporting Standards (IFRS),
competence and ethical conduct among its 38 general
identify gaps and suggest measures to ensure that the
insurance brokers. Mitba expects to collect MYR3
insurance industry moves towards full IFRS
billion (USD868 million) in premiums to push its
compliance by 2011. The committee is expected to
market share in the non-motor general insurance
submit its report by 31 March 2009.
business to 50% in three years. Currently, 85% of the
broker market is held by the nine larger foreign-based
IRDA released the revised Investment Regulations,
insurance brokers.
titled “IRDA (Investment) (Fourth Amendment)
Regulations, 2008” with changes aimed at providing
more flexibility to insurers in investing in instruments
that could improve returns and thereby benefit the
policy holder in the long run.
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Taiwan Thailand
The Ministry of the Interior has put into place a new The Office of Insurance Commission (OIC) has said it
National Pension system whereby those not covered is seeking permission from the Finance Ministry to set
by other insurance policies once they reach retirement up a contingency fund to protect consumers in the
age, will be entitled to a monthly premium based on event of financial difficulty by a local insurer. The
the basic minimum wage, currently NTD17,280 THB10 billion (USD292 million) fund would be split
(USD537). The premium rate for the insurance is 90:10 in favour of life over non-life insurers.
6.5% for the first year, increasing by 0.5% in the third
year and every two years thereafter until a limit of
12%. Insured people must pay 60% of the premium,
while the central competent authority will be
responsible for the remaining 40%.
The Financial Services Commission (FSC) has made
a number of moves to deregulate in the past months.
Firstly it is considering allowing insurers to invest in
China equities, real estate and mutual funds. Recently
the FSC increased its offshore asset allocation limits
to several local insurers, giving them more freedom in
international assets. Secondly, it is about to end the
monopoly that Taiwanese banks have on the trust
business by allowing fund product manufacturers and
fund distributor agents to compete. Thirdly, the FSC
is drafting a bill that would allow Taiwan to promote
itself as an “international wealth management” centre
allowing exemptions on gifts and inheritance tax for
those moving funds into the country.
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Contact details
The distribution teams of Watson Wyatt are based in Hong Kong, India and Singapore. Please contact any
of the consultants listed below if you need more information about our services.
Hong Kong
John O’Rorke – Managing Director, Distribution Consulting
Steve Kean – Director, Distribution Consulting
Brian Chan – Consultant
Watson Wyatt Insurance Consulting Limited
29F, Sun Hung Kai Centre
30 Harbour Road, Wanchai
Hong Kong
Tel: +852 2827 8833
Fax: +852 2827 7700
Email:
john.ororke@watsonwyatt.com
steve.kean@watsonwyatt.com
brian.chan@watsonwyatt.com
India
R. Krishnamurthy – Managing Director, Distribution Consulting
Carissa Hickling – Principal Consultant
Rajesh Sabhlok – Senior Consultant
Saju Paul – Consultant
Watson Wyatt Insurance Consulting Pvt. Ltd.
Solitaire Corporate Park Building No.5
Andheri Kurla Road,
Andheri (E), Mumbai 400 093
Tel: +91 (022) 2838 9900, 2837 9900
Fax: +91(022) 2837 0700
Email:
rajagopalan.krishnamurthy@watsonwyatt.com
carissa.hickling@watsonwyatt.com
rajesh.sabhlok@watsonwyatt.com
saju.paul@watsonwyatt.com
Singapore
Stephen Cotham – Director, Distribution Consulting
Watson Wyatt Insurance Consulting Pte. Ltd.
135 Cecil Street
#09-01
Singapore 069536
Tel: +65 6880 5629
Fax: +65 6880 5699
Email:
stephen.cotham@watsonwyatt.com
distribution debrief has been prepared by Watson Wyatt for general information purposes only and does not
constitute professional advice. The information, opinions and projections contained in this Newsletter are
derived from various sources and have not been independently verified by Watson Wyatt. If you require
professional advice or require any further information please contact any of the above named individuals.
Errors and omissions excepted. Currency rates as at 30 September 2008.
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