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Published on September 1, 2007

Competitors battle it out with ever-lower premiums and compensations that are actuarially unsound, resulting in high loss ratios in major market segments.

Department of Insurance statistics show that last year, motor insurance, at Bt56.7 billion accounting for 59 per cent of total business, saw a loss ratio of 64.56 per cent, with 65.81 per cent in the voluntary motor-insurance sector. Anything above 60 per cent means the company is paying more than it earns, said AXA Insurance chief executive Kheedhej Anansiriprapha.

Despite growth in premiums of 36 per cent, or Bt498.6 million, AXA has been adversely affected by the motor sector, with a loss ratio touching 70 per cent. The company's official ties with Honda, while boosting sales, are both a blessing and a curse.

"CRV customers are all right, but we have a large number of claims from Jazz and Civic drivers," said Kheedhej.

Recently, garage operators who dealt with cash-strapped Sampanh Insurance called on the Insurance Department to help them settle Bt950 million worth of unpaid bills.

Kheedhej said high loss ratios in key markets had made portfolio diversification inevitable. He cited the "poaching" of Anon Opaspimoltum from Thai Re to build Viriyah Insurance's non-motor business to Bt900 million by the end of the year as a prime example. Currently, Viriyah Insurance's direct non-motor premium sales are only Bt690 million, a fraction of its Bt14.5-billion motor equivalent.

Lucrative sectors include marine and fire insurance, with loss ratios of 25.66 per cent and 20 per cent, respectively, but the markets are dominated by a few Japanese firms, which reflects the nature of the export business.

In the short term, Kheedhej sees selective risk underwriting, stricter claims management and more prudent cash-flow management, particularly in credit control, as solutions to stunted growth.

Insurers will also need to maintain a healthy reserve, Kheedhej said. As business grows larger in size and value, an accident in a billion-baht computer-parts factory could wipe out the entire reserve of a small or medium insurer.

This makes consolidation inevitable, with the government planning to deregulate the industry and trade liberalisation knocking on the

door.

The playing field is shrinking, with the top 20 insurance companies out of a total of 74 making up 80 per cent of the premium volume. Of these, 28 are partly owned by foreign companies.

Thailand remains a lucrative market for foreign investors. Swiss Re says that while the global insurance industry is forecast to grow 2-3 per cent on average this year, the Thai insurance industry will grow 7-8 per cent, revised downwards from a forecast of 12 per cent earlier.

Ki Nan Tsui

The Nation