Higher fraudulent claims expected this year

Pakit Iamopas, president and CEO of AZCP, said yesterday that the company could handle such behaviour and weather the economic downturn, which would last a few years.

The company's premiums would grow 10 per cent to Bt2.3 billion this year, after marking 1.7 times the growth of the industry over the past five years, he said.

All insurance companies need to strengthen themselves in the short term in order to not only survive amid the fierce competition, but also to meet upcoming riskbase supervision and other regulations required by the Insurance Commission in the long term, he said.

Moral hazards would always come into play during economic downturns, he said, adding that some policyholders would fake deaths to claim benefits.

Crimes and thieves would also increase due to rising unemployment, which would force the company to be more cautious in accepting claims.

The economic contraction would fuel layoffs in many industries, which would weaken purchasing power and jack up nonperforming loans.

The industry would hardly grow this year because of the economic slump and fierce competition. It expanded 5 per cent in 2008 and 6 per cent in 2007.

Demand for insurance would pick up slightly in tandem with other industries such as the auto industry, but the government's megaproject investments would help boost demand.

"The economic downturn will bring about changes in customer buying behaviour. For example, car owners will shift from voluntary type of policies with high premiums to compulsory policies. So total premiums will drop drastically," he said.

Insurers should reinforce their capital and maintain good risk and cost management in a bid to survive over the next few years.

AZCP has a capital adequacy ratio of more than 300 per cent of total premiums as of February, higher than the new requirement of 150 per cent. It also made a profit from its portfolio investment last year.

It wants to retain existing good customers through new products. Tightened credit control would be introduced to prevent bad debt acceleration.

Cost control, such as for headcount, claim unit cost and nonproductive marketing, would be adopted to ensure profitability.

"Expenses would be only for product development and keeping existing customers," he said.

Supatra Bhuripanyo, chief marketing adviser, said the company would introduce complete services through e-business and e-claim.

Many products were offered to serve the changing demands of customers, she said.

In the long run, the company plans to enhance its economy of scale, with continually rising premiums, she said.

Pakit said the company also wants economy of scope with various types of products to cover targeted segments. It has been conducting a study about product liability insurance.

"We cannot be everything to everybody. But we will be something for somebody. We will not jump into any market segment that we do not like," he said.

It also wants to sharpen economy of speed, with good timing in jumping in and out of the market.