- By Thet Zin Moe
People save part of their income to deal with the inevitable consequences of old age, sickness and death for themselves as well as for their near and dear one. However mishaps like sickness and deaths occurs not only when a person gets old. It can happen anytime anywhere. Due to illnesses, accidents, carelessness of self or other or natural disasters, they will face discomfort and inconvenience at the least or even loss of life or limb. Even if there was no personal injury or death, there may be loss of property or home to fire and natural disasters that had disastrous consequence to anyone. For such cases, saving wouldn’t be enough for most of the people. Individuals and organizations need to consider for such scenarios and take up preventive measures. Measures that will ensure maintaining of an existing lifestyle or business regardless of whatever the disaster or mishap may be. That preventive measure is insurance.
Majority of the people in Myanmar do not understand the advantage of insurance protection. Most also didn’t prepare for the future as well. So they have little awareness of insurance. Unsurprisingly, insurance market in Myanmar was very small. Insurance penetration rate didn’t even reach one percent. Following table shows the comparison of insurance penetration rates in Myanmar, Laos, Thailand and Viet Nam.
The reason for this low penetration was that Myanmar only has a state-owned Myanma Insurance in the insurance market until 2013. Citizen owned private insurance businesses were allowed into the market starting from 2013 and today there are 11 citizen-owned private insurance companies operating in the local insurance market. Since then an increasing numbers of insurance types were introduced to the people.
Following this, the government is now arranging for foreign insurance companies to enter into the local insurance market.
Even before local private insurance companies were allowed into the market, foreign insurance companies has set up representative offices in Myanmar as they were fully aware of the future prospect of Myanmar insurance market.
Following are the dates on which foreign insurance companies set up offices in Myanmar.
Three insurance companies from Japan were allowed to offer six kinds of insurance in Thilawa Special Economic Zone with temporary licences under the Special Economic zone Law in 215. An Insurance Supervisory Committee was formed to start necessary preparation to let foreign insurance do their services in Myanmar market. Taking in to account the economic development of the State, incomes of the people, insurance market need, capacity of local insurance companies and people’s knowledge on insurance industry, a road map was drawn to grant more freedom in the market where foreign insurance companies will be allowed to compete freely with one another and actions plans were adopted.
Insurance services were classified as life insurance and non-life insurance due to differences in the basic characteristics. Arrangements were made to ensure freedom in both insurance types. In order to meet international standards in selecting international companies for the market consultant companies were systematically hired.
Insurance penetration into Myanmar market was very weak. Of the non-life insurances that were able to penetrate into the market substantially were third-party and fire insurances. Life insurance had the least attraction due to weakness in design and marketing techniques.
Life insurance is partly saving for the insurer as if required there is an opportunity for the insurer to loan money from the insurance company. On the unhappy event of the death of the insurer, remaining family will have financial support for theirfuture livelihood.
On the part of the insurance companies the premium payments received from the insurers become a capital for investment. Insurance companies normally become investors in wide ranging businesses as well as in government bonds and securities thus injecting money back into the economy.
Of the 11 local private insurance companies, only three engages in life insurance service and life insurance sector hasn’t progress much. As of 2018, life insurance penetration reaches only 0.01 per cent while non-life insurance penetration was slightly higher at 0.05 per cent. That was why the government was planning to allow foreign insurance companies to provide life insurance services under joint venture with local insurance companies or as 100% foreign investment.
Out of 11 local private insurance companies, eight were engaging in general or non-life insurance service. Myanma Insurance offers 36 types of insurance while local private insurance companies offer nine types of insurance. Non-life insurance service in Myanmar is still very weak. Due to the sale of the same type of insurance policies that were of weak design at the same premium rates with weak marketing and weak claim payments, interest in insurance was still very low. In addition to the fire and vehicle insurance that had become popular, new type of insurances like health, crop and education insurances need to be introduced.
As state-own Myanma Insurance and 11 local private insurance companies were giving insurance service, the numbers of insurance providers were not low considering the country’s economy and insurance knowledge. If more was permitted, it would be difficult to regulate the market. Powerful investors can manipulate the market and customers’ distrust of the service can rise. That was why the government was allowing foreign companies to offer general insurance service in joint venture with local insurance companies. This will allow local insurance companies to learn insurance techniques, increase capital, offer wider ranges of insurance services. This will benefit the insurance market, the local and foreign investors while encouraging systematic competitions.
In the region Viet Nam and the Philippines allowed 100 percent foreign owned insurance companies in 1998 and 1999 when they liberalize the insurance market. Indonesia, Thailand and Malaysia allow foreign companies to operate insurance services in joint ventures with local companies in 1992, 1996 and 1997 and then gradually liberalize the market by raising the foreign percentage of the joint venture. In its effort to liberalize the market Myanmar sought necessary advice from the World Bank Group, studied the experiences of the countries in the region and suggestions from local private companies and representative/branch office of foreign companies.
Now, Myanmar has selected some of the world’s leading life insurance companies such as AIA Company Limited, CHUBB Tempest Reinsurance Ltd., Prudential Hong Kong Limited andManulife (founded as the Manufacturers Life Insurance Company) to provide life insurance service in Myanmar. Plans are underway on selecting foreign insurance companies to provide general insurance service in Myanmar under joint venture with local insurance companies.
In conclusion, the move to allow foreign insurance companies into Myanmar market aims to create better insurance protection for the State and the people, create more employment opportunities, raise capital for nation-building works and create a better environment for the people to have a brighter future as well as attracting more foreign investment.
(Translated by Than Tun Aung)