In the first half of last year, tormented by uncertainties from rising oil prices and interest rates, drought and political strife, life insurers generated total premiums of Bt80.06 billion. That was up only 2.3 per cent from the first half of 2005, compared to 11.38-per-cent growth between the same periods in 2004 and 2005.

The situation improved in the second half but not enough to beat the results of 2005. Life premiums in the first 10 months of 2006 reached Bt136.93 billion.

That represented growth of 4.5 per cent above 2005 but paled compared to 9.99-per-cent growth for the first half of 2005 over 2004.

Non-life insurers faced a similar fate, posting 6.34-per-cent growth in premiums for the first half of 2006, compared to 13.91-per-cent growth in the same half in 2005.

According to Thai Re-Insurance, growth of the non-life industry for all of last year was projected at 8.21 per cent. Slow vehicle unit sales, high interest rates and floods are the main culprits for the sluggish growth. Non-life insurance data on the Insurance Department's website has not been updated since last June.

However, both sectors have ridden the boom in health insurance and personal accident insurance (PA). PA premiums earned by life insurers climbed 28.35 per cent to Bt3.3 billion in the first 10 months of 2006 while health coverage, which must be sold as a rider to a main policy, added Bt17.96 billion in premiums.

PA premiums for non-life insurers expanded 12.1 per cent to Bt2.69 billion, while health provisions brought in Bt1.64 billion.

Everybody loves advertisements

The difficult year caused the penetration rate to remain at the 17-per-cent level of past years, so insurers had to strike up a new strategy to fight for a bigger piece of a stagnant pie.

Even the largest player, American International Assurance (AIA), could not resist jumping on the bandwagon of using advertising to increase brand awareness. AIA spent Bt50 million on advertising in 2006 after a couple of years of absence from the little screen.

Thai Life Insurance, the second-largest life player, maintained its position as the biggest spender on advertising. It consistently outlays more than Bt100 million for television, radio, print, cinema and outdoor ads.

Muang Thai Life Assurance, the fifth-largest player, more than quintupled its ad budget, from Bt24.66 million in 2005 to Bt160.59 million last year.

Besides targeting domestic markets, some units of multinational companies took advantage of their parent companies' branding campaign.

AIG - the parent of AIA - put its brand on Manchester United jerseys. Global Alliance spent an undisclosed figure to sponsor the soccer World Cup in Germany and a race-car team for Formula One. ING Group is also backing a Formula One team.

Non-life insurers, including Bangkok, Syn Mun Kong and Sri Muang, helped boost billings for ad agencies. Each spent about Bt50 million on advertising last year.

The total advertising budget for the insurance industry - both life and non-life - shot up 51.98 per cent from Bt738.4 million in 2005 to Bt1.12 billion last year.

Using a single distribution channel won't last long

All players are now seeking more distribution channels as relying on a single channel has proven to be not so productive for long-term stability.

AIA and Thai Life, which together have more than 100,000 sales representatives, are seeking ways to sell their products through bancassurance and telemarketing.

Siam Commercial New York Life (SCNYL), the biggest player in bancassurance thanks to strong support from Siam Commercial Bank, is also trying to strengthen its sales through agents.

Insurers affiliated with banks - like Bangkok Life Assurance, Bangkok Insurance (connected with Bangkok Bank), Muang Thai Life Assurance, Muang Thai Insurance (connected with Kasikornbank), SCNYL and Siam Commercial Samaggi Insurance (connected with Siam Commercial Bank) - also find banks as a valuable source of customers and sales.

Warning for consumers

Consumers could face higher rates if a draft insurance law is approved by the government this year.

Late last year, a Commerce Ministry committee proposed the setting up of an insurance fund to increase liquidity for insurers in order to protect the interests of policyholders in the event an insurer is forced to shut down because of insufficient reserves.

As the interim government has clearly signalled that every issue initiated during its term must be finished while it is in power, the law is expected to be passed this year.

Insurers would be forced to contribute to the fund at a rate depending on how liquid they are. The lower their reserve, the more they have to contribute.

Insurers are likely to pass the additional cost of doing business on to policyholders. This will result in either bigger premiums or scaled-down coverage.

Consumers should learn to study the fine print of policies they buy. Now most customers take out an insurance policy just to escape from the annoyance of sales representatives, who are either their friends or relatives.

The proposed law would also force the Insurance Department to come out from under the Commerce Ministry's wing and become an independent organisation.

Piyarat Setthasiriphaiboon

The Nation