Young population places low priority on insurance, prefers investments for gains
Bangkok Life Assurance has realised that its expansion into Cambodia, its first overseas venture, needs more time to see tangible results as many people there do not yet think insurance is important.
Chone Sophonpanich, president of BLA, said that after forming a joint-venture company named Cambodia Life Insurance last year, the company found that the Cambodian population is largely young, and if people have money to invest they put low priority on insurance, preferring investments to accumulate wealth.
BLA’s role in the JV is providing knowledge and designing health insurance and risk protection.
The Cambodian government took up 51 per cent of the joint venture with BLA holding 8 per cent, a life-insurance company from Indonesia 25 per cent and Bangkok Insurance 8 per cent. The remaining shares are held by small investors.
Chone said Cambodia was the first step in BLA’s preparation for the Asean Economic Community. The market is small with only three players including Manulife Financial and Prudential. Manulife is the leader in the life-insurance market at there.
He said the company had no plan to increase its stake in the JV or expand to other markets in the region if it no sees no good opportunities; it will focus on the domestic market first.
In the Thai market, the company believes there is high potential to market life insurance as a savings plan. However, Chone said high household debt was making it difficult to sell such products because people had other priorities as they faced high everyday expenses.
Still, BLA’s premium income for the first six months of the year was on target. First-year premiums were Bt6.5 billion and gross premiums Bt22.5 billion.
The company projects new business this year of Bt12.34 billion and total premiums of Bt40.75 billion. It has 1 million policyholders.
Bancassurance is a major channel for BLA, contributing 75 per cent of its new business, with the rest coming from its 19,000 agents.
He said the company would maintain the current number of agents but would emphasise productivity, making more of them financial advisers. Currently about 410 of them have such qualifications, and their number will be increased to 500 by end of the year.
Market volatility has not affected BLA’s investment portfolio as it has focused on long-term products that match up with maturities of its insurance policies.
The portfolio in the first six months increased to Bt150 billion from Bt130 billion at the end of last year. About 85 per cent of its investment goes to fixed-income products, of which 65 per cent are government bonds. The rest is invested in stocks, mutual funds and loans.
Chone said that once the Finance Ministry allows insurers to extend the proportion of their investment overseas, BLA would put more into corporate bonds issued abroad. Its overseas investment portfolio is less than 1 per cent of the total currently.
The company targets return on investment this year of 5 per cent, similar to last year.