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Malaysia’s AIA AFG Takaful Bhd has set its sights on growth in the Malaysian takaful insurance market by expanding its reach in the Southeast Asian country. The Kuala Lumpur based joint venture is taking positive steps to penetrate the growing takaful bancassurance business in Malaysia.

AIA AFG Takaful Bhd is a 70:30 percent joint venture between American International Assurance (AIA) and Malaysia’s Alliance Bank dedicated to providing takaful savings, protection and investment products.

AIA was recently granted a family takaful license from the Malaysian central regulators Bank Negara Malaysia. AIA’s local partner – Alliance Bank Malaysia Bhd – is one of Malaysia’s leading lenders in one of the largest takaful insurance markets in the world.

The takaful insurance market is increasingly becoming an important market for insurers searching for new sectors of growth. Currently Malaysia is ranked second in terms of the provision of takaful insurance products in the world and the AIA AFG Takaful Bhd venture is designed to strengthen the insurer’s foothold in this rapidly expanding sector of the insurance industry.

AIA – the Asian insurance arm of the multi-national company AIG – floated on the Hong Kong Stock Exchange in late 2010 after a failed acquisition bid by the major British insurer Prudential. AIA is now aiming to strengthen its presence in the Asia-Pacific region of the world, which has seen exceptional growth in the demand for insurance products with the takaful insurance sector becoming an increasingly important brand geared to Islamic based nations.

AIG has been restructuring its global operations in order to repay the United States government US$182 billion as part of its bail-out in 2008 following the crises affecting the world’s financial industry. This has included the divestment of its interests in insurers including Alico, AIG Star Life Insurance and the AIG Edison Life Insurance Co to MetLife and Prudential Financial respectively; it is currently planning to sell its Taiwanese subsidiary Nan Shan as the insurers looks to generate further capital to repay the government loan.

AIA is regarded as the crown jewel in AIG’s global network, recognizing its significant presence in the Asian region and the new venture with Malaysia’s Alliance Bank will augment the insurer’s position in this emerging market. The Alliance Bank has a well developed network of over 90 banking outlets in Malaysia and, as part of the joint venture with AIA, the workforce will be increased threefold to 60 dedicated posts in order to strengthen its competitive position in the takaful insurance market.

As global insurers look for new opportunities to offset a slow-down in growth in traditional international markets, takaful insurance is growing in importance with multi-national insurers taking action to penetrate the market. Demand for takaful insurance products – geared towards Muslim populations – has increased significantly in recent years, encompassing countries in the Middle-East and Africa regions – most prominently in Malaysia, Indonesia, Qatar, and the United Arab Emirates.

Renowned consultancy firm Ernst & Young reported that the Malaysian takaful insurance market was worth US$889 million in 2008 – making it one of the key nations for takaful products; Ernst & Young also predict that the total market for takaful insurance will amount to US$ 7.7 billion by 2012.

The Malaysian government has been strongly supporting the development of the takaful insurance sector by encouraging insurers to accelerate growth across the country to meet the needs of both the urban and rural Muslim populations. The Malaysian government’s support for foreign and local insurers in the supply of takaful insurance products resulted from difficulties within the Islamic insurance industry in developing appropriate insurance products to meet emerging, specific market demands.

Bank Negara Malaysia (BNM), Malaysia’s central bank, granted four new licenses for family takaful joint ventures in 2010, which entitled foreign and local insurers and financial providers to enter the market and offer takaful insurance products in Malaysia. Along with the AIA permission, Great Eastern Holdings Ltd, ING Groep NV and AMMB Holdings Bhd were the other foreign firms given permission to start offering takaful insurance in Malaysia.

The takaful industry in Malaysia was established in 1985 after the enactment of the Takaful Act 1984 and has developed to become the second largest takaful market in the world after Saudi Arabia. Bank Negara Malaysia, predicts that the Malaysian takaful market will grow between 15-20 percent annually. The takaful insurance market plays a key role in the overall Islamic financial system, with the major players in the sector being Prudential BSN Takaful Bhd and the Mayban Fortis owed Etiqa Takaful.

Insurance Companies Mentioned:

AIA

The AIA Group is a leading life insurance organisation in Asia Pacific that traces its roots in the region back more than 90 years. It provides individuals and businesses with products and services for life insurance, retirement planning, accident and health insurance as well as wealth management solutions. Through an extensive network of more than 320,000 agents and approximately 23,500 employees across 15 geographical markets, the AIA Group serves the customers of over 23 million in-force policies in the region. The AIA Group has branch offices, subsidiaries and affiliates located in jurisdictions including Australia, Brunei, China, Hong Kong, India, Indonesia, Macau, Malaysia, New Zealand, Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam.

AIA AFG Takaful Bhd

AIA AFG Takaful Bhd. is a joint-venture company between American International Assurance Bhd. and Alliance Bank Malaysia Berhad, a wholly owned subsidiary of Alliance Financial Group Berhad.. AIA AFG Takaful Bhd. aims to create and introduce innovative and competitive Shariah-compliant solutions respecting the needs of the Muslim community and service quality demands of all Malaysians.

AIG

The American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally.

Prudential Financial Inc

Prudential Financial Inc. is a financial services leader, with approximately US$750 billion of assets under management as at September 2010. Prudential Financial operates in the United States, Europe, Latin American and Asia, with approximately 42,000 employees worldwide

MetLife

Possessing over 140 years of insurance expertise, MetLife aims to be an innovator in the field of international Life insurance. Globally, MetLife is able to offer its clients accident and health insurance, life insurance, disability income protection, and retirement and savings products.

Prudential

Prudential has been in the insurance and financial services business since 1848. Today they operate throughout the UK, US and Asia offering international health insurance and retirement planning services, supported by 27,000 employees worldwide.

Great Eastern

Great Eastern is the oldest and most established life insurance group in Singapore and Malaysia. With $50.9 billion in assets and 3.8 million policyholders, it has two successful distribution channels – the tied agency force and bancassurance. The Company also operates in China, Indonesia, Vietnam and Brunei.

ING

ING provides banking, investments, life insurance and retirement services and operates in more than 50 countries. It serves more than 85 million private, corporate and institutional customers in Europe, North and Latin America, Asia and Australia.

Multi-national insurer, the ACE Group, has announced the appointment of Jeffery Hager as the new Regional President for ACE Far East. Mr Hager will be responsible for ACE’s property and casualty (P&C) and accident and health (A&H) insurance businesses in Japan.

The post is based in Tokyo with Mr Hager reporting to ACE’s Vice Chairman, ACE Limited, and Chairman Insurance Overseas – General: Mr John Keogh. The new appointment will see Mr Hager taking over from Neil Smith, who moves to head ACE’s P&C and A&H insurance businesses in Thailand.

The new Regional President joins ACE from Dallas based Fireman’s Fund Insurance Company, where he has been National Sales Leader since 2009. Jeffrey Hager previously held the position of Executive Vice President with AIU, with responsibility for this company’s P&C and A&H activities in Japan.

“Jeff has an extensive and varied insurance background, ranging from country management responsibility in Asia to management of an agency sales force in Japan to marketing and front-line claims experience. I’m confident that his unique combination of experience and proven leadership of the P&C and A&H businesses in Japan will serve him well in guiding ACE’s continued success in the Japanese market.” Mr. Keogh said on the Mr. Hager’s new appointment to ACE.

ACE’s new head of Japanese property and casualty (P&C) and accident and health (A&H) insurance businesses brings 20 years of insurance industry experience holding functional positions in sales, distribution, marketing and claims in a number of countries including the USA, Korea and Japan.

The ACE Group is a leading global insurer and specialist in commercial property and casualty insurance. In 2009, it held assets valued at US$78 billion with gross written premiums amounting to US$19 billion. The US based insurer has a global presence with more than 50 offices worldwide and clients in over 170 countries. It offers property, casualty, automobile, life, personal, accident and health insurance products along with umbrella insurance coverage.

ACE has a strong foothold in the Asia-Pacific region with activities in Australia, China, Hong Kong, India, Indonesia, Japan, Korea, Macao, Malaysia, New Zealand, the Philippines, Singapore, Taiwan, Thailand and Vietnam. The insurer reported net income of US$675 million in the third quarter 2010 reflecting a 37 percent year-on-year increase for the group.

As the new regional president of ACE Far East business, Mr Hager will be responsible for overseeing a region which is experiencing mixed trading conditions. While China is at the forefront of economic growth, and the Chinese insurance industry is emerging as a pivotal market for global insurers, the position for insurers in Japan is one of stagnation in line with the sluggish state of the economy.

The ACE Group has 90 years experience in the Japanese insurance business and has established a sound status in the insurance market in the country; the company had a capital valuation of ¥8.15 billion (US$98.52 million) in March 2010.

Although the Japanese economy, and its insurance sector, has been static compared to other countries in the Asian-Pacific region, overall the ACE Group’s operations in the region are expected to continue to be buoyant during 2011 reflecting the insurers well developed Asian network and wide range of savings and protection products offered.

Insurance Company Mentioned:

The ACE Group was founded in Switzerland in 1985 and is a global leader in insurance and reinsurance serving a diverse group of clients. Headed by ACE Limited (NYSE:ACE), a component of the S&P 500 stock index, the ACE Group conducts its business on a worldwide basis with operating subsidiaries in more than 50 countries and commercial and individual customers in more than 170 countries. The company operates through four segments: Insurance–North American, Insurance–Overseas General, Global Reinsurance, and Life.

A series of studies has highlighted concerns about the number of people dying from chronic non-communicable diseases in the group of ten countries forming the Association of Southeast Asian Nations (ASEAN). The studies published in a recent addition of the Lancet journal covered the issues and potential impact of chronic non-communicable and infectious diseases affecting the regions estimated population of 600 million people over the foreseeable future. The challenges are particularly acute because of the potential for major disasters in the region in an era when changes in social, economic and political reform are taking place.

The Southeast Asian nations included in the study were Brunei, Cambodia, Laos, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. The studies incorporated the state of healthcare provision in the ASEAN block and called for action to protect populations and minimize deaths arising from diseases afflicting individuals – especially the poorer elements of society.

The papers warn of an emerging health crisis in Southeast Asian countries, highlighting the effects of chronic illnesses such as cancer and heart disease; chronic illness caused the death of 2.6 million people – over 60 percent off all deaths in the region – in 2005. The extrapolation predicts that this could increase to 4.2 million deaths per year by 2030, if action is not taken to achieve an improvement in health conditions.

The study also covered the impact of infectious diseases in the region, including the risks from emerging diseases such as SARS and bird flu in addition to malaria, cholera and dengue; recognizing that the region is highly prone to outbreaks of these sorts of difficult to control infectious diseases. Calls are made for Southeast Asian governments to take a more pro-active approach to the control of infectious diseases with the setting up of better surveillance processes to contain risks.

It is recognized that Southeast Asia is a region of the world which is vastly diverse in social, economic and political aspects. While Southeast Asia has become a crucial region for global trade, the social fabric of the region has been shaped by historical and geographical factors producing a network of diverse cultures. However the region is vulnerable to natural disasters and in some cases inadequate healthcare systems contributing to concerns for the health of inhabitants in the region if measures are not taken to combat chronic and infectious diseases.

The region is also facing the burden of an ageing population, and a shift in populations from rural to urban locations, placing extra demands on public healthcare systems; the rapid demographic changes occurring within and across national borders. The high level of migration of people to urban areas is increasing population densities in urban areas and is heightening the risk of infectious diseases particularly affecting poorer elements of society.

Southeast Asia is a region prone to national disasters impacting on the environment and leading to extreme health issues. The occurrence of monsoons, typhoons, droughts and floods can result in large numbers of people contracting infectious disease such as malaria and cholera.

Political turmoil and tensions in the region can also be detrimental to the delivery of quality healthcare and the control of outbreaks of infectious diseases. The studies emphasized the need for an improvement in surveillance techniques in order to combat these affects and avoid the threats from pandemics.

The papers studied the financing of health provision in the Southeast Asian countries subject to the review, identifying those countries seeking to provide an increase in universal coverage instead of a direct out-of-pocket payment based systems. Some countries, notably Laos and Cambodia, primarily relied on the provision of donations to fund healthcare for their poorer segments of society.

Thailand, Vietnam Indonesia and the Philippines are four countries in the Southeast Asia which are currently going through an economic expansion, and have a social health insurance scheme in place with payroll tax providing public healthcare. Also, as these countries experience a growth in affluence, the number of individuals covered by health insurance has increased in recent years and is set to continue on an upward trend relieving pressures on state funded healthcare provision.

The establishment of soundly based arrangements for funding improvements to healthcare is recognized as key to combating the affects of chronic and infectious diseases in the region.

Singapore and Malaysia, two of the most developed nations in the Southeast Asia, both have advanced healthcare systems, which are readily available to the citizens of these countries. Also Singapore and Malaysia have strong private healthcare systems playing a major role in providing healthcare for the more affluent populations in these countries.

The poor populations in the poorer countries in South east Asia are clearly most at risk from inadequate healthcare systems. In addition to concerns over monitoring and controlling health issues, there are worries that the Southeast Asian Nations Framework Agreement on Services will further lead to a brain drain of medical professionals working within the public healthcare services throughout region as they seek work in the private Southeast Asian healthcare sector, thus creating a shortage of human resources for state run health services in the region.

The introduction of mircoinsurance specifically aimed at making insurance affordable for the less wealthy has expanded in recent times and has become an important method of saving and provision of health insurance. This will undoubtedly provide a significant benefit in better managing the effects of chronic and infectious diseases in the medium and longer term in Southeast Asia

The Vienna Insurance Group (VIG) has announced better than expected profits for 2010, highlighting the improvement in trading conditions in the fourth quarter last year. In a preliminary report covering operations in 2010, the insurer confirmed that it achieved a pre-tax profit of €505 million (US$686.8 million) reflecting a 15 percent year-on-year increase in margins.

VIG initial evaluation of trading results indicate that unconsolidated premiums written reached €8.7 billion (US$ 11.83 billion) in the 2010 financial year – an increase of 6.1 percent. The insurer’s non-life insurance segment achieved €4.8 billion (US$ 6.52 billion) in written premiums, with written premiums in the life insurance segment totaling €3.9 billion (US$ 5.3 billion) – a 11.7 percent increase compared to the previous 12 months.

The 15 percent increase in profit for the full year was particularly significant, highlighting the strength of activity in the fourth quarter as the profit margin for the first three quarterly periods in total amounted to 11 percent.

The Austria-based insurer is one the leading insurance groups in Central and Eastern Europe (CEE) and experienced strong growth as the CEE economies gathered momentum during 2010 and predicts the region will eclipse markets in Western Europe in 2011.

The CEO of the Vienna Insurance Group, Günter Geyer, said “By achieving very remarkable growth rates in a challenging period, we accomplished something quite unexpected in 2010. Both in Austria and in Eastern Europe, we succeeded in boosting premiums significantly. We recorded strong increases, notably in the life insurance segment.”

In Austria, VIG’s core market, the insurer’s subsidiaries – Wiener Städtische Versicherung, Sparkassen Versicherung and Donau Versicherung recorded an increase of 4.5 percent to reach €4 billion (US$ 5.44 billion) in written premiums in 2010.

VIG has been expanding in the CEE region over the past decade, with initial ventures in Germany, Slovakia and the Czech Republic in 1990 being followed by establishing insurance activities in countries such as Hungary, Poland, Liechtenstein, Croatia, Georgia and Belarus.

VIG reported positive figures in the Czech Republic market with a year-on-year increase of 10.2 percent to total €1.8 billion (US$ 2.44 billion); this was generated by the groups Kooperativa pojiš?ovna, a.s, ?eská podnikatelská pojiš?ovna, a.s, and Pojišt’ovna ?eské spo?itelny, a.s, subsidiaries. VIG’s Czech life insurance premiums amounted to €740.4 million (US$ 1 billion) – a surge of 20.4 percent in 2010 – with premiums in the non-life sector amounting to €1.1 billion (US$ 1.5 billion).

The Slovak Group of companies Kooperativa pois?ov?a, a.s., Komunálna pois?ov?a, a.s. and Poist’ov?a Slovenskej sporitel’ne, a.s reported written premiums totaling €658.9 million (US$ 896.1 million) an increase of 3.2 percent over 2010; although non-life insurance premiums written declined to €318.4 (US$ 433 million) this was offset by an increase of 15.5 percent in Slovak life insurance premiums reaching €340.5 million (US$463 million).

In Poland, VIG, recorded written premiums of €753.6 million (US$ 1.02 billion) – an impressive increase of 25.7 percent. VIG’s ventures in the Polish non-life sector increased by 28.9 percent, amounting to €564.9 million (US$ 768.2) in premiums, while the life insurance sector reported an increase of 17.0 percent to reach €188.7 million (US$ 256.6 million). VIG said that the significant increase in Polish written premiums was primarily due to the expansion in the group’s single-premium business.

However, VIG’s Romanian groups recorded an overall decline of 12.8 percent in the value of premiums due to the restructuring of its non-life portfolio in the country. Romanian life insurance premiums totaled €93.5 million (US$ 127.1 million) an increase of 8.2 percent, while the non-life insurance segment premium reached €442.5 million (US$. 601.8 million).

VIG has been expanding operations in both emerging and established markets over the last two decades, building up the group’s presence in Europe – particularly the CEE region – gaining a strong foothold and market status which has driven improvements in written premiums.

Other insurance markets in which the Vienna Insurance Group has a presence include Albania, Bulgaria, Germany, Georgia, Croatia, Liechtenstein, Macedonia, Russia, Serbia, Turkey, Ukraine, Hungary and Belarus. Business in these countries produced total earnings amounting to €907.3 million (US$ 1.23 billion) in premiums written – contributing an increase of 7.5 percent in group results in 2010. The Ukrainian, Macedonian and Turkish insurance markets were highlighted by VIG as having developed significant premiums returns in 2010.

VIG envisage that its operations in emerging CEE insurance markets will drive growth for the group in 2011, while activities in the established markets are likely to be more challenging as economic conditions suffer the impact of national austerity measures.

Activities in the Ukrainian and Turkish insurance markets have been highlighted by VIG as core targets for future growth. In recent times, VIG has established life insurance ventures in Montenegro and Macedonia, and has specialized in property insurance in Lithuania. These new additions to the Austrian Group’s portfolio are designed to increase its exposure in Eastern European and bolster premium growth in the future. Currently, VIG are the market leaders in the Austrian, Czech Republic, Slovakian, Romanian, Bulgarian and Croatian insurance markets.

VIG provide clients with property/casualty, life, and health insurance products and services. The group offers a broad range of insurance coverage in areas of natural catastrophes, storm, technology, transportation, household, burglary, fire, liability, legal expenses, marine, aviation, motor vehicle, casualty, and credit guarantees.

The insurance markets in Central and Eastern Europe (CEE) are growing in importance for multi-national insurers looking to expand global presence. The CEE countries have been particularly attractive to insurers over the last decade as more countries have gained access to the European Union improving opportunities for insurers. The growth in the demand for insurance products in Poland and Slovakia has been significant, while insurers see scope for further developments in the Turkish, Ukrainian, Macedonian and Albanian markets.

Insurance Company Mentioned:

Vienna Insurance Group

The Vienna Insurance Group (VIG), is one the largest international insurance groups in Central and Eastern Europe with approximately 23,000 employees and a premium volume of around €8 billion. VIG is focused on the CEE economic region the insurance provider made the transition from a national insurance company to an international insurance group with more than 50 insurance companies in 24 countries. In total, about 50% of all VIG’s premiums already come from the Central and Eastern European markets.

The impact of de-tariffing in the Indian general insurance industry has lead to a challenging time for Indian insurers during the 2007-2010 period. This factor is highlighted in a report by rating agency ICRA. The combination of tough economic conditions and the de-tariffing of the fire, motor and engineering sectors in the Indian insurance industry has resulted in a recorded compounded annual growth rate (CAGR) of 11.5 percent between 2007-2010, which compares with a growth rate of 16.8 percent during 2004-2007.

A report released by ICRA, India’s credit rating agency, analyzes the general insurance industry in India – a business which is estimated to be worth Rs 348 billion (US$ 7.6 billion). It found that the general insurance sector went through a challenging period between 2007-2010 set off by the global financial crisis, which triggered the complete (other than third party motor insurance) de-tariffing of the general insurance industry in the country from the 1st January 2007. The de-tariffing measures saw Indian general insurers activate the discounting of prices – initially within parameters permitted by the Indian insurance regulatory apparatus – but these were subsequently removed.

The de-tariffing of charges has had a significant impact on the four public sector run insurers and private insurance companies, affecting the pricing, profit margins and growth of the general insurance business in India in the 2007-2010 period. De-tariffing resulted in pricing discounts without due regard to the risks and profitability of the business being generated.

Market leaders in the general insurance business in India include ICICI Lombard, Bajaj Allianz, Reliance General and HDFC ERGO.

The health insurance sector has been particularly challenging for insurers as prior to de-tariffing margins had been cross subsidized by the more profitable insurance products in the fire and engineering sectors. However, health insurance is the fastest growing segment of the Indian insurance market led by multi-national insurer’s recent ventures with locally based and established insurance companies. This is reflected by the new developments such as the formation of MaxBupa – the partnership between UK’s British United Provident Association (BUPA) and locally based Max India Limited – competing with Star Health, Apollo Munich and Bajaj Allianz. In 2010, the health sector accounted for 20.8 percent of the general insurance market in India.

Over recent years the Indian health insurance industry has maintained steady growth rates, driven by rising income levels and an increased awareness of the benefits of health insurance leading to a CAGR in excess of 30% during the last six years.

This level of growth is predicted to continue over the next five years with the prospect of improving returns from new written premiums; insurance companies in the private sector are expected to be particularly well placed to capitalize on emerging opportunities. Indian banks are expected to enter the Indian health insurance market, seizing on opportunities to cross-sell polices to customers buying other forms of insurance from them.

The development of microinsurance products aimed at offering the high numbers of the low paid elements of society with a range of insurance cover could stimulate significant volumes of new business.

While ICRA’s analysis expects the soft pricing regime to continue in the short-term, placing continued pressures on margins for insurers in India, there is a reasonable prospect for premiums to return to levels to fully reflect risk attribution in the longer-term. In the meantime, the focus for insurers in the Indian general insurance industry will be on improving network efficiency, product development and differentiation as well as cost controls in order to maintain market share linked to the exceptional growth in the Indian economy.

Insurance Companies Mentioned:

MaxBupa

Max Bupa Health Insurance is a 74:26 joint venture between Max India Limited and UK-based Bupa. Bupa is a leading private healthcare provider with more than 10 million customers worldwide and over 60 years experience in the health sector. The Max India Group has expertise in both health and insurance related services including hospitals, clinical research and life insurance.

Star Health and Allied Insurance

Star Health and Allied Insurance is a specialist health insurance provider and was the first stand alone health insurers in India. Star Health and Allied Insurance provides health, accident, student, travel, and life insurance.

Apollo Munich Health Insurance

Apollo Munich Health Insurance Co. Ltd. (previously known as Apollo DKV Insurance Co. Ltd) is a joint venture between the Apollo Hospitals Group and Munich Health. Apollo Munich Health Insurance provides health, personal accident and travel insurance.

Bharti Axa General Insurance

Bharti AXA General Insurance is a joint venture between Bharti Group and AXA Group. Founded in July 2007 in Bangalore, India it now has over 40 branches across India offering a variety of insurance products for retail, commercial and rural customers.

HDFC Standard Life Insurance Company Ltd

HDFC Standard Life Insurance Company Ltd. is one of India’s leading private life insurance companies, which offers a range of individual and group insurance solutions. The company provides a line of protection, retirement, savings and investment, children, health, and group plans. It is a joint venture established in 2000, between Housing Development Finance Corporation Limited (HDFC Ltd.) and The Standard Life Assurance Company, a leading provider of financial services from the United Kingdom.

HDFC ERGO

HDFC ERGO General Insurance Company Limited is a 74:26 joint venture between HDFC Limited, India’s premier Housing Finance Institution & ERGO International AG, the primary insurance entity of Munich Re Group. HDFC ERGO has been expanding its presence across the country and is today present across 71 cities with78 branch offices with an employee base of over 950 professionals. The company has a right balance of distribution channel comprising of Dealerships, Brokers, Retail and Corporate Agents, Bancassurance and Direct Sales Team.

ICICI Lombard GIC Ltd

ICICI Lombard GIC Ltd. is a 74:26 joint venture between ICIC Bank Limited, India’s second largest bank with consolidated total assets of over USD 100 billion at March 31, 2010 and Fairfax Financial Holdings Limited , a Canada based USD 30 billion diversified financial services company engaged in general insurance, reinsurance, insurance claims management and investment management. ICICI Lombard GIC Ltd. is the largest private sector general insurance company in India

The German based Ergo Insurance Group has announced that it has entered into two separate insurance ventures to strengthen its presence in Asia. In China, Ergo has entered into a life insurance joint venture with a local assets investment company. In Vietnam, Ergo has acquired a stake in a Vietnamese non-life insurance specialist.

Ergo Insurance, a subsidiary of global reinsurer Munich Re, announced in January 2011, that it is setting up a 50-50 Chinese joint venture with the Shandong State-owned Asset Holding Company (SSAIH). The deal was signed in Jinan – the capital of Shandong province – by SSAIH President Liu Changsuo and the ERGO Chairman of the Board of Management Dr. Torsten Oletzky.

Speaking on the significance of the Chinese insurance venture, ERGO Insurance Group Board of Management member, Dr. Jochen Messemer, said: “China is one of the strongest growth regions in Asia. As a consequence, both private customers and companies have an increasing requirement for provident products and a safeguarding against risks.”

Ergo has been present in China for several years with a representative office in Beijing and the new 50-50 life insurance joint venture will see the German insurer opening up a head office in Shandong province. The decision to enter the market in Shandong province was taken because the region plays a pivotal economic role in the Chinese economy and it has become the third largest domestic insurance market in China. The region has a population of 92 million citizens, offering Ergo huge potential to generate high premiums with their Chinese partners.

During Ergo’s time in Beijing, the German insurer has been analyzing the Chinese insurance market, and foreign insurer competition operating in the country and now feels that the time is right to enter the life insurance sector with SSAIH. Ergo plans to use their experience in the Chinese insurance market and continue developing a suitable business and sales model for the new SSAIH joint venture.

The Duesseldorf based insurer Ergo’s Chinese joint venture will see the German insurer providing expertise in areas of sales, risk management and product development. The Ergo and SSAIH partnership is still subject to the Chinese Insurance Regulatory Commission’s (CIRCs) final approval.

The Vietnamese joint venture will see Ergo acquire a 25 percent stake in the Global Insurance Company (GIC), a local insurer specializing in non-life insurance products in Vietnam. GIC was founded in 2006 and specializes in motor vehicle, fire and transport insurance; in 2009 the company recorded premiums of approximately €11 million (US$ 14.5 million).

“We are aiming for a long-term strategic partnership to develop Global Insurance Company into a leading insurer in Vietnam. This investment is part of our strategy to become active in the highly attractive non-life insurance markets in South-East Asia.” said Dr. Jochen Messemer on the potential benefits of the Vietnamese venture.

Vietnam’s economy has enjoyed bumper growth in recent years and has become a prime market for global insurers trying to capitalize on the growth in prosperity in the country and the expanding Vietnamese insurance industry. The Vietnamese non-life market is reported to have grown by more than 20 percent annually in recent years, with this sort of trend forecast to continue. The Ergo – GIC venture is planned to be formalized in February 2011 in the capital Hanoi.

The two new Asian insurance ventures will augment Ergo’s presence in the region, and will help the German insurer to continue its international growth, offering the company scope to access two emerging markets with soaring rates of economic expansion.

The two ventures will increase Ergo’s exposure in emerging international markets and is part of the German insurer’s plans to grow on the global stage. Asia has become a vital region of the world for multi-national insurers to generate growth in written premiums. Vietnam has a growing insurance sector, which has expanded rapidly over recent years and is set to continue. China has become a crucial global economic powerhouse in recent years driven by the growing prosperity of the massive population in the country. This has created a high demand for insurance products and made the Chinese insurance sector on the most desirable markets in the world. Ergo’s initiatives are expected to produce a significant increase on the 40 million clients currently supplied and generate profitable new business.

In the Asia-Pacific region, Ergo maintains a presence in South Korea, Singapore and India. It is understood that in addition to the recently announced joint ventures in China and Vietnam, the German insurer plans to further increase its presence in the region. Outside Asia, Ergo has a high exposure across Europe and in Canada operating in travel, life, property-casualty, direct, legal protection and the health insurance sectors though such brands as Deutsche Krankenversicherung AG (DKV).

Insurance Companies Mentioned:

Ergo

Ergo is a subsidiary of Munich Re and offers a wide spectrum of insurance provision and services across 30 countries; it currently has more than 40 million customers. Ergo has a strategic focus in Central and Eastern Europe and certain Asian markets. The German insurer has become one of the leading health and legal expenses insurance companies within Europe. Additionally Ergo provides property and personal accident insurance in India.

Munich Re

Munich Re stands for exceptional solution-based expertise, consistent risk management, financial stability and client proximity. This is how Munich Re creates value for clients, shareholders and staff. It operates in all lines of insurance, with around 47,000 employees throughout the world. Especially when clients require solutions for complex risks, Munich Re is a much sought-after risk carrier. The primary insurance operations are mainly concentrated in the ERGO Insurance Group. ERGO is one of the largest insurance groups in Europe and Germany and 40 million clients in over 30 countries place their trust in the services and security it provides. In international healthcare business, Munich Re pools its insurance and reinsurance operations, as well as related services, under the Munich Health brand.

The provision of employer-provided health insurance is expected to increase by an average of 10.5 percent globally during 2011. This assessment is identified by specific regions worldwide in a report by global professional services firm Tower Watson.

The Latin American region is expected to experience the largest cost increase this year at 13.7 percent, followed by North America at 11.6 percent. The Middle East and Africa are forecast to see an increase of 10.2 percent, as is the Asian-Pacific region, while Europe is forecast to generate the lowest increase in the categorization at 9.1 percent.

Global medical cost trends between 2009-2011
	2009	2010	2011
All	10.2	9.8	10.5
Asia Pacific	9.9	10.3	10.2
Europe	9.4	7.8	9.1
Latin America	11.6	12.1	13.7
Middle East/Africa	10.9	10.1	10.3
North America	10.8	11.3	11.6
All figures are shown as a percentage increase.

The main findings from the survey were that 95 percent of the countries included in the survey experienced an increase in medical cost trends exceeding the rate of general inflation. The report also found that medical costs are likely to continue to increase in double-digit numbers over the next 5 years, representing a challenge for companies providing health insurance for employees. Despite increasing costs, the report recognizes that companies appreciate the benefits of providing health insurance for employees as a method of maintaining a healthier workforce and resultant higher attendance levels.

The Tower Watson report is based on surveys conducted between September and October 2010 and includes information from the world’s leading health insurers offering medical insurance solutions to employers across 37 countries throughout the regions of Africa, Asia, Europe and the Americas. Data was used from 170 insurers in total recognizing the significance of the market share held in each country. Health insurers taking part in the study were asked to provide information regarding medical cost trends in the countries where they had a presence.

In addition to analyzing global medical cost trends by region, the report entitled – 2011 Global Medical Trends – looked into market trends in the provision of health insurance distinguishing effects between advanced and emerging economies. The findings indicated that emerging economies will see the bigger increase at 11.8 percent, while a 9.3 percent increase is forecast for advanced economies.

Countries such as Chile, the United Arab Emirates, South Africa, Brazil and the Philippines were categorized among emerging economies, while the US, United Kingdom, Italy, France and Switzerland featured as advanced economies. Switzerland is expected to incur the biggest increase in cost trends over the past four years at 6.7 percent within the advanced economies, with Chile seeing the largest jump in medical cost trends at 9.8 percent in the emerging economies.

Towers Watson’s, senior international consultant, Francis Coleman, said: “The growing demand for private healthcare, particularly in developing nations, has placed enormous upward pressure on the cost of providing this valuable employee benefit. With double-digit medical cost increases now the norm, there appears to be a shift among employers and insurers toward a more holistic and consumer-directed approach to healthcare – one that helps employees to become more aware of risks and more responsible for maintaining a healthy lifestyle.”

The survey highlighted the growing corporate interest in wellness programs. This feature is applicable to all regions, with the majority of respondents adding some kind of wellness element to their healthcare packages. It was noted that globally 72 percent of respondents offered clients lifestyle and health education programs in addition to other popular components including personal health assessments and reports offering chronic condition and disease management programs.

“The clear interest all regions are showing in employee wellness is encouraging, and we expect that wellness features will play a greater role in managing global medical costs,” said Nicole Serfontein, a senior international consultant with Towers Watson.

In recent years, health insurance has grown in popularity as a fringe benefit offered by employers to its workforce and is becoming a valuable benefit in attracting and retaining staff. In particular, the demand for corporate health insurance in countries with developing economies has been increasing as the workforce market has become more competitive. Changes in state funded health services resulting in some discretionary treatments being cut back or refused has highlighted the benefits of corporate insurance.

The more stringent application of health and safety laws in the workplace has also added to the benefit and need for company provided health insurance.

Insurers reported two significant factors driving up employer based medical insurance costs; these were; A) the increasing costs for treatments partly due to advances in medical technology and, B) employees making an increased use of corporate medical insurance in some cases for treatments of a non-essential nature not available under public run health systems. These factors together with the insurance companies drive to improve profit margins and maximize market opportunities will have contributed to the uplift in the overall cost of corporate provided medical insurance.

Health insurance providers still use tried and tested methods in order to control costs, such as coinsurance, deductibles, contracted networks and pre-approved products. While the emphasis on the benefits from taking a holistic approach to healthcare is being widely used as an additional method in an attempt to control health costs.

PruHealth, the joint venture between British insurance giant Prudential and Discovery Holdings is launching a new health product range. It will be the first new product to be released by PruHealth since its take-over of Standard Life Healthcare UK in August 2010.

The new product range will be launched on the 1st of March 2011 and will result in the gradual phasing out of existing Standard Life and PruHealth policies.

The new health insurance product will be available to individuals, SMEs (small & medium enterprises) and corporate clients. A key feature of the new range of healthcare cover is that it can be tailor-made to suit personal requirements, with a series of add-ons to a basic healthcare package. The add-on options will include cover for cancer and an addition to promote wellness and vitality, with discounts for gym membership.

PruHealth has taken time in launching the new product range, which follows consultation with current policyholders in order to create a healthcare insurance product to penetrate the market.

Part of PruHealth’s service will include the development of a ‘Cover Check’ programme designed to simplify policy documentation making it easier for policyholder understanding. Marketing of the new product range will highlight the transparency of the cover included in the policy documents, with the emphasis on a ‘Full Cover’ policy having no hidden conditions.

PruHealth acquired Standard Life Healthcare UK in August last year as a bolt-on to Prudential’s insurance products with the intention to grow its healthcare business.

As part of the launch of the new product range, PruHealth will move its customer services operation from South Africa to the UK, although back-office staff will remain in South Africa. The decision to relocate the PruHealth customer service staff is a key part of the insurers bid to gain market share in the UK and enhance its reputation for quality of service.

PruHealth’s new product has been designed to meet a wide spectrum of healthcare needs building on its core strengths of brand awareness and service delivery. Consequently, the company is optimistic that the efforts taken to consult with policyholders in advance of its launch will reap positive benefits in terms of securing new business premiums.

Insurance Company Mentioned:

PruHealth

PruHealth is part of a joint venture named Prudential Health Holdings Limited, between Prudential Assurance Company of the UK and Discovery Holdings. The joint venture was started in 2004 and offers private medical insurance in the United Kingdom. Currently Discovery Holdings owns a 75 percent stake in the joint venture while Prudential Assurance holds the remaining 25 percent.

The UK Government published its 350-page health bill detailing the proposed reform of the established British National Healthcare System (NHS). Implementation of the plans contained in the bill and associated documents – released on the 19th January 2011 – will see an unprecedented reform of the British healthcare system.

The pro-market based shake-up of the UK healthcare system is expected to save the government many billions in the future and improve the delivery of patient care. The changes – reflecting the most significant upheaval of the NHS since its inception in 1948 – will be overseen by David Cameron’s Coalition government. Under the new healthcare proposals, the government expects to save the UK taxpayer around £10 billion (US$ 15.7 billion) over the next decade.

As part of the new health legislation, private healthcare providers will see an increased opportunity to offer patient care through being allowed to compete with state funded NHS hospitals. The changes will see the government hand General Practitioners (GPs) 80 percent of the country’s massive healthcare budget in a radical move to make the NHS more cost efficient.

A key part of the reform will result in 24,000 management staff involved with the current NHS being eliminated at a controversial initial outlay of £1.4 billion (US$ 2.2 billion). Out of the £1.4 billion, payments for staff redundancies will cost around £1 billion (US$ 1.57 billion), with another £400 million being spent on IT and property costs.

The government’s proposals have been widely criticized especially the spending of such a large sum of money on changes, planned for implementation by 2013, at a time when austerity measures are being applied to other parts of the UK economy. However, the UK government contend that the initial financial outlay will be more than offset by long-term savings in running costs for this national institution. According to government calculations £5 billion (US$ 7.8 billion) will be saved by 2015 just by staff reductions.

Critics of the new health bill believe the reforms will be largely disruptive for the NHS and are unnecessary at a time when the government should be saving money rather than spending on changes.

Under the proposals published in the Health and Social Care Bill, the government plan aims to:

* Give GPs greater power and responsibility for buying care from hospitals, being allowed to form consortiums to carry this out.

* Give hospitals autonomy outside the control of the government body – the Department of Health. Under the new proposals, if a hospital fails it can be taken over by private operators in order to become financially efficient.

* Provide each region with a local HealthWatch organisation, which will ensure patients and carers have a voice.

* Introduce a ‘Care Quality Commission’ which will have the responsibility of ensuring all standards in the NHS are regulated and monitored. The commission will have powers to shut down any healthcare service failing to meet required standards.

* Introduce a hospital regulator with powers to decide how much hospitals receive for treatments. Additional powers will provide for the regulator issuance of licenses to healthcare providers and promoting competition within the healthcare sector.

The UK government is carrying out the reforms of the NHS partly to save expenditure on the NHS – where funding levels have increased significantly in recent years and are still considered inadequate – expecting to shed 4 percent from the national budget annually over the next four years. The other aspect of the reform is the modernization of the UK healthcare system as the country faces increasing medical costs due to an ageing, ailing population seeking access to more sophisticated but expensive medical treatments.

A major part of the proposals is the axing of Primary Care Trusts, which are part of the NHS primary healthcare services working at a community level. The Primary Care Trusts (PCTs) take up 80 percent of the overall NHS budget and, since created, have cost more to run in administration than the provision of front line patient care. The abolition of the PCTs is responsible for incurring the initial cost of £1 billion (US$ 1.57 billion) in redundancy payments, but once implemented is expected to save the NHS £1.7 billion (US$ 2.6 billion) every year.

The creation of new GP consortiums, with the responsibility for primary healthcare services, will be closely monitored through the HealthWatch network. The proposals highlight the emphasis on improvements to patient care, with patients having a greater choice in the supply of services. The GP consortiums will have a cap on administration costs and will be expected to do “more for less”. A fundamental element of the creation of GP consortiums is to cut out middle management and bureaucracy and to speed up delivery of services on a more personal basis.

The expectation is that patients are unlikely to see much difference in the way healthcare services are provided in the short term, however, in the long term the government premise is that patient care will improve as a result of the changes being introduced.

So far as hospitals are concerned, the reforms will give them independence from the central government as they become Foundation Trusts. While hospitals are given greater autonomy, they are required to be efficient with the prospect of being taken over if they fail to deliver to the standards required. Part of the reforms will see no limits on the number of patients a hospital can treat, allowing hospitals to become more cost effective. As a safeguard, the healthcare regulator will have budget provisions for the retention of essential services if a Foundation Trust is relieved of responsibilities under the new process.

Private healthcare providers will be allowed to compete for the treatment of NHS patients under the proposals, with the scope to take over failing NHS hospitals. The pro-market based reform of the UK’s NHS is expected to give the private healthcare sector good opportunities for growth with inclusion in the supply of medical services for the national system.

While there is considerable opposition to the proposals in the Health Bill, the UK government is intent on progressing with full implementation over the next two years, with pilot schemes already being put in place with selected GPs.

Terveystalo, the established Finnish healthcare group has announced that it will acquire the ODL Tervey’s network of medical facilities from its current owners – Oulun Diakonissalaitos foundation.

Terveystalo will take-over the Oulu’s Deaconess Institute’s health services in order to consolidate their existing Finnish private healthcare operations. The acquisition will provide Terveystalo with healthcare facilities in the North of Finland. This will expand the healthcare provider’s reach in this European country with a reputation for high quality standards of healthcare.

Terveystalo is Finland’s leading private healthcare provider offering comprehensive healthcare services, occupational healthcare and hospital services to individuals, groups and insurance companies, including patients out-sourced from the public healthcare sector.

Finland has a relatively small population of 5.2 million people, but there is a high proportion of aging inhabitants suffering from chronic medical conditions. While private healthcare currently supplies around 20 percent of healthcare coverage in Finland, there is an established interaction with the state run medical system – the Social Insurance Institution (KELA). The combination of these factors provides private healthcare operators, such as Terveystalo, with incentives for expansion of their activities and profit objectives. KELA supports private healthcare providers in Finland by using their facilities for patient treatments and doctor consultation fees.

Terveystalo is currently present in 100 locations spread across 60 towns in Finland, supplying more than 10 percent of the 17,000 doctors working in the country. Currently Terveystalo has a workforce of roughly 2,500 medical professionals generating group sales in 2009 amounting to €300 million (US$ 360 million).

The proposed acquisition by Terveystalo is subject to approval by the Finnish Competition Authority.

The Finish healthcare system is regarded as one the best in the world, with residents covered under a largely decentralized healthcare system, which has been developed following major reforms introduced in the 1990s. While the Finnish private healthcare sector plays a residual role in the provision of the country’s healthcare, it offers patients a high standard of care with minimal waiting times.

Healthcare Company Mentioned:

Terveystalo

Terveystalo is Finland’s leading private healthcare service company, operating private clinics and hospitals that offers healthcare, occupational health, and medical treatment services for corporations and private individuals in the country. Its services include comprehensive occupational healthcare services, including testing procedures, as well as medical treatment services; general practitioner and specialist services; hospital services, such as surgical operations; and diagnostics services comprising imaging, laboratory, and screening services for private clinics, occupational healthcare units, and medical centers.

A recent report conducted in Korea has indicated that the outlook for the near future of the Korean Health Insurance system is rather grim. The Health Insurance Policy Institute under the National Health Insurance Corp. (NHIC) estimated that by 2020, there will be a 16 trillion won (US$ 14 billion) annual deficit in this sector. This figure already assumes a steady increase in the insurance premium payments of salaried workers. Indeed, this is a red flag for the authorities to come up with some kind of radical reforms without further delay.

Korea’s universal health insurance system was started initially in 1977 and has been internationally recognised as the role model for public healthcare. However, the system has encountered some stumbling blocks, namely on the lack of financial support and an increasing number of old people in the country, hence a growing demand on medical care. Moreover, the local community has developed some bad habits in their use of the system, for example, too many people visit the clinics or hospitals even for common colds, causing doctors to over prescribe excessive medication as part of the treatment.

In 2009, there was a 3.2 billion won (US$ 2.9 million) deficit in the national health insurance account. By 2010, the gap has grown to 1,299 billion won (US$ 1.1 billion), 400 times greater than the previous year. According to the NHIC, the main reason being that they have included broader coverage of more illnesses and their treatment methods. The research centre of the insurance corporations estimated that such deficits will only continue to grow as the costs charged by the medical service providers are rising at a pace where the incoming revenue cannot come close to covering them. It is estimated that by 2030, the expenses will increase 3.3 times, from 41 trillion won (US$ 37 billion) to 137 trillion won (US$ 123 billion) while the income from insurance premiums will rise about only 2.1 times during the same period. Insurance payments for people at the age of 65 or above will increase from 13.4 trillion won (US$ 12 billion) in 2011 to 32 trillion won (US$ 29 billion) in 2020 and eventually to 70.3 trillion won (US$ 63 billion) by 2030. This equates to 50% of the total healthcare expenses. These estimates are based on the assumptions that the current coverage of illnesses by insurance, insurance premiums and payments to medical institutions remain the same.

If the payments to medical institutions for treatment increase by 2.5% annually, then by 2030 the total healthcare payments are estimated to increase from 137 trillion won to 180 trillion won. Taking into account the current 20% subsidy from the Government, by 2030, employees contributions towards insurance premiums will increase to 11.7% of their salary.

To put a stop on the financial burden of Korea’s insurance system, the following solutions were proposed for consideration by the research institution:-

i) Put in place regulations to ensure that it is mandatory for an individual who earned income to make contributions to their own insurance premiums. Review the criteria on the dependents of insurance policyholders, to ensure that there are no loopholes in avoiding making premium payments.

ii) Increase taxes on the sales of tobacco and liquor.

iii) Review the investigation process and take preventive measures to stop dishonest medical service personnel from defrauding the system.

iv) The Ministry and Health and Welfare should expedite the development of better payment systems for medical institutions, as well as improving the allocation of insurance income resources, in order to avoid unnecessary spending on excessive and redundant treatments.

v) Rationalise the medical insurance business by using the DRG (diagnosis-related group) system more broadly and efficiently. This is to ensure similar illnesses use the same level of hospital resources, to avoid incurring high medical expenses.

Similar to Korea, the healthcare system in Hong Kong is also facing the challenges of a rapidly ageing population and rising medical costs. There is an imminent need to ensure its sustainable development in order to provide the public with adequate protection. In 2008, the Hong Kong Government embarked on healthcare reform, putting forward a package of reform proposals through the first stage consultation entitled “Your Health, Your Life”. In 2010, the Government rolled out the second stage consultation on healthcare reform and proposing a voluntary Health Protection Scheme. The Government has promised to draw HK$50 billion (US$ 6.41 Billion) from the fiscal reserve to support healthcare reform after the supplementary healthcare financing arrangements are finalised for implementation. The aim of the proposed scheme in the long run is to offer incentives to encourage people to move away from the public system and to participate in the highly competitive private medical system, thus relieving the long-term demand for public healthcare services.

The population in Hong Kong continues to grow, and is approaching 8 million people. Of this number, it is estimated that about 3.8 million people have access to the low cost Government funded public healthcare system. However, more programs are being developed that will cater to citizens’ needs. One such example is the Voluntary Health protection scheme, which is proposed to provide subsidies to the most at risk patients, such as people who have reached the age of 65 or above, individuals with pre-existing conditions as well as incentives for the younger generations of society by offering limited co-payments for treatments. In other words, on top of the universal healthcare that is already in place, this proposed healthcare reform will be an added financial burden to the Hong Kong Government’s health budget. Given that the Korean’s universal healthcare is running at a deficit, it is important that the Hong Kong Government learn from its neighboring countries in the Asia Pacific region to avoid suffering a similar fate.

As the Asian medical tourism continues to grow, the Philippines’ government has announced action to help in the country’s bid to secure a bigger share of this lucrative industry.

While a number of Asian countries are positioning themselves to take advantage of the booming medical tourism industry – which is currently dominated by India, Thailand and Singapore – the Philippines is preparing to introduce a new visa, which will allow foreign nationals to stay in the Philippines for up to six months while receiving medical treatment.

The proposed new medical visa for the Philippines is being overseen by the country’s Bureau of Immigration and will mean foreigners seeking medical treatment are permitted to stay in the country for up to six months without needing to apply for a visa extension, which would normally be required by tourists to stay for that length of time.

Currently, visitors to the Philippines wishing to stay in the country for a prolonged period of time are required to secure an Alien Certificate of Registration or identity card (I-Card) to enable an application for a visa extension to be approved. The new medical visa is designed to simplify the visa process and incentivise people requiring medical treatment to use the facilities available in the Philippines.

The new medical visa requirement will help the medical tourism industry in the Philippines to become more competitive in the Asia-Pacific region, with the potential to secure an increased slice of the market. The Philippine government has been promoting the medical tourism sector in the country since 2004 – through the Philippine Medical Tourism Program (PMTP) – and has strongly promoted the healthcare system by focusing on the country’s internationally trained doctors and English-speaking healthcare professionals.

The Philippines, along with its Asian rivals in the medical tourism industry, is able to provide medical and surgical treatments to foreign nationals at significantly lower prices compared to treatment in Europe and the United States. In addition to offering a cost effective solution to medical treatments and procedures, Asian countries such as the Philippines, are able to provide modern, sophisticated, privately run facilities staffed by highly trained healthcare professionals.

While India, Thailand and Singapore are currently the major players in the medical tourism industry, other Asian countries have been jockeying for a greater share of the growing medical tourism market. In addition to the Philippines, Taiwan, South Korea and Malaysia have been stepping up efforts to appeal to more medical tourists.

Taiwan has been heavily marketing its tourism industry, particularly to the Chinese, seeking to capitalize on its high standard of private healthcare and closeness to the growing affluent population on the mainland. South Korea is aiming its medical tourism sector towards Japanese patients seeking better value medical and surgical treatments. Malaysia is promoting its private medical sector, emphasizing the country’s Islamic roots to target clients of Middle Eastern origin. In general, all the Asian countries are driving to promote their specific facilities available for medical tourists, with Europeans and Americans seen as the key targets.

India, Thailand and Singapore have been building their medical tourism industries over a number of years, developing a reputation for quality and affordable private healthcare. Facilities such as the Bumrungrad and Bangkok International private hospitals in Bangkok have established themselves on the global stage as highly regarded international medical and surgical treatment centres. The Fortis Healthcare private hospital group has been establishing itself across Asia to take advantage of the demand for private healthcare in domestic and international markets.

In addition to competition within Asian countries for medical tourists, Dubai has established a medical tourist hub for the middle-eastern region. The construction of the Dubai Healthcare City (DHCC) provides cutting edge healthcare facilities, which can cater for medical tourists although prices charged are more expensive than those available in Asian countries.

The Asian medical tourism industry is forecast to boom in the coming years, with an estimated total value of US$100 billion annually by 2012. Although India, Thailand and Singapore have gained an early advantage in establishing their private healthcare sector on a global stage, these countries are set to face increased competition from emerging countries now offering medical tourism facilities. The Philippines initiative to ease visa requirements for medical tourists is a step in this direction.

The medical tourist industry in Asia is being driven by clients seeking treatment in state-of-the-art medical facilities resourced by well trained, expert doctors and healthcare professionals. This is coupled with the facilities being located in a desirable, attractive region of the world, with medical costs which are only a fraction of the price of those in the USA and Europe.

Also, the future of the medical tourism industry may benefit further from healthcare reforms currently being developed in western hemisphere countries, as these countries seek to tackle rising medical costs. These healthcare reforms could lead to more patients from countries such as the UK seeking treatment in Asia due to the state funded National Health Service (NHS) deeming a medical procedure to be non-essential and unavailable through the free-of-charge system.

Companies Mentioned:

Fortis Healthcare Limited

Fortis Healthcare Limited is a healthcare provider having a network of 28 hospitals, satellite centers and heart command centers with nearly 3,300 beds capacity.

Bumrungrad International

The Group’s principal activities are owning and operating hospitals. Its flagship hospital, Bumrungrad International, is a renowned medical centre attracting over 1 million patients annually and named one of the world’s top ten international hospitals by Newsweek International. The Company also owns a businesses in real estate and anti-aging and functional medicine.

The international health insurer CIGNA has announced plans to expand its expatriate benefits network in Africa. This will augment the US-based insurer’s African resource base to a total of 47,500 doctors and healthcare workers and increase its range of access to hospitals on the African continent. The expansion of CIGNA’s network in Africa means that the US insurer’s worldwide network now nears 900,000 healthcare professionals operating in 27 countries.

CIGNA is one the global leaders in the provision of medical services for expatriate workers and will add 500 doctors and hospitals to its CIGNALinks network in Nigeria and Egypt. The increase in healthcare professionals and facilities in the two Africa countries will be completed through a new alliance with the Medical Services Organization based in South Africa.

The expansion in the range of CIGNA’s expatriate benefits now means the health insurer is able to provide more healthcare services to its policyholders and maintain it global presence as one of the leading international health insurance companies.

CIGNA’s senior director for Global Health Solutions, Timothy Blevins, said “CIGNALinks in Africa is designed to offer customers substantial discounts when accessing the local network for care and to reduce out-of-pocket costs at the time that care is delivered.”

The key advantage of using the CIGNALinks network is that it provides members with an easy process for making claims and healthcare payments as the scheme is designed to be administration friendly, operating through links with local healthcare organizations. CIGNA clients have 24/7 access to CIGNA customer services organization worldwide.

CIGNA has over 700,000 expatriate customers across more than 200 countries. The recent increase in the CIGNALink’s network in Africa means that access is now available to approximately 900,000 medical specialists and a comprehensive range of hospital and healthcare facilities worldwide, cementing the international health insurer’s status on the global stage.

CIGNA’s expansion of expatriate benefit cover will now include two of Africa’s most populous countries, with strong expatriate communities. Nigeria is a country which attracts expatriates to work in the large scale oil and gas industries in the country, while Egypt is a highly developed African nation with a wide range of industrial activity.

CIGNA, like most international insurers, has been looking to grow its position in global insurance markets in order to offset its relatively static position in the USA. The recent increase in the CIGNALinks network will enable the insurer to maintain a competitive edge as an expatriate health provider.

CIGNA provides insurance plans to cover medical, dental, vision, accident, pharmacy, life and disabilities, for international and expatriate clients. Further growth in CIGNA’s network coverage is known to include expansion into emerging Asia-Pacific markets with India and Turkey being identified as specific targets. The Philadelphia-based health insurance company acquired Belgium’s Vanbreda International in 2010 to give increased access to the expatriate health insurance market.

CIGNA is preparing to announce its financial results for 2010 in February 2011; the insurer reported third quarter 2010 net income of US$307 million – down from US$329 million – in the same period in 2009.

Insurance Company Mentioned:

CIGNA

A global health service company dedicated to helping people improve their health, well being and sense of security. CIGNA Corporation’s operating subsidiaries provide an integrated suite of medical, dental, behavioural health, pharmacy and vision care benefits, as well as group life, accident and disability insurance, to approximately 46 million people throughout the United States and around the world.

Economists at Swiss Reinsurance predict that 2011 will be a year of mergers and acquisition (M&A) within the insurance industry. The Asia-Pacific region is reliably forecast to be the focus of activity outpacing the global economy, which is expected to expand at a rate of 3.5 percent during the year.

Swiss Re’s predictions for 2011 highlight the continued strength of emerging markets in Asia, with growth significantly exceeding levels in mature markets. This follows the pattern of insurance business activity in 2010 when the premiums from life and non-life insurance in emerging Asian economies grew by 16.8 percent and 17.3 percent respectively, with the most significant contribution being generated by China.

It is estimated that there will be an 8 percent growth in real GDP in the emerging Asian economies of China, India, Indonesia, Malaysia, Thailand, Vietnam and the Philippines in 2011; with China and India maintaining their dominant position, and expecting to record annual growth rates of 8.7 and 8.6 percent respectively.

Speaking on these findings, Clarence Wong, Swiss Re Chief Economist Asia, said “The Asia economic outlook remains positive, driven by robust domestic consumption and investment demand, sustained capital inflows into Asia, rising intra-regional trade and investment, and supportive government fiscal and monetary policies.”

The renowned consultancy firm Pricewaterhouse Cooper (PwC) recently forecast that China and India will become the second and fifth largest economies, respectively, in the world by 2020. As growth in the Asian economy accelerates in the wake of the 2007-2008 global financial crisis, a recent PwC report predicts that the economies in Asia such as China, India and Indonesia will overshadowed those of the traditional western hemisphere economic strongholds representing a global shift in world markets.

The strong data supporting economic growth in Asia is likely to influence the drive by international insurers to bolster their presence in the region, in order to capitalize on the growing prosperity of the massive populations in this part of the world, which have rising demands for insurance products.

While the insurance industry has largely been able to recover from the worldwide financial crisis in 2007-2008, insurers are searching for opportunities to grow business and written premiums. The demands for life and non-life insurance in Asia is forecast to drive this growth reflecting rising incomes and general improvements in wealth creating demand for individual, family and business insurance protection. Demographic changes in Asia, including an increase in aging and ailing populations, will help to drive up the demand for products such as retirement and health insurance.

The life insurance sector in the emerging Asian markets saw premiums increase in real terms from 10.7 percent in 2009 to 16.8 percent in 2010 – this is expected to grow by 10.3 percent in 2011. In China, life insurance premiums grew by an enormous 24.4 percent in 2010. Indonesia, Thailand, Malaysia and Vietnam also recorded robust growth, with life insurance premiums realizing growth in excess of 10 percent.

The multinational insurers Zurich and Aviva both entered the Indonesian life insurance sector in 2010 with Zurich buying a major stake in PT Mayapada Life and Aviva taking a majority share in PT Asuransi Winterthur Life Indonesia (WLI) – this enabled both companies to gain access to one of Asia faster growing life markets.

As more of the Asian population has an increased level of disposable income and has become more aware of the benefits from a better quality of healthcare available from privately run medical sources, they have invested in private medical insurance (PMI) to safeguard long-term health. Additionally, low interest rates and improved knowledge of investment products are driving up the demand for investment-linked insurance products, providing insurers in emerging Asian markets with significant scope for new written premiums.

The Asian non-life insurance market saw an increased in premiums of 17.3 percent in real terms in 2010 and is forecasting growth of 12.5 percent in 2011. In particular, China experienced growth in this sector amounting to 21.5 percent in 2010 which is forecast to grow by 14.1 percent in 2011. While in Vietnam, business increased by 13 percent in 2010 and it is expected to grow by 14.2 percent in 2011.

Vietnam and Thailand have both emerged as two rapidly expanding South-East Asian economies and two countries which have strong developing insurance markets. The insurance sectors in both Thailand and Vietnam were highlighted as regions for international insurer expansion in 2010 as both countries have evolving economies and growing middle class populations.

The non-life insurance market in Asia is benefiting from an increase in demand for property insurance and has seen a significant growth in car ownership driving up the need for motor insurance. Also, as Asian governments support local infrastructure projects there will be a need for more commercial insurance.

Although emerging Asian markets are set to continue their strong momentum throughout 2011, some risks from such robust growth have been identified. Clarence Wong has warned about this by saying: “However, the rosy prospect is clouded by emerging risks, such as rising inflation, brewing asset bubbles, potentially abrupt reversal of capital flows, and increasing risks of currency wars and trade protectionism.”

China and India are leading the charge in global economic recovery closely followed by Thailand, Indonesia and Malaysia with consequential benefits for global insurers. However, insurers will be faced with some obstacles in complying with restrictions imposed by regulatory authorities when entering into new ventures.

While insurers are presented with opportunities for new premiums from emerging Asian markets, it is essential to ensure premiums provide satisfactory rates of return compared to the risk exposure.

The significance of the Asia region become clear in 2010, when British insurer Prudential placed a US$35.5 billion bid for the American International Group (AIG) Asian insurance arm American International Assurance (AIA) – although this eventually collapsed. Such an audacious bid highlighted the importance of the Asian region to insurers looking to refocus business activity from stagnant western markets to more prosperous Asian markets; it is expected that 2011 will see more M&A activity in the Asian insurance industry.

Other international insurers such as Generali, Aviva, Allianz, Aegon and Sun Life Financial, in addition to Prudential, have all highlighted the prospects for growth in Asia especially China and India. As austerity measures begin to bite in Europe and North America, limiting scope for the writing of new insurance premiums in the coming years, there will undoubtedly be a dash by insurers to position themselves to achieve maximum penetration of the growth in the Asian insurance markets.

Insurance Companies Mentioned:

Swiss Re

Swiss Reinsurance Company Ltd was established in 1863 and is present in more than 20 countries. Swiss Re provides reinsurance products and financial service solutions. It offers various reinsurance products covering property, casualty, life, health and special lines – such as agricultural, aviation, space, engineering, HMO reinsurance, marine, nuclear energy, and special risks.

Prudential

Prudential has been in the insurance and financial services business since 1848. Today they operate throughout the UK, US and Asia offering international health insurance and retirement planning services, supported by 27,000 employees worldwide.

Aviva

Europe’s fourth largest insurance company, with more than 300 years of experience in the global insurance industry, Aviva is committed to the safety and satisfaction of its customers. They sell a broad range of insurance products including motor and property insurance, protection and health insurance, business insurance, life insurance and pensions.

AIG

The American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally.

Zurich

Headquartered in Zurich, Switzerland, Zurich Financial Services Group is an insurance-based financial services provider with a network of subsidiaries andoffices in North America and Europe and also in Asia-Pacific, Latin America and other markets. Zurich is one of the world’s largest insurance groups, and one of the few to operate on a truly global basis. With 60,000 employees serving customers in more than 170 countries, our business is concentrated in three business segments: General Insurance, Global Life, and Farmers.

Allianz

Allianz Group is one of the leading global services providers in insurance and asset management. With approximately 153,000 employees worldwide, the Allianz Group serves approximately 75 million customers in about 70 countries. On the insurance side, Allianz is the market leader in the German market and has a strong international presence.

Sun Life Financial

Sun Life Financial is an international financial services organization providing a range of protection and wealth accumulation products and services to individuals and corporate customers.

Assicurazioni Generali SpA

The Generali Group is one of the most significant participants in the global insurance and financial products market. The Group is a leader in Italy and Assicurazioni Generali, founded in 1831 in Trieste, is the Group’s Parent and principal operating Company. Generali is one of the leading global players in the assistance sector thanks to the Europ Assistance Group, active in more than 200 countries with services in the motor, travel, healthcare, home and family sectors. In recent years, the Group has made a significant return to 14 central-eastern European markets and has set up offices in the principal markets of the Far East, including China and India.

On January 1st 2011, the Malaysian Government made health insurance compulsory among the foreign working population, with the aim to eradicate the fraudulent and unpaid hospital bills that were piling up in the country. The Malaysian Government estimates the total figure to amount as high as RM$18 million, or USD$5.8 million.

From the first of January, Health Minister Datuk Seri Liow Tiong Lai, introduced the Foreign Worker Hospitalization & Surgical Insurance Scheme, making it compulsory for employers to provide health insurance coverage to foreign workers. Further to this, employers are enforced to provide workers compensation insurance to foreign workers, under the Foreign Workers Compensation Scheme.

With some employers budging to comply with the new scheme, Health Minister Datuk Seri Liow Tiong Lai reissued warnings to employers on 7th January, mandating that payment of premiums are made by March, or else foreign worker’s permits will not be renewed. Outstanding medical bills must be cleared, otherwise worker’s permits will also not be renewed.

The Foreign Worker Hospitalization & Surgical Insurance Scheme was introduced as a result of the ever-increasing fraudulent and unpaid hospital bills in Malaysia, said to be made predominantly by foreign workers receiving medical care in the country. Allegations have also been made against foreign patients profiteering from prescription medications, purchased from hospitals and artificially inflated to overseas customers.

The Foreign Worker Hospitalization & Surgical Insurance Scheme applies to all foreign workers in Malaysia. The scheme is limited to cashless claim services, within Government hospitals in the country. A set premium of RM150, or USD$49.07 has been applied for the insurance scheme, which covers up to RM10,000, or USD$3,270 a year in medical expenses. Those eligible under the scheme must be full time foreign workers, between the age of 18 to 59. Foreign workers covered under the insurance scheme, are entitled to hospital care, only within Non-Corporatised Malaysian Government Hospitals. Foreigners under the scheme do not need to provide any cash or guarantee letter from the insurer, they only need to turn up with their passport. The Malaysia Assurance Alliance Berhad (MAA) were appointed by the Ministry of Human Resources to partake in the design of both the Foreign Worker Hospitalization & Surgical Insurance Scheme (SKHPPA), and the Foreign Workers Compensation Scheme (FWCS).

There are around two million foreign workers registered in Malaysia, predominantly employed in the labour market, working in plantation farming as well as domestic maids. There is however a current shortage of maids working in the country, partly due to allegations of abuse among maids working in Malaysia. The collective figure of working foreigners, is however on the increase in Malaysia and the Government hopes to control this figure. Tuberculosis was once under control in Malaysia, however due to the migration of people from high risk countries the incidence rate is on the rise again. More than 17 thousand Tuberculosis cases are reported annually in Malaysia, with around14 % involving foreign workers.

Workers compensation insurance claims are very low among the foreign worker population in Malaysia. Only 75 % of foreign registered workers are said to be covered by workers compensation schemes by the employer. The Malaysian law mandates that employers must provide workers compensation insurance coverage to all permanent employees.

Employers are arguing that the premiums associated with the new compulsory health insurance mandate is too high, placing an unfair burden on employers. Deputy chairman of the Sabah Parti Keadilan Rakyat, Christina Liew argued “It is like penalizing the employers whenever the government imposes new policy with regard to foreign maids and plantation sectors… surely, the premium should not be so high as RM120 per worker”.

Although the coverage is relatively low, capped at a RM10,000, employers argue that the total amount in premium would exceed the hospital debt. Plantation farmers are debating the scheme and refusing to pay the premium. Shamsuddin, on behalf of the The Malaysian Employers Federation (MEF) are arguing “They have their own arrangement. Plantation workers’ medical fees are covered by the employers based on the law”, further adding “with more than two million foreign workers, the sum will total more than RM240 million annually.” Plantation farms are located outside of urban areas and generally have little access to hospitals. With plantation and farming estates paying costly premiums, food prices may inevitably increase.

There are 32 insurers said to be currently registered on the scheme. End of last year, following announcement of the scheme, insurance companies were competing to partake a share of the new market, however the scheme is said to be open to all insurers.

Those insurers who made their policies available on the 1st January include: Tokio Marine Insurance (Malaysia) Berhad; Malaysian Assurance Alliance Berhad; AXA Affin General Insurance Berhad; MUI Continental Insurance Berhad; The Pacific Insurance Berhad; Barjaya Sompo Insurance Berhad; Jerneh Insurance Berhad, Kurnia Insurance (Malaysia) Berhad; RHB Insurance Berhad; and Progressive Insurance Berhad. Others to be registered by February 15th include QBE Insurance (Malaysia) Berhad; Overseas Assurance Corporation (Malaysia) Berhad, Allianz General Insurance Company Berhad; Oriental Capital Assurance Berhad; and Sayarikat Takaful Malaysia Berhad.

Insurance Companies Mentioned:

Allianz General Insurance Company Berhad

Allianz General Insurance Company Berhad is a subsidiary of the Allianz Group, one of the leading global services providers in insurance and asset management. With approximately 153,000 employees worldwide, the Allianz Group serves approximately 75 million customers in about 70 countries. On the insurance side, Allianz is the market leader in the German market and has a strong international presence.

AXA Affin General Insurance Berhad

AXA Affin General Insurance Berhad is a subsidiary of the AXA Group, a worldwide leader in Financial Services. Headquartered in Paris, the AXA Group companies are engaged in life insurance, health insurance and asset management services among others. AXA’s operations are diverse geographically, with major operations in Europe, North America and the Asia/Pacific area.

Malaysia Assurance Alliance Berhad

Malaysia Assurance Alliance Berhad (MAA) was incorporate in 1968, MAA is a subsidiary of MAA Holdings Berhad. MAA is one of the leading insurance and financial services companies in South Asia, providing services mainly within Malaysia, as well as in Indonesia and the Philippines.

Berjaya Sompo Insurance Berhad

Berjaya Sompo Insurance Berhad is an insurance provider, offering a range of products including health insurance, personal liability and motor insurance. The company originated in 1974, merging its services with Sompo Japan Insurance Inc, Japan’s second largest insurer, in 2006.

Jerneh Insurance Berhad

Established in 1971, Jerneh Insurance Berhad is a subsidiary of Jerneh Asia Berhad, (JAB) an investment holding company. Jerneh Insurance Berhad is based in Malaysia, providing insurance products in accident, health insurance, household and other insurance products and services.

Kurnia Insurance (Malaysia) Berhad

Kurnia Insurance (Malaysia) Berhad is one of the leading General Insurance companies in Malaysia. Previously known as Industrial and Commercial Insurance, the company was established in 1978 and purchased by its present owners in 1991. Kurnia Insurance (Malaysia) Berhad specializes in motor, medical, personal accident, home and business insurance products.

Progressive Insurance Berhad

Progressive Insurance Berhad is a reinsurance company established in Malaysia. Founded in 1974, the company moved its headquarters from Sarawak to Kuala Lumpa in 1982. Today the company’s financial equity has been expanded following 94% stake jointly purchased by the Sabah State Government and Permodalan Bumiputra Sabah Berhad.

MUI Continental Insurance Berhad

Established in 1976, MUI Continental Insurance Berhad is a general insurance company. MUI Continental Insurance has branches throughout Malaysia, with leading US insurance underwriter CNA Financial Corporation, as one of its shareholders.

QBE Insurance (Malaysia) Berhad

A subsidiary of the QBE Group, QBE Insurance (Malaysia) Berhad is a joint venture company with MBf Insurans, merging in 2002. The QBE Group established services within Malaysia in 1905 and today it is one of the top 25 insurers and reinsurers worldwide. Headquartered in Sydney, Australia, QBE operates out of 49 countries around the globe, with a presence in every key insurance market.

RHB Insurance Berhad

RHB Insurance Berhad is a subsidiary of the RHB Banking Group, the first local bank established in Malaysia in 1913. RHB Insurance Berhad provides a range of general insurance services including health, property, automobile, personal liability, among other insurance products and risk management services.

The British United Provident Association (Bupa), a highly regarded specialist international providers of healthcare services has entered into a partnership agreement with the Alltrust Insurance Company of China Limited. The newly formed venture will commence business on the 27th January of 2011. This will see Bupa International providing administration facilities for Alltrust’s range of private health insurance products for Chinese citizens employed overseas, and for expatriates working in China.

Bupa International is a recognized expert expatriate health insurer and will work with Alltrust – a local Chinese insurer – to provide Chinese citizens working abroad, and expatriates resident in China, with private health insurance products. Alltrust’s headquarters are based in Shanghai and the company has registered capital of around RMB 1 billion (US$150 million). Alltrust received approval from the China Insurance Regulatory Commission (CIRC) to trade as a general insurer in China over six years ago in 2004.

The venture between the British health insurer Bupa and Alltrust will be able to offer policyholders complete insurance cover while resident in China or provide plans for health coverage to Chinese citizens while based overseas.

Speaking on the agreement, Henry Du, Alltrust’s Chairman, said, “Our partnership concludes a rigorous search for the right partner – Bupa operates in 190 countries around the world, and has a wealth of experience, which will be a great assets to us as we look to continue to grow in China.With more than 60 years’ experience and established relations with thousands of doctors and medical facilities all over the world, Bupa International will offer our clients access to quality health cover and world class service.”

Alltrust’s new partners will provide a multilingual team with the ability to provide clients with assistance when they require treatment and support in searching for the closest and most suitable hospital to meet their specific treatment requirements. Part of Bupa’s international network includes 200,000 medical providers along with links to over 7,500 hospitals and clinics worldwide.

Bupa’s services include the ability to provide policyholders with options for booking appointments on their behalf, and for medical bills to be settled direct with the medical provider. Additional advantages for Alltrust’s policyholders from the partnership with Bupa include contact with multi-lingual doctors and advisers, and the ability and experience in organizing emergency evacuations and repatriations, with access to 24 hours medical advice services.

Unlike many international insurers, Bupa International has not made a commitment to enter into a Chinese joint-venture to gain direct access to the health insurance market. While many global insurers have made establishing a presence in China a fundamental mission, Bupa has not been particularly active in the world’s second largest economy other than having a representative office in the country. This is unlike Bupa’s initiative in India with the formation of MaxBupa in 2010, enabling it to feature as a major influence in the Indian insurance market.

Bupa is not alone in this approach, US health insurers – as in the case of the UnitedHealth Group – have also stepped back from developing the Chinese market. While the United Health Group Inc. is present in Beijing, selling health products to expatriates in China, and providing Chinese expatriates working overseas with insurance cover, it has not yet seen fit to enter into a joint venture with a local insurer.

The Chinese government and some corporate institutions. provide Chinese citizens with basic healthcare coverage, but there are limitations on the extent of cover provided with out-of-pocket payments required to be made. Consequently, there is a view that more international health insurers should take advantage of the weak indigenous healthcare coverage and the growing more prosperous middle class in China; the Aviva-COFCO joint venture, the Generali-China National Petroleum Corporation and Prudential-CITIC links are, however, examples of initiatives in this direction.

Foreign insurers wanting to establish a presence in China must enter into a joint venture with a Chinese insurer and obtain permission from the CIRC. After a foreign insurer has established a recognized joint venture, in order to expand network coverage, it must receive a separate license to operate in specific regions. Health insurers in China will also be required to build a network of hospitals and provide health clinics, medical professionals and IT services to maintain patients records. Although the process for foreign insurers to establish a presence in China seems difficult, the rewards are potentially significant with a market of over 1.4 billion people. Alltrust will be well placed with the new Bupa agreement to offer expatriate insurance products.

In recent years, Bupa has enjoyed more success overseas as trading conditions in more established markets such as the UK and USA have become more difficult; emerging markets providing Bupa with stronger returns in 2010 compared to the health insurer’s home base in the UK.

Insurance Companies Mentioned:

Bupa

Bupa was established more than 60 years ago in the UK and is now has ten million customers in over 190 countries, and over 52,000 employees around the world. Bupa is a leading international healthcare provider, offering personal and corporate health insurance, workplace health services and health assessments. As a provident association Bupa has no shareholders, because of this it uses its profits to invest in healthcare and medical facilities around the world. Bupa has operations around the world, principally in the UK, Australia, Spain, New Zealand and the US, as well as Hong Kong, Thailand, Saudi Arabia, India, China and across Latin America.

Alltrust

Alltrust Insurance Company Of China, Ltd., was founded in 2004 operates as a general insurance company. Alltrust offers property, liability, credit, health and accident insurance products.

CIGNA

A global health service company dedicated to helping people improve their health, well being and sense of security. CIGNA Corporation’s operating subsidiaries provide an integrated suite of medical, dental, behavioural health, pharmacy and vision care benefits, as well as group life, accident and disability insurance, to approximately 46 million people throughout the United States and around the world.

UnitedHealthcare Group

UnitedHealth Group is a leading health care company, serving more than 75 million people worldwide. UnitedHealth Group is a leader in the health benefits and services industry, the insurers six businesses – UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare & Retirement, UnitedHealthcare Community & State, OptumHealth, Ingenix, and Prescription Solutions – offer exceptional service, broad capabilities and enduring value in creating a modern health care system.

Aviva

Europe’s fourth largest insurance company, with more than 300 years of experience in the global insurance industry, Aviva is committed to the safety and satisfaction of its customers. They sell a broad range of insurance products including motor and property insurance, protection and health insurance, business insurance, life insurance and pensions.

Aetna has entered into a novel three-year reinsurance agreement with Vitality Re as part of the US insurer’s long-term capital management strategy.

The purpose of the reinsurance deal is to allow Aetna’s commercial health insurance unit to release retained capital in order to provide more flexibility for the expansion of operation essentially arising from developments in US health reforms.

The new agreement between Vitality Re and Aetna will allow the US health insurer to reduce its own capital base by providing collateral for US$150 million of reinsurance coverage on a portion of Aetna’s group commercial health insurance business.

The Cayman Island based company – Vitality Re – is a newly formed insurer which has released the industry’s inaugural health insurance-linked notes in a private offering in relation to the recent agreement with Aetna.

Joseph M. Zubretsky, senior executive Vice President and CFO of Aetna, said: “I am pleased to announce the successful completion of this transaction, which allows Aetna to free up capital held with respect to the covered business, and deploy it accretively for other purposes. Through this innovative transaction, we have improved our capital efficiency, enhanced our financial flexibility and reduced our weighted average cost of capital. We expect this to be the first step in a larger program.”

In addition to Aetna announcing its new reinsurance agreement, the US health insurer highlighted strategic plans for 2011 at the J.P. Morgan Healthcare Conference held in San Francisco on the 10th January 2011.

A key part of Aetna’s business plans for 2011 is to increase its presence in the Medicaid market in conjunction with the President Obama lead health reform program in the US; a major element of the US healthcare amendment being to expand the reach of healthcare coverage in the country.

Medicaid is available to certain low-income individuals and families in the US and is seen as a pivotal factor by Aetna for growth of the insurer’s activities in the future.

Medicaid is a joint US federal and state government healthcare scheme providing health insurance for low-income individuals and families in the US under the March 2010 Patient Protection and Affordable Care Act. As the US healthcare reform package begins to take effect, Aetna aims to seize the opportunity to increase the number of policyholders under the Medicaid arrangements.

Arrangements for Medicaid insurance will change in early 2014 making it more accessible to a greater pool of people in the US. From 2014, nearly all American adults under the age of 65 with an individual income under US$15,000 per year will be eligible for Medicaid in all US states. Couples, pregnant woman and people with disabilities will also be able to qualify, with the threshold level being altered to make Medicaid easier to obtain.

Health insurers in the US have experienced a steady decline in membership numbers in recent years resulting from the tough economic conditions following the near collapse of financial markets in 2008 and the resultant increase in the level of unemployment with corporate retrenchment. As the US healthcare system primarily revolved around companies providing their workforce with healthcare coverage, the vulnerability of the health insurance network in the USA – and its impact on the nation’s general health – has been exposed.

As the US health reform program starts to take shape, it is expected that an extra 30 million Americans will have access to health insurance with US health insurers, such as Aetna, competing for this market.

However, the US health reforms require insurers to comply with tighter regulations including the requirement to spend roughly 80 percent of collected premiums on direct medical care, with strict guidelines for the provision of healthcare coverage for the vulnerable population.

Aetna announced third quarter earnings amounting to US$419.6 million, covering 18.5 million members – although this reflected a decline of 74,000 in its customer base. Aetna is expected to release fourth quarter figures for 2010 in February 2011.

Aetna recently announced that it has completed the takeover of Medicity, a health information exchange technology company. The acquisition provides Aetna with information on a broad range of products and services covering health systems, hospitals, physician practices and health information exchanges. This will allow Aetna to be more efficient in the provision of patient care and reduce associated healthcare costs.

In addition to health care management services for Medicaid plans, Aetna provides a wide range of health insurance products and services including care plans for medical, pharmacy, dental, behavioural and disability conditions; it also provides group life plans. The client base includes individuals, employer groups, government units, part-time and hourly workers, labor groups and expatriates.

While Aetna, like most health insurers in the USA, has struggled in recent years to maintain, let alone generate new new clients, the proposed reforms to health insurance present US health insurers with new opportunities. Aetna’s new agreement with Vitality Re is designed to offer the health insurer more flexibility in writing new commercial health insurance in this very competitive business.

Insurance Company Mentioned:

Aetna

Aetna is a leading global diversified health care benefits company head-quartered in the U.S., serving approximately 35.8 million people with information and resources to help them make better informed decisions about their health care. Aetna offers a broad range of traditional and consumer-directed health insurance products and related services, including medical, pharmacy, dental, behavioural health, group life and disability plans, and medical management capabilities and health care management services for Medicaid plans. Our customers include employer groups, individuals, college students, part-time and hourly workers, health plans, governmental units, government-sponsored plans, labour groups and expatriates.

New York Life has entered into arrangements to sell its stake in its Shanghai-based joint venture, Haier New York Life Insurance Co. Ltd.

Shanghai-based Haier New York Life Insurance had previously been a joint venture between New York Life Insurance and electrical appliance manufacturer, Haier Group, with each partner holding a 50 percent stake. The Haier New York Life Insurance company has a registered capital of RMB 835 million (US$ 126 million).

As per the agreement, New York Life has sold a 25 percent stake in Haier New York Life to Japanese insurer, Meiji Yasuda Life Insurance Co., which happened on the 7^th January 2011. New York Life will transfer its remaining 25 percent stake in the Haier New York Life joint venture to its Chinese partner, Haier Group Corp. The joint venture will be renamed from Haier New York Life Insurance to Haier Meiji Yasuda Life Insurance Co., Ltd and will provide Meiji Yasuda Life with an entryway into the Chinese insurance market. Approval for the Equity Interest Transfer has already been granted by the China Insurance Regulatory Committee (CIRC).

After the shares owned by New York Life have been transferred to Haier Group and Meiji Yasuda Insurance, the joint venture will subsequently issue new shares worth RMB 345 million (US$ 52 million) to the shareholders. This will result in the joint venture’s registered share capital increasing to RMB 1.18 billion (US$ 178 million), and will lead to Meiji Yasuda Insurance’s shareholding in the joint venture increasing to 29.24 percent.

Dick Mucci, the Chairman and Chief Executive Officer of New York Life International said that “After a thorough review to determine the best strategic direction for the future of HNYL, the partners concluded that majority ownership of the insurance company was most desirable and that Haier Group would fill that role going forward. Haier and New York Life have worked hard to build a strong foundation for HNYL and we have now decided to enter into this transaction with Haier Group and Meiji Yasuda Life. This transaction will also allow New York Life to devote our financial and management resources to our other operations, which serve millions of our policyholders.”

Companies Mentioned:

New York Life

The New York Life Insurance Company is one of the largest mutual life insurance companies in the United States, and also operates in India, Mexico, Thailand, China and Taiwan. The Fortune 100 Company was started in 1845, and is headquartered in New York, New York. New York Life sells life insurance, retirement income and investment products, as well as long-term care insurance.

Haier Group

Haier Group is a manufacturer of electric appliances, based in Qingdao, Shandong Province in China. In 2009, the company had a turnover of RMB 124.3 billion (US$ 18.8 billion).

Meiji Yasuda Life Insurance

Established in 1881, Meiji Yasuda Life Insurance was the first life insurance company established in Japan. Headquartered in Tokyo, Meiji Yasuda Life now has over 40,000 employees in Japan, as well as 81 regional offices, 22 group marketing offices and over 1,000 agency offices. The company also has 8 subsidiaries or representative offices oveseas.

India’s General Insurers Public Sector Association (GIPSA), have shortlisted 9 companies to create a captive joint-venture third party administrator (TPA) to manage their cashless claims services.

GIPSA’s group of four public sector general insurance companies — New India Assurance; United India Insurance; Oriental Insurance and National Insurance; own 80% of India’s cashless claim insurance market and are set to make their decision on their partner for the TPA in two months. Among the 9 who are considered for the TPA are US companies Aetna and United Healthcare.

GIPSA aims to utilise technical support from the proposed joint-venture TPA to control and recover its recent health insurance losses that have resulted from mismanagement of its cashless service claims. GIPSA are currently undergoing a process of change in their approach to health insurance and therefore announcing their decision to build their own TPA.

GIPSA has in turn caused turmoil among the existing TPA’s in India, given that GIPSA accounts for over 80 per cent of business for TPAs; TPAs are concerned that a captive company will overthrow the market. The TPA’s have addressed their concerns to the Competition Commission of India (CCI), and have asked GIPSA to refrain from a decision until the CCI responds, which is expected sometime in the next few weeks.

On July 1st 2010, GIPSA set forth the Preferred Provider Network (PPN), setting new requirements for hospitals offering cashless services in India. Under the PPN, GIPSA fixed the cost for 43 common surgical packages, offered as part of the cashless claims insurance policy. Hospitals enrolled in the PPN would have to meet these requirements and agree to the fixed costs of procedures in order for their patients to be able to utilize the cashless claims insurance services. Shortly after the PPN was established, the number of facilities offering cashless services fell from 900 to just over 70 hospitals. A number of hospitals were said to be reviewing and adjusting their fees in order to participate in the PPN.

Healthcare providers have argued that the fees set by the PPN are too low and in turn are damaging the quality of services that the hospitals can offer. The medical fees set by insurance companies were said to fall 50 percent lower than other hospital rates. On 13th of August 2010, the Association Medical Consultants, Mubai (AMC) publicly urged all hospitals listed on the PPN to withdraw their enrollment and for all remaining hospitals to refrain from offering cashless services.

According to M. Ramadoss, MD of New India Assurance, ‘Rates could vary from hospital to hospital, based on location, facilities, and equipment. It’s not a one-size-fits-all solution. If there is an industry standard for standard rates, we will welcome it. Due to the absence of it, I have to step in, but not to rob hospitals of their profits. We have benchmarked average costs of the previous two-three years and have used recommendations of doctors on panels for frozen standard rates for procedures and treatments’.

GIPSA is hoping to increase the number of hospitals listed on their network, however, given the discrepancy of healthcare fees, the number of hospitals listed on the PPN may drop in return.

However, given that an increasing number of recognizable hospitals are joining the PPN, including Jaslok Hospital, some hospitals in India fear they may lose customers over competition. Recently established Medanta Hospital joined the PPN in order to increase its patient numbers, as well as Sir Ganga Ram Hospital which recently had several top doctors leave. A couple of other big institutions are also said to be in negotiation with GIPSA to join the PPN including hospital chains Max and Apollo as well as the Bombay Hospital and Kokilanben Dhirubhai Hospital. Fortis Group is also another large hospital chain that is likely to enroll in the near future.

GIPSA has argued that the PPN is a ‘policy-holder friendly system’, given that the low hospital rates would reflect in its low premiums. It also allows policyholders to claim directly, without going through the reimbursement process and therefore not having to worry about insurers not covering the treatment.

However on July 1st 2010, the Union Government of India introduced a 10.3% service tax charge to every cashless claim made by patients under the insurance policy. Although the service tax is paid through TPAs, as they reimburse the hospital claim, the patient’s policy is ultimately affected – given the accommodation needed for the service tax fees which is likely to increase the insurance premium in the long run. Patients who claim through the reimbursement system are not charged the service tax fee.

GIPSA have experienced considerable losses on their cashless service claims, as the medical costs incurred from claims has so far outweighed their premium revenue. The loss ratio, in some instances, was calculated as high as 130 per cent. The PPN have therefore set tight limitations on hospital packages, with the aim to avoid future mismanagement of claims.

Media outlets have questioned whether the losses faced by GIPSA were partially due to over inflated or falsified bills submitted by hospitals, however the AMC argued that this claim was ‘preposterous’. The AMC believe the losses faced by GIPSA are ‘over-exaggerated; due to faulty product designs and mistakes made in working out the premiums; and due to connivance of the TPA’s in passing false/over-exaggerated claims’. The AMC says they will negotiate with GIPSA to get a ‘fair deal for all our members’.

There are currently 9 companies competing for the opportunity to be part of the joint-venture TPA. Aetna is continuously seeking ways of expanding its market globally and this is one of its most recent moves. Other companies looking to become GIPSA’s partners in the captive TPA include United Healthcare, Patni Computers; Coris International; Cambridge Solutions; Lason; and existing TPA’s E-Meditek & Medi Assist.

Insurance Companies Mentioned:

Aetna

Aetna is a leading global diversified health care benefits company head-quartered in the U.S., serving approximately 35.8 million people with information and resources to help them make better informed decisions about their health care. Aetna offers a broad range of traditional and consumer-directed health insurance products and related services, including medical, pharmacy, dental, behavioural health, group life and disability plans, and medical management capabilities and health care management services for Medicaid plans. Our customers include employer groups, individuals, college students, part-time and hourly workers, health plans, governmental units, government-sponsored plans, labour groups and expatriates.

United Healthcare

UnitedHealthcare, founded in 1977, is an operating division of UnitedHealth Group, a diversified health and well-being carrier in the United States. United Healthcare offers healthcare and insurance services throughout the United States.

Patni Computer Systems

Patni Computers, incorporated in 1978 and based in Mumbai, is one of the leading global providers of Information Technology services and business solutions, with international offices across America, Europe and Asia-Pacfic.

Coris International

The CORIS Group is an assitive services company, operating one of the world’s widest established international assistance and claims handling networks in the world. Based in Paris and founded in 1987, the network is at the disposal of independent clients in the Travel, Assistance and Insurance industries. Since its founding, CORIS now has physical locations in more than 40 countries across the globe.

Cambridge Solutions

Cambridge Solutions, founded in 1993, is an integrated, global service delivery system offering business solutions to large and growing companies through a broad range of IT and business process outsourcing services.

Lason India

Lason India Limited provides business process outsourcing solutions. It supports global operations in the United States, Canada, China, and Mexico. The company, headquartered in India, was founded in 1992 and is a subsidiary of Lason Inc, based in Michigan, USA.

E-Meditek TPA Services Ltd

Established in 2000, E-Meditek was one of the first Third Party Administrators to receive a license from the Insurance Regulatory and Development Authority in India.

Medi Assist

Medi Assit operate in India and were founded in 2006. Medi Assit are a Third Party Administrator, licensed by the Insurance Regulatory and Development Authority.

The American medical technology company Medtronic has announced that it will provide a total of US$750,000 in grants towards the development of healthcare infrastructure in Haiti.

The Minneapolis based company Medtronic is a market leader in the provision of medical technology for restoring health, alleviating pain and extending the lives of millions of people globally. The US$750,000 grant will be provided through the Medtronic Foundation and is part of Medtronic’s continuous support to improve the health of people and communities requiring help.

The Boston based Partners in Health, a non-profit healthcare organization, will receive US$500,000 of the Medtronic Foundation’s grant, which will be used to finalize the construction of a public hospital in the Central Plateau city of Mirebalais – 60km northeast of the capital Port au Prince. On completion, the Mirebalais Hospital will be used for clinical care and technical capacity, with the prime objective being for the public healthcare facility to offer a greater range of diagnostics and therapeutics treatments.

The Mirebalais Hospital will also be used as a medical teaching facility to train resident physicians, nurses and medical students.

The remaining US$250,000 will be go to International Medical Corps, a not-for-profit humanitarian organization, to develop the provision of primary healthcare covering such medical areas as paediatrics, obstetrics and infectious diseases. The International Medical Corps will work in unison with Haiti’s Ministry of Public Health and Population to evolve professional development and healthcare training programs in order to educate physicians in Haitian primary healthcare. The two bodies will work together in creating healthcare policies to augment the public healthcare system at community level in Haiti.

Following the earthquake in Haiti in early 2010, Medtronic pledged to donate a total of US$2.1 million in aid for the country. The latest donation of US$750,000 follows a previous donation of US$1.35 million made in cash and healthcare products by Medtronic in the initial aftermath of the earthquake, which measured 8.8 on the Richter scale.

The news of Medtronic grants comes a year after the devastating earthquake which shocked Haiti in January 2010 resulting in most of the country’s infrastructure being destroyed. The earthquake which struck Haiti was in fact one of the worst earthquakes to be recorded in the last 100 years and was responsible for killing more than 220,000 people.

Haiti is the poorest country in the western hemisphere and one the poorest in the world. Even before the 2010 earthquake, the Haitian healthcare system was in dire straits and was limited in the provision of health services it could provide. In the wake of the enormous earthquake in 2010, the country’s infrastructure was thrown into turmoil with healthcare facilities rendered virtually non-existent presenting an environment for theoutbreak of serious diseases such as Cholera.

Financial grants such as those provided by Medtronic are pivotal in the rebuilding of Haiti’s infrastructure ranging from schools to the healthcare system. The grants are being provided in order to improve the lives of the Haitian citizens. International governments, non-profit organizations and charities have all pledged aid to support the rebuilding of Haiti’s infrastructure, which remains in dire need of help with many Haitians still living in makeshift camps run by charities.

Although it has been a year since the earthquake struck Haiti, much of the financial aid promised to the country – US$ 11 billion over the next 10 years – has not arrived. This is partly due to political uncertainty and the widespread rioting, which took place in November 2010. Until full funding and political stability returns to Haiti, redevelopment of the country’s infrastructure is likely to remain in a state confusion, with the consequential adverse impact on the nation’s healthcare system. The completion of the Mirebalais hospital project is, nevertheless, a major step in the right direction.

Organization Mentioned

Medtronic

Medtronic Inc. is based in the USA and is a global leader in medical technology. Medtronic manufactures and sells medical devices for worldwide distribution. Medtronic medical technology helps to make it possible for millions of people to resume everyday activities, return to work, and to live better and longer.

International Medical Corps

International Medical Corps is a humanitarian, non-profit organization established in 1984 dedicated to saving lives. International Medical Corps is run by volunteer doctors and nurses who work together to improve the quality of life of people worldwide through health interventions and related schemes.

Partners In Health

Partners in Health is focused on averting millions of preventable deaths among poor people living in the developing world. Partners in Health work towards fivefundamental principles: access to primary healthcare, free healthcare and education for the poor, community partnerships, addressing basic social needs and serving the poor through the public sector.

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