Major players in the Australian insurance industry are fighting tooth and nail to halt the rise of price comparison services for customers seeking to better evaluate their coverage options in the country.
Two of Australia’s predominant insurance companies, Insurance Australia Group (IAG) and Suncorp Insurance, have sent letters to several domestic insurance comparison websites, demanding they remove information and references about their companies’ car insurance products and to terminate all links referring back to their brand’s websites. The insurers allege such action was necessary because premium comparison web services cannot provide the most accurate pricing data for their brand’s products as they don’t have the most pertinent coverage information available.
IAG and Suncorp have a combined market share of almost 70 percent of Australia’s insurance business. The two companies have been undergoing substantial legal efforts to fend off the increased competition that has resulted from the modern surge in choice in retail insurance products and assessment services. The most efficient mechanism by which to do this has been to obstruct the business models of comparison websites. The two insurers have also developed alternative brands to promote alongside those supported by challengers such as Hollard and Auto & General.
An internal report issued from global investment bank JP Morgan is being cited as evidence supporting the Australian insurers’ concerns about new price comparison modules. The report claims that millions of dollars could be lost in revenues for the country’s largest insurance groups if the mechanisms involving price control and evaluation were altered and made arguably more accessible to brokers and consumers.
The report condemns the growth of online comparison and prices aggregating services as a significant threat to established insurer’s commercial premiums. Enabling customers to focus only on rates could have a debilitating effect on the overall product catalogue, some insurers argue.
JP Morgan’s research calculated that QBE Insurance, Australia’s largest international insurer, could lose up to $414 million in commercial premiums, and that Suncorp and IAG might forgo $378 million and $244 million in revenues respectively. A further $800 million could be lost in home and vehicle premiums, according to the report.
JP Morgan concluded that $1.8 billion of commercial and personal insurance premiums would be “at risk” from the alleged “contestable platforms” that allow both brokers and customers to compare and analyze prices of products.
According to JP Morgan, Australian insurers should use their current position as leverage to better control the concentrated structure of the market, refusing to license out their services arbitrarily to prevent private comparison websites from gaining a presence amongst consumers. Insurance companies would therefore stop undercutting each other and become involved with price comparison systems run through established brokers rather than anomalous internet services.
Operators of online independent insurance evaluation services claim these Australian insurance giants have long tried to prevent their customer-friendly premium rate comparison websites from gaining a foothold in the market.
The recent demand for a removal of certain product-lines is an indication that certain insurers remain uncomfortable with online firms estimating their premiums. If these companies do not make their quotes more available on the internet however, ultimately many potential customers will not factor their products into a purchasing decision, online comparison services claim. There is already a problem of underinsurance in Australia, and this development, blocking adequate premium price discovery, would not alleviate that issue.
Within the United Kingdom, the comparison industry asserts that it has made a significant impact in reducing premium prices for insurance services across the board for customers, particularly in auto coverage. By providing more readily available information about insurance costs, the UK industry has been forced to innovate and develop more comprehensive services for a customer base’s previously unmet needs.
Insurers feel that the growth of the price aggregator industry in the United Kingdom is responsible for limiting their margins in the country and would not want a similar development to take place in Australia. Independent internet insurance evaluation services maintain that the industry’s paranoia ignores the success and increased customer base that these online assessment services can and have already provided. The diverse access to necessary insurance information will enable both customers and brokers to provide valuable feedback on the further progress of the insurance industry in Australia.
Insurance Companies Mentioned
Insurance Australia Group (IAG) is the largest general insurer for Australia and New Zealand. The company provides personal and corporate insurance policies under several different brands, including NRMA Insurance, CGU, SGIC, SGIO and Swann Insurance.
QBE Insurance Group Limited 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. The Americas Division, headquartered in New York, conducts business through various property and casualty insurance subsidiaries in eight countries.
Suncorp-Metway Ltd (SUN) is an Australian financial services corporation offering general insurance, banking, and wealth management services. The Suncorp-Metway Group was formed on 1 December 1996. Suncorp’s acquisition of Promina has made it the second largest domestic general insurer in Australia and now serves over 3.5 million general insurance customers throughout the country.
A coalition of 18 international insurance associations from Europe, Asia and the Americas have drafted a letter to the Brazilian government, petitioning them to reconsider two recently enacted reinsurance regulations that could threaten the market and severely reduce the availability of insurance in Brazil, including coverage for the upcoming 2016 Olympics and 2014 FIFA World Cup being held in the country.
The letter follows joint calls made by both the Federation of European Risk Management Associations (FERMA) and International Federation of Risk Management Associations (IFRIMA) on Brazil’s CNSP (National Board of Private Insurance) to revoke Resolution 225 and 232 and the checks now placed on the Brazilian reinsurance business.
Brazil’s insurance industry has undergone significant evolution in recent years and has been experiencing healthy growth as a result of improving economic conditions and the loosening of market regulations in the country. The background of the dispute between the CNSP and private insurers springs from 2007 reforms the Brazilian government implemented to update and restructure its laws governing the insurance sector in the country, namely Complementary Law 126/07 which eliminated the previously existing state monopoly on the reinsurance trade. The goal of these reforms has been to open the local markets to increased competition and improve the availability of insurance coverage and lower the costs to Brazilian citizens.
Multinational insurance associations were pleased with these initial developments, as IFIRMA notes in a recent statement: “With the opening of the national market to other Brazilian and foreign reinsurance players, within less than three years, insurers could offer very good products to meet the needs of society and companies of all sizes. The result of that appropriate and necessary opening was the reshaping of the insurance sector, with companies focused on various fields of activity to offer products of high quality, substance and reliance to all buyers.”
However, two new resolutions that came into force March 31st are seen as undermining these previous reforms and attempting to rollback the liberalization of the Brazil’s reinsurance market by means of an unexpected executive order from the CNSP.
Resolution 225 and 232 will require 40 percent of all reinsurance business to be allocated to Brazilian companies, rather than the current ruling granting them the right of first refusal. The legislation would further prohibit local insurers from ceding more than 20 percent of premium, related to coverage provided, to affiliated intracompany reinsurers located abroad.
In a prior statement, FERMA President Peter den Dekker said that his association believed that these regulations would “damage the interests of our members and the development of the insurance and reinsurance market in Brazil. We, therefore, ask the Brazilian government to rescind them.”
The Brazilian authority’s attempt to restrict insurance and reinsurance capacity in the largest South American market is seen as one of the most significant issues facing the global insurance industry. In the letter, the 18 multinational organizations agree that both CNSP regulations represent a marked departure from international regulatory standards and would “dramatically restrict the ability of private insurers and reinsurers—both Brazilian and foreign—to do business in Brazil.”
The letter asserts that international insurance groups would no longer be able to utilize globally accepted prudent risk management strategies to meet the greater insurance capacity requirements that will prove critical to the development of the Brazilian economy. The new resolutions expose existing Brazilian policyholders to greater risk and would also impair local job creation and tax collection. Reducing foreign insurance capacity for handling large commercial risks in Brazil will drive up prices as it will be become more difficult and expensive for Brazilian insurers to access foreign reinsurers. “The benefits of diversification of risk into the global insurance market will be lost and, as a result, insurance likely will cost more for Brazilian consumers,” the letter said.
Many international companies have significant interests in Brazil and are calling into question the need to jeopardize global investment in Brazilian insurance and reinsurance operations at this time. Those of which operate in captive insurance are concerned that the new regulations will mean that arranging reinsurance for the captive will mean more intermediaries, added transactions, and thus greater cost. An open and competitive insurance market helps create a favorable business environment overall. The letter agrees that changing the rules is not necessary: “the local market currently does not have the capacity to bear the significant risk required for economic growth…which once again demonstrates the total incompatibility of the new Resolutions with the reality of the domestic market.”
The letter further maintains that if applied to current foreign license holders in Brazil, the regulations would constitute an abrogation of contract terms and be declared illegal under Brazilian law. Multinational insurers stress that such drastic moves could call into question Brazil’s ability to provide sufficient insurance and reinsurance for the Olympic Games and World Cup.
Insurance groups are now looking to work with the Brazilian authorities to examine and reassess the consequences of these resolutions and to better develop new regulations that will allow for the growth and sustainable development of a healthy and dynamic insurance market in Brazil.
“We hope to work with the Brazilian government to expand the insurance and reinsurance markets, maintain adequate capacity and provide people and businesses in Brazil with a wide array of innovative insurance products. Leaders in Brazil had been working for many years to remove unnecessary restrictions and open the market to more competition. A more open and competitive market will benefit consumers and businesses alike,” said Dirk Kempthorne, president and CEO of The American Council of Life Insurers (ACLI), one of the signatories to the letter, in a statement.
The Brazilian insurance market is the largest in South America, and offers the potential to become a more prominent international insurance market across all disciplines. Recent economic stability, positive credit trends, and regulatory reforms that have stabilized the currency and promoted domestic savings, have all contributed to continued growth across the insurance industry in Brazil. In spite of continued regulatory hurdles, large multinational insurers cannot ignore the market’s size and growth potential and will be looking to invest themselves further in Brazil, and other emerging economies, to offset the continued static performance of the established North American and Western European markets.
The full list of signatories includes:
American Council on Life Insurers
American Insurance Association
America’s Health Insurance Plans
Association of Bermuda Insurers and Reinsurers
Association of British Insurers
Asociacion Mexicana de Instituciones de Seguros
Brazil US Business Council—US Chamber of Commerce
European Insurance and Reinsurance Federation (CEA)
Coalition of Service Industries
Council of Insurance Agents and Brokers
Dublin International Insurance & Management Association
European Federation of Insurance Intermediaries
Federacion Interamericana de Empresas de Seguros
International Engineering Insurance Association
International Underwriting Association
General Insurance Association of Japan
Property and Casualty Insurers Association of America
Reinsurance Association of America
The American Council of Life Insurers (ACLI) represents over 300 life insurance and assorted financial service companies operating in the United States. ACLI member companies deal in pensions and other retirement plans, 401k, long-term care and disability compensation insurance, as well as reinsurance.
The International Federation of Risk and Insurance Management Associations (IFRIMA) is an international umbrella organization representing 23 risk management associations in over 30 countries around the world.
Federation of European Risk Management Associations (FERMA) is comprised of 19 European Risk Management Associations, representing over 4800 individual members and a wide range of industries, including manufacturing, financial services, health organizations and government.
A new study conducted by Great Britain’s second largest insurer, Aviva PLC, reveals interesting developments on the changing attitudes of British workers when considering possible emigration from the UK.
The study, facilitated by market researchers OnePoll, surveyed 1,000 British employees nationwide aged 18 to 45 from 31 March to 5 April 2011, and found that over half (54%) of respondents would now contemplate leaving the United Kingdom and moving abroad.
While short respites outside of the UK have become more common, Aviva was surprised by the number of people contemplating better long-term prospects outside the country. Almost half (46%) of the respondents would consider a permanent move abroad compared to only 39 percent of those surveyed last year. One in five polled (21%) indicated however, that they would remain more cautious and only be prepared to move overseas for between one to three years.
The unconvincing forecast for the British economy has been the primary factor in the growth of these figures. Aviva’s survey discovered that 89 percent of respondents believed that the UK job market has been in perpetual decline for the last 3 years. More than half (54%) further admitted that government cuts have had a negative impact on their standard of living. Many of those surveyed claimed that the current culture of austerity and cost-cutting initiatives in Britain were now playing a key role in driving them to consider a move abroad.
More traditional reasons for emigration from Britain were also represented in the report. Almost half (45%) of respondents indicated that they were motivated to move abroad in pursuit of a better year-round climate. A further third of those polled (31%) believed that a move overseas could offer a healthier, less demanding and more varied lifestyle, with a better balance of work and family time available.
Aviva’s research showed that the same five countries first identified in the company’s 2010 study remained the principal re-location destinations of choice: Australia, Canada, Spain, New Zealand and the US. Other countries mentioned as popular destinations included: France, Germany, Italy, Switzerland and the UAE.
Addressing the UK study, Teresa Rogers, business lead for international private medical insurance at Aviva, said: “When times are tough, it might seem natural to set one’s sights on moving abroad. But our survey shows that there are certainly pros and cons to moving and people need to plan carefully if they are considering making their dream a reality.”
Indeed, the research highlighted that a quarter (25%) of British respondents worried that they might have worse benefits if they moved out of the country. More than a third (37%) acknowledged that they may have fewer state-funded privileges in their new foreign location.
Mrs. Rogers further highlighted that uncertainty regarding quality of medical service in a new country remained a chief going concern for expatriates. “Health is clearly a primary concern for people and whether you’re thinking of moving abroad for a short time or on a more permanent basis you need to take care to ensure you and your family are always properly protected,” she added.
Healthcare has been an increasing concern for Britons when considering a move abroad. Almost half (46%) of those polled believe the UK has superior health benefits to other countries worldwide. Over a third of respondents claimed the National Health Service (NHS) would be one of the British institutions they would miss the most if they left. This is an increase on last year’s results which indicated only a quarter (25%) felt the same way about the NHS.
Speaking for Aviva, Mrs. Rogers understood British concerns with regard to foreign healthcare services: “Healthcare provision varies greatly around the world and even routine medical care can prove costly in countries that don’t offer a similar service to the NHS.”
Anxiety about medical services overseas, prompted six in ten (59%) responders to declare that they would factor heath insurance into their travel planning. In contrast, 38 percent of those polled, claimed they would not arrange any sort of health insurance prior to moving.
Mrs. Rogers summarized Aviva’s assessment of these figures: “Although it’s very encouraging that over half of the people we spoke to would consider taking out international health insurance, over a third (39%) would sort their health insurance out only once they’ve arrived,” she said, adding, “this could leave them in a difficult position should the worst happen.”
To better meet the needs of their expanding base of globally mobile clients, Aviva has been upgrading its international private medical insurance products. These upgrades range from structural adjustments in the application and claims handling processes to minor changes in global group coverage policies.
Aviva has also been very proactive in expanding its operations to attract more potential clients worldwide. The company has established a presence in many of the increasingly lucrative Asian insurance markets through joint ventures with locally based insurance companies in order to capitalize on the rising demand for insurance products and services in the region.
In Asia, Aviva currently operates out of China, India, Malaysia, Sri Lanka, Singapore and Hong Kong, and recently agreed to acquire a 60 percentage stake in Asuransi Winterthur Life of Indonesia. Although Aviva has announced its intentions to pull out of its joint venture with First Financial in Taiwan, pending regulatory approval, the company remains otherwise committed to concentrating on both the Indian and Chinese key markets in the Asia-Pacific region and it’s well established client base in Western Europe and North America.
Insurance Company Mentioned
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.
Medical insurance annual premiums are expected to increase by around 10 to 20 percent this year to catch up with rising healthcare costs in the UAE. This annual increase is expected to continue for years to come.
Many factors have contributed to this price hike, including ones caused by insurers, healthcare personnel, impending legislation, and from individual medical insurance policyholders themselves.Read the rest of the Medical Insurance Premiums Rise in the UAE article.
A new report issued by Bank Negara Malaysia (BNM), Malaysia’s central bank, demonstrates the continued growth in demand for takaful products and the country’s overall continued prominence in the global Islamic insurance industry.
The takaful industry in Malaysia was established in 1985 after the enactment of the Takaful Act 1984. The Malaysian government has played a prominent role in supporting the development of the takaful insurance sector by actively encouraging insurers to accelerate their expansion across the country to meet the coverage needs of both the growing urban and rural Muslim population. The Government’s support for both foreign and local takaful insurers in the market resulted from deficiencies within the Islamic insurance industry in previously developing insurance products to adequately meet the Malaysian market’s specific demands. According to BNM, Malaysia has become the largest takaful market in the world with over one quarter of total international takaful assets being held in the country, and valued at 12,445.5 million ringgit (US $4.15 billion) in 2009.
Bank Negara Malaysia’s 2010 Financial Stability Report, a supplementary study attached to the bank’s annual report, revealed that total income from family takaful policies increased nearly 20 percent on 2009’s figures, from 3,381.6 million ringgit (US $1.13 billion) up to 4,030.2 million ringgit (US $1.35 billion) for 2010. This data includes the increase in net contributions for family Takaful, which rose to 3,326.9 million ringgit (US $1.1 billion), and net investment income which similarly grew from 354.8 million ringgit ($118 million) to 451.6 million ringgit ($150 million) in 2010.
For general takaful, the underwriting profit in 2010 experienced a slight decline from 170.1 million ringgit (US $ 57 million) to 145.8 million ringgit (US $48.6 million), although the overall operating profit for takaful providers in Malaysia improved from 247.5 million ringgit ($82.6 million) to 272.4 million ringgit ($90.92 million) over the same period. Additionally, investment income for general takaful enjoyed an increase from 57.7 million ringgit ($19.3 million) to 67.9 million ringgit ($22.66 million).
According to the BNM report, both the standard insurance and takaful sectors have sustained domestic demand for savings and protection products in Malaysia. In the past 5 years, the Malaysian insurance industry has experienced a compound average growth rate of 27 percent per anum in terms of net premium contributions, with family takaful policies leading the way. Family takaful grew 28 percent annually over the last 5 years and now represents more than 80 percent of Malaysia’s total Takaful market. The improved performance of the local equity market has also supported stronger results for the year.
Growth has been driven by a strong post-2009 recovery in demand for investment-linked products as well as rising per capita GDP and increased Malay consumer capacity for common life and non-life protection insurance services. Payout of benefits and claims as a percentage of premiums in 2010 increased marginally up to 58 percent for life insurance business and 62.3 percent in general insurance. Demand for coverage products is only expected to rise as the market still remains largely untapped with only 54 percent of the Malaysian population currently holding a life insurance or family takaful policy.
The promising forecast for the domestic insurance industry has coincided with the arrival of several new takaful companies in Malaysia. The latest is ING Public Takaful, launched in April 2011 as a joint venture between the Malaysian subsidiary of ING, the Dutch financial services group, and the local banks Public Bank Bhd and Public Islamic Bank Berhad.
Speaking at the launch of ING Public Takaful Ehsan, Bank Negara Deputy Govenor Mohd Razif bin Abd Kadir remarked that this new international joint venture marked an important milestone in Malaysia’s economic evolution. “With this strategic alliance between two financial groups of such caliber, Bank Negara Malaysia looks forward to strong management stewardship, innovative product offerings, wide distribution channels, operational and service excellence as well as breakthrough business strategies that are well-matched by robust risk management capabilities,” the deputy governor said. Malaysia remains determined to put forth a great effort in providing a sufficient financial safety net and proactive investment opportunities for its growing Muslim population
Industry analysts have outlined several key indicators that could further drive the growth of the takaful industry in Malaysia. The first is to take advantage of the relative low penetration rate of certain takaful insurance services in the market, particularly medical and health takaful, which accounted for only 9 percent of new business in family takaful for 2010. The transformation of Malaysia from a middle to high income country will also present continued growth opportunities. The takaful industry will need to take advantage of their more affluent customer base by broadening their services and offering more sophisticated investment-linked and wealth management products. Designing products that can appeal to both Muslims and non-Muslims while retaining Shariah compliance in business operations could also present a challenge.
Another key factor to takaful development will be the Malaysia International Islamic Financial Centre (MIFC) initiative, which originated from the Malay government in 2006 as a way to enhance the international position of Malaysia’s Islamic finance operations. Deputy Gov. Mohd Razif explained the importance of stimulating the Islamic financial services industry: “This presents a huge window of opportunity for our Takaful operators to accelerate their regional and global orientation and move up the global value chains. It is therefore important for strategic international partners such as ING to explore all possible avenues to elevate the business potential of Takaful internationally,” he said.
Further global and regional Takaful partnerships are planned to develop and enter the market in upcoming years. The Malaysian Government has been committed to the gradual financial liberalization of its Islamic finance sector with four new takaful licenses being granted to international insurers by the central bank in 2010. Notable companies that have entered the Malaysian takaful industry under this recent legislation include: AIA AFG Takaful Berhad, a 70:30 joint venture between AIA Berhad and Alliance Bank Malaysia Berhad, the previously mentioned ING Public Takaful Ehsan, and a partnership between AMMB Holdings Berhad and Friends Provident Group plc, UK. A joint venture featuring Koperasi Angkatan Tentera Malaysia Berhad and Great Eastern Life Assurance Company Limited and has been granted a takaful license but has yet to commence operations in the country.
These entrants bring the total number of takaful providers in Malaysia up to 12. These other Malaysian takaful operators include HSBC Amanah Takaful Sdn Bhd, CIMB Aviva Takaful Berhad, Prudential BSN Takaful Berhad, Hong Leong Tokio Marine Takaful Berhad, Etiqa Takaful Berhad, Syarikat Takaful Berhad, MAA Takaful Berhad, and Takaful Ikhlas Sdn.Bhd.
The takaful insurance market has become an important market for multinational insurance companies searching for new sectors and opportunities for growth. While the outlook in more established international markets remains quite static, demand for takaful insurance products, targeted towards Muslim populations prominent in Middle-East, North Africa and South Asia, has grown significantly, particularly in Indonesia, Qatar, Saudi Arabia, the UAE and Malaysia.
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.
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.
Bank Negara Malaysia
Bank Negara Malaysia is Malaysia’s central bank, tasked with overseeing the nation’s economic and financial systems.
US President Barack Obama has expressed an interest in curbing the amount of Americans looking to go abroad and receive medical treatment. Through the 2010 US health reform law, the President’s administration has planned to tackle spiraling healthcare costs and ensure medical services remain competitive and affordable in the United States.
Addressing questions on America’s healthcare options at Northern Virginia Community College, president Obama said, “My preference would be that you don’t have to travel to Mexico or India to get cheap healthcare.” On why US health insurance does not cover medical expenses incurred abroad, The President added: “I’d like you to be able to get [inexpensive treatment] right here in the United States of America that’s high quality.”
Obama was also adamant that prescription drug prices would need to be brought under control “One of the things that we want to do as part of our health care reform package is let’s start doing a better job of negotiating better prices for prescription drugs here in the United States, so that you don’t feel like you’re getting cheated because you’re paying 30 per cent or 20 per cent more than prescription drugs in Canada or Mexico.”
In response to another question on handling rising medical costs in the US, Obama said: “Before we went on the path of ‘you can go somewhere else to get your health care’, let’s work to see if we can reduce the costs of health care here in the United States of America. That’s going to make a big difference.”
President Obama was speaking of the growing phenomenon of citizens choosing to cross borders and shop for elective health procedures, a practice known as medical tourism. The substantial development of the global economy coupled with the falling costs of travel and communication has enabled world class healthcare practices to establish themselves all around the world. International clients seeking alternative healthcare solutions to what is available in their home countries at competitive prices now are presented with many opportunities.
Popular locations for medical travel include countries in South East Asia and Latin America, where many surgery procedures, including transplants, cost a fraction of the price they would do in North America or Western Europe and usually can offer shorter waiting times for treatment. The convenience and efficiency of pursuing international healthcare options is something to be considered for patients seeking to fully evaluate their future health procedures.
The Indian medical industry in particular has emerged as a major market for medical tourism, drawing thousands of international patients by meeting the global demand for modern, high quality, healthcare treatment available through internationally recognized private hospitals at affordable prices. Estimates have the Indian medical tourism industry generating over $2 billion in revenues by 2012.
Medical tourism clients visiting the subcontinent had previously tended to be travelling from Africa, Asia or other countries without access to certain medical procedures. Now with a relatively static economic outlook in the West, patients from countries like the US have turned to India for complex procedures such as cardiac surgery, orthopedic operations, and neurosurgery as well as dental treatment. Cardiac bypass surgery performed in the US might cost upwards of $60,000, but a patient who chooses to get the procedure in India might have to pay only $10,000 for the operation, including travel and accommodation.
Members of India’s leading private hospital chains have responded to Obama’s statements and assert that it is not just low prices that have lured international patients to India. Anupam Sibal, Medical Director at Apollo Indraprastha Hospital, New Delhi, explained: “No one travels for reasons of costs alone. It is the relatively low costs coupled with high quality care.” Delhi’s Apollo Hospital alone has treated over ten thousand foreign patients in the past two years.
According to Sangita Reddy, executive director of operations at Apollo Hospitals, American private insurance companies themselves have recommended medical treatment in India to some of their clients. “Healthcare costs have not come down in the US and Obama’s statement may not have much impact out here,” she said.
Dr. Naresh Trehan, chairman of Medanta, the Medicity, confirmed that the Indian healthcare industry had nothing to worry about. “For the president of a country to admit that healthcare is cheaper elsewhere shows the deficiency of that country. But India is not about cheap healthcare but affordable high quality healthcare. The success rate of heart surgeries in some top Indian hospitals is 99.8 per cent. Indian doctors are skilled.”
Dr. Trehan commented further that a significant proportion of American patients who had sought treatment in Indian hospitals did not have prior health insurance in the States. “We are fulfilling a need of people who are out of the health care net in the US,” he said. Data from the US Census Bureau reveal that around 50.7 million Americans, or about 16.7 percent of the country’s population, do not currently have health insurance. The new US healthcare reform law will reduce the number of uninsured but the true effects of this legislation have yet to be realized.
The United States’s healthcare system must become more cost-effective if it wishes to maintain and attract the increasing number of globally mobile patients. Healthcare in America has remained very expensive and will be a hot topic in the run up to the US midterm elections in November.
Meanwhile in the United Kingdom, efforts could be underway to promote medical tourism and drive prospective international patients towards the nation’s private health facilities. While the government is looking to deter excess foreign access to the NHS, independent medical institutions are actively looking for overseas clientele. London & Partners, a comprehensive marketing, investment and tourism agency, has been appointed to encourage visitors to engage with private industry in England’s capital city.
Many British private hospitals already attract a substantial amount of medical tourists as private patients. International clients choose London due to its convenient central location and the plurality of high quality medical treatment offered in the city. Private medical institutions such as Spire and HCA International specialize in catering to patients from all over the world with an array of services. These companies cooperate closely with global medical referrers and sponsors including country embassies, health offices and private corporate companies in handling efficient international medical care.
Apollo Hospitals Group
Apollo Hospitals is the largest healthcare provider in Asia, third largest in the world. The company operates 53 hospitals, a total capacity of 8500 beds, across Asia. The company also offers medical consultancy and pharmacy services. Apollo Hospitals was founded in 1983 and is based in Chennai, India
Medanta – The Medicity
Medanta is one of India’s largest multi-specialty institutes located in Gurgaon, in the National Capital Region. The institute includes research centers and medical and nursing schools. Medanta has 1250 beds and 45 operation theatres catering to over 20 different specialties.
Spire Healthcare is a private hospital network in the UK whose mission is to be the best private provider of quality healthcare. Spire Healthcare has 26 year heritage in the private healthcare sector.
The Hospital Corporation of America (HCA)
The Hospital Corporation of America (HCA) is the largest private operator of healthcare facilities in the world. HCA operates some 170 acute care, psychiatric, and rehabilitation hospitals in the worldwide.
As the climate of political discontent spreads across North Africa and the Middle East, insurers are reviewing their coverage capabilities against such situations. According to a new report issued by global insurance broker Willis Group, companies operating in volatile parts of the world may soon be unable to provide sufficient insurance coverage for their staff and assets. These firms may also find that their existing policies do not necessarily provide cover against the turmoil being felt in these regions.
In Willis Group’s report, entitled ‘Political Risk Insurance: Mind The Gap,’ the insurance broker warns of the risks of going global and that while “companies may be able to assess and manage technical and even commercial risks, it is extremely difficult to deal with or indeed predict political events.”
Traditionally, ‘political risk’ has been associated with governmental interference actions such as expropriation. However, Willis notes that national governments are now not the only source of political risk. Local governments, community groups, NGO’s or other factions advancing political objectives can also be sources of political risk. Additionally, social issues such as poverty, human rights and labor disputes also fuel civil unrest and conflict. The report highlights that: “the situation in the Middle East and North Africa is a prime example of where the original touch point was not due to any direct intervention on the part of the government, but was ostensibly a populous movement driven by high food prices.”
Companies operating in emerging markets need to identify and monitor threats to business and to develop a comprehensive risk management strategy. This strategy should identify the necessary measures required to adequately mitigate these exposures, including the purchase of suitable insurance coverage with the capacity to respond effectively in the event of a loss.
The Willis Group report details the three major types of insurance service that businesses concerned about political insecurity should consider: Strikes, Riots and Civil Commotions (SRCC) insurance, Terrorism coverage and full Political Violence cover. In the past, it has been a widespread practice for companies working in unstable territories to purchase SRCC or Terrorism cover as an extension on their property insurance and other policies. Willis warns however that these extensions would not necessarily protect against populous violence or other adverse current events. The report concludes that full political violence insurance is the most comprehensive coverage for the type of unrest North Africa and the Middle East is currently facing.
Full political violence insurance is much broader than traditional terrorism policies, protecting against financial loss dealing with a wide array of civil problems including politically motivated sabotage, riots, armed insurrection and civil war. Premiums for full political violence cover are traditionally fixed at inception and will cover abandonment of property without physical damage.
Coverage for the evacuation of staff from politically unstable situations is available under most corporate Kidnap and Ransom insurance (K&R) policies. The report cites incidences in Kuwait in 1991 and Lebanon in 2006, when it became necessary to evacuate staff. In these circumstances, many clients were simply not aware they had K&R coverage until it was brought to their attention. Emergency evacuation coverage can also be provided through group personal accident and business travel insurance policies, though the degree of coverage through these services varies considerably and has been typically focused on business travelers rather than expatriate staff members. Evacuation in times of strife can be an arduous process and Willis advises companies to plan and prepare in advance of an emergency.
Companies concerned with supply chain vulnerability are advised to consider purchasing alternative options to political violence cover. Trade Disruption Insurance can cover an importer’s financial losses resulting from confiscation, import embargo or port blockage, supplier insolvency, or war. In some cases, Marine Cargo insurance can also be used as an extension to protect against the risks of strikes, riots and other acts of civil strife.
Insurance markets meanwhile are responding in a number of different ways. Willis warns that some insurance companies, particularly those more exposed to the now unstable territories, are actively reviewing their initial plans and current capacity to continue offering even the most basic SRCC policies to clients in these afflicted regions. Insurers have been communicating with their policyholders, making it abundantly clear that the turmoil currently enveloping North Africa is not addressed by SRCC extensions. Insurers may plan to re-evaluate the terms and prices of said policies or simply withdraw that precarious element of coverage all together.
Specialist insurance markets, principally Lloyd’s of London, are continuing to offer both terrorism and full political violence coverage. These dedicated insurers will be reviewing their own exposures and aggregations as well. The rating structure for insurance has become more stringent to reflect the overall perceived increase in risk.
Global business continues to expand and explore new market opportunities. The Willis Group report acknowledges that with commodity prices projected to remain strong for the foreseeable future, there is significant potential for foreign investors to continue operating in emerging markets. Access to these resource-rich markets however comes with real and inherent risks to business. Tenuous political and socio-economic situations in these countries often combined with inadequate macroeconomic and civil infrastructure can impede development. Willis notes however that the widespread political demonstrations across Europe demonstrate that the tumultuous desire to overthrow incumbent governments is not unique to any specific part of the world.
Commenting at the launch event for the report, Willis Group President, Grahame Millwater summarized the company’s outlook: “Exposure to political unrest will only grow as global business continues to expand into new and often hostile territories where the threat of resource nationalism, creeping expropriation and supply chain vulnerability is increasing. Our message to companies around the world is to use their brokers to navigate the insurance options available for these risks and to identify any potential gaps in their coverage.”
Insurance Companies Mentioned
Willis Group Holdings plc is a leading global insurance broker. Through its subsidiaries, Willis develops and delivers professional insurance, reinsurance, risk management, financial and human resource consulting and actuarial services to corporations, public entities and institutions around the world. Willis has more than 400 offices in nearly 120 countries, with a global team of approximately 17,000 employees serving clients in virtually every part of the world.
During the third Saudi Labor Market Exhibition at the Jeddah Exhibitions and Conferences Center, Zuhair Ibrahim Maghrabi, the chief HR officer from Bupa Arabia, announced that Bupa Arabia has reached a Saudisation level of 52 percent, which means that 52 percent of the Bupa Arabia workforce is currently made up of Saudi nationals. Bupa Arabia is a subsidiary of Bupa, and specializes in providing health insurance in Saudi Arabia.
The Saudi Labor Market Exhibition is a crucial event that is a critical part of Bupa Arabia’s business strategy. The CEO of Bupa Arabia, Tal Nazer, said, “Localizing our manpower is the core of our strategic planning for steady business growth and we are fully committed to train and recruit more young male and female employees in order to integrate them in the national workforce and enabling them to be a part of the Kingdon’s social and economic development.”
Maghrabi expresses Bupa Arabia’s success in Saudisation by saying, “We are proud that Bupa Arabia’s workforce has reached a Saudisation level of 52 percent of the total number of employees.” He goes on to add, “the Saudi Labor Market Exhibition is an important link between job seekers and the private sector, in recruiting Saudi male and female employees in order to integrate them in the national workforce and enabling them to be a part of the Kingdom’s social and economic development.”
Last year, Bupa Arabia began a partnership with the Human Resources Development Fund (HRDF), which was valued at $693,331 USD. The partnership was formed with the goal of recruiting and training 94 male and female employees in a variety of roles within Bupa Arabia.
The deal was signed by Abdul Rahman Al Zahrani, who said at the signing ceremony, “Our partnership with Bupa Arabia is very strong as the company is one of the pioneers in recruiting and training Saudi employees and has excellent training resources and the capabilities to offer rewarding career opportunities.”
Bupa Arabia has a good reputation in the Kingdom, and has won the Best Working Environment Award in 2007, 2008, and 2009. Bupa Arabia is also seen as a pioneer in employing females, winning the Best Working Environment Award for Women in 2008, and recruiting the first all female team in 2001.
Insurance Companies Mentioned:
Bupa was established more than 60 years ago in the UK and now has ten million customers in over 190 countries, and over 52,000 employees around the world. Bupa is a leading international healthcare provider, offering personal and corporate health insurance, workplace health services and health assessments. As a provident association Bupa has no shareholders, because of this it uses its profits to invest in healthcare and medical facilities around the world. Bupa has operations around the world, principally in the UK, Australia, Spain, New Zealand and the US, as well as Hong Kong, Thailand, Saudi Arabia, India, China and across Latin America.
The Indian insurance industry will continue to outpace the country’s economic growth and is projected to reach US$ 350 to 400 billion in premium income by 2020. These figures will put India amongst the top three life insurance and top fifteen non-life markets in the world within the next nine years, according to a new report.
At present, the insurance sector in India comprises of 23 different life and 24 non-life companies, and is cumulatively valued at over US$ 66 billion. The development opportunity for life and non-life insurance coverage is being driven by the continued growth of India’s population and economy. This increase in prosperity has been combined with stringent regulation and unique product development in the domestic insurance industry, which has helped develop the business to meet the changing coverage needs of India’s fast-moving society.
Released on April 11th 2011, a study by the Federation of Indian Chamber of Commerce and Industry (FICCI) and the US-based Boston Consulting Group (BCG) titled ‘India Insurance, Turning 10, Going on 20′, reveals that awareness and total penetration of insurance services (premiums as a percentage of GDP) in India have increased from 2.3 percent of the population in 2001 to 5.2 percent in 2011.
In addition, there has been a substantial increase in coverage. The report detailed that the number of life insurance policies now in force had increased almost 12 times over the past decade and the number of people receiving health insurance had also risen nearly 25 fold.
“This massive growth will have a significant impact on India’s ranking in the global insurance industry and is based on strong fundamentals,” remarked FICCI Director General Rajiv Kumar.
The FICCI report primarily attributes better terms and the surge in availability of a wide variety of modern insurance products, including unit-linked products, whole life coverage, automobile assistance, auto pay per km motor insurance, maximum net asset value (NAV) guarantee, disease management and wellness services, to having boosted the development and growth of the industry in India. Progress has also been made through improvements in operations and systems management in the industry, with the establishment of five distinct service channels, including bancassurance, corporate, auto and direct dealers, to accompany the existing third party agency and domestic salaried sales staff. Alongside the emergence of these multiple channels, the distribution reach had increased nearly six fold for life and one-a-half times for non life, marking a shift in the gradual evolution of the Indian insurance market from a state monopoly into a truly competitive system.
Even though Indian life and general insurance companies have been performing well over the past decade and are projected to grow through to 2020, the industry has yet to find a solution to its mounting profitability problems. The non-life insurance industry incurred cumulative underwriting losses of Rs 300 billion (US$ 6.7 billion) and the private life insurers reported losses of Rs 160 billion (US$ 3.6 billion) through Mach 2010
Underwriting loss is measured as the difference between premium income and claims paid out. Non-life insurers report a net profit or loss after taking into account their investment income. Many Indian non-life insurers remain profitable on net basis. The report cites several reasons for non-life insurer’s continued operating losses, including high claims cost of third party liability polices, health loss ratios, fraud in the auto and health insurance sectors and lack of sufficient management. For life insurers, the report claims last year’s customer-friendly regulations regarding unit linked policies as the reason they have tightened their operating margins.
The report is critical of Indian insurance companies, whose pursuit of top line growth at any cost has led to inefficient business models and inferior operating margins in comparison to international benchmarks in both the life and non-life insurance sector. Overall, there has been a limited focus on the end customer, with intermediaries given a more prominent role among Indian insurers. Companies have been criticized for not maximizing value from existing customers.
To achieve sustainable profitability FICCI suggests that domestic life insurers need to fix their agency operating model, build long-term strategic non-agency partnerships, invest and develop alternative channels and products, and most importantly to better incorporate an innovative customer-centric operating model. For non-life insurers, the report outlined similar objectives: develop an optimal product portfolio, move towards risk based pricing, develop innovative claims management systems and establish alternate distribution channels and retail products.
The national government and insurance regulators will also have an important role in enabling Indian insurers to sustain profitability. FICCI outlines several items that should be on the authorities’ agenda, including regulation to relax Indian ownership and investment norms, defining IPO standards in the country, permitting banks to sell policies from multiple insurers, standardize electronic insurance statements and to enable Indian insurers to more easily expand internationally.
A bill to raise the foreign direct investment (FDI) cap in the private insurance market from the current 26 percent up to 49 percent is currently pending in Parliament. This legislation will be important in attracting the necessary capital and international expertise towards the Indian insurance sector. India has tremendous economic potential due to its large labor force and rapidly expanding middle class. The projected increase in per-capita GDP will correlate with an increasing demand for a wide range of insurance and investment products. International insurance companies and domestic Indian insurers have been gaining increased market penetration through providing insurance protection products and financial services to meet the emerging demands of this more prosperous population but, with a population exceeding a billion people, the potential for further business appears infinite.
The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm and one of the world’s leading advisors on business strategy. BCG partners with clients in all sectors and regions to identify opportunities, address critical challenges, and transform their businesses. Founded in 1963, BCG is a private company that operates through 71 offices in 41 different countries.
Federation of Indian Chambers of Commerce and Industry (FICCI) is India’s head chamber representing over 500 industry associations and business units employing over 20 million people. FICCI works closely with the Indian Central and State governments and regulatory bodies to research and implement policy change.
AETNA, one of the world’s oldest insurance companies, has partnered with Huatai Insurance in the People’s Republic of China in order to provide a comprehensive individual international private medical insurance policy within the Chinese insurance market.
The AETNA offering is thought to be extremely similar to the company’s existing individual international health insurance products, and is designed to offer medical protection throughout the Greater China Region.
AETNA entered the Chinese insurance market in 1997 through a joint venture with China Pacific Life Insurance Company; the companies formed Pacific An-Tai Life Insurance Company, although AETNA later sold its stake in the venture to ING during 2000.
However, it was not until 2008 when AETNA officially established a presence in the China, opening a representative office in Shanghai in order to explore the growth potential offered by the world’s second largest economy. With the interest from a number of global insurance leaders towards China, the partnership with local insurance provider Huatai places AETNA in good stead to capitalize on the rapid growth of the burgeoning Chinese middle class.
Huatai insurance company has been active in the Chinese insurance market since 1996, when the company was created by a group of 63 large-scale enterprises. Huatai specializes in the provision of Accident and Health, Property, and Liability insurance.
With more than a decade of experience working within the Chinese healthcare system, the Huatai partnership presents significant opportunities to AETNA as the company seeks to develop the future of its business in China.
The AETNA Huatai health insurance offering is expected to be available to purchase within China by the end of Q2 2011. However, actual details of the policy, and its expected deployment date, remain uncertain at this time.
It has emerged within international private medical insurance industry that A+ International Insurance may not offer policyholders the option of renewing their medical insurance policies in the future.
A+ International Insurance’s decision to not offer clients a renewal on their IPMI policies may be due to Cigna’s purchase of Van Breda International; Van Breda International was integral to A+ International’s plan offerings and policy administration.
Cigna, a leading US based international insurance provider, purchased Vanbreda International in August 2010 in order to access the Belgian insurer’s international reach.
A+ International’s partnership with Vanbreda International is through Justitia NV. Justitia, an independent insurance company within the Vanbreda Group of companies, is responsible for underwriting A+ International’s international health insurance plans.
Justitia NV generated premium collections of EUR 18.5 million (US$ 26.3 million) in 2008.
While A+ is a relatively new entry to the global health insurance market, the company does have a significant number of policyholders worldwide; the potential denial of renewal terms to existing customers may leave a substantial number of consumers without adequate medical insurance coverage.
A+ policyholders are advised to contact the company, or their intermediary, in order to understand their health insurance options in the event that they are not offered a renewal of their current policy.
At present there has been no official confirmation from A+ International Insurance regarding future business, but policyholders who have contacted the company have been informed that there may not be renewal terms on their policies.
Speaking last week at the All-Russian Forum of Medical Workers, Russian Prime Minister Vladimir Putin addressed the country’s continued health care problems and outlined the substantial investments required in the health system to improve outcomes.
The crisis in Russia’s healthcare system has been a persistent problem for many years. Despite an elaborate hospital network and an ample staff of trained health professionals, the medical system has remained unable to provide most citizens with acceptable levels of health care services. The quality and accessibility problems have been principally due to the continued lack and uneven distribution of funds, medical equipment and supplies in the healthcare infrastructure in Russia. These factors coupled with ineffective governance and the poor health and lifestyle choices of many Russians, has resulted in health standards that trail below Western European standards.
The All-Russia Medical Worker Forum, held for the first time at the Russian cardiology research and production center, was called to asses development initiatives involving the Russian healthcare sector, including improving medical workers’ contribution and education, regional healthcare modernization programs and the implementation of medical insurance schemes. Prime Minister Vladimir Putin, alongside several other government ministers, headlined the event and offered a thorough analysis of Russia’s health status in the premier’s address.
Mr. Putin first acknowledged that the demographic crisis, in which Russia lost 700,000 to upwards of a million people annually throughout the nineties, had abated but there was still much work yet to be done. “We have curtailed the destructive trends…But despite all our painstaking efforts, the population in the country has shrunk by 500,000 people over the past five years: these are serious figures,” Putin said.
Life expectancy in Russia has increased from 65.3 to 68.9 in the period of 2005–2010. The birth rate increased 19 percent while the death rate dropped over 11 percent during the same period. In recent years thousands of Russian medical institutions and ambulatory services have received new updated medical equipment and vehicles, cutting both waiting times for diagnostic tests and emergency response time by over half. There has also been a substantial one-third decrease in infant mortality due to improved concentration on maternity care. Despite these positive trends, Mr. Putin remarked that Russia was still too far behind Europe in their health outcomes: “We have spoken about some positive trends in the healthcare system and we have something to show for it. Yet the average lifespan in our country is 8-10 years lower than in neighboring European countries, the death rate from cardiovascular diseases is 4-5 times higher,” Putin said.
The Prime Minister then went into detail describing the poor condition of many hospitals in the country, highlighting that almost a third had no running hot water, let alone up-to-date and clean medical equipment. “A quarter of all the medical facilities in the Russian Federation are in need of overhaul,” Putin said.
An additional deterrent to improving healthcare quality in Russia has been the paltry salaries offered towards medical workers, which Putin admits “are barely above the subsistence minimum.” The tendency has been towards rewarding seniority and this has resulted in excessive management staff and a shortage of necessary primary care workers operating in the healthcare sector. This inadequacy needs to be fixed in order to better allocate resources and improve efficiency in health provision.
In the second half of his address, Mr. Putin put forth his solutions for the healthcare system. The Prime Minister argued for improved and decentralized healthcare funding, culling the oversized management staff, improving conditions for young doctors and modernizing Russia’s medical information systems through the introduction of electronic databases.
First and foremost, considerable investment has been promised to the healthcare sector. Mr. Putin remarked that the government now has the necessary framework to ensure that positive effects of increased health spending will be widespread. “I am 100% sure that we made the right decision in creating a financial basis for the regional programs. Over the next two years, we are now able to continue to invest in the healthcare system – that is, over and above current financing to the substantial tune of 460 billion rubles (US $16 billion) – in order to reinvigorate the network of medical institutions in Russian towns and villages.” Under this extensive spending plan, over 40 percent of federal and municipal medical facilities will be repaired and upgraded. The healthcare system, as a whole, will receive more than 100,000 units of modern medical equipment. The funds will be reportedly be covered by the recent rise in insurance premiums from 3.1 to 5.1 percent.
The government has earmarked 788.7 billion rubles (US $28 billion) for the ‘Healthcare National Project’ which will run through to 2013. The initiative was launched in 2005 to improve Russian health outcomes and measure the quality of medical services in the country. Since its inception, the project has overseen the construction of 7 high-tech medical facilities and 11 maternity clinics across the country, which have provided care for over a million Russians.
To encourage regional responsibility in local healthcare development, the government is in the process of establishing a 30 billion rubles (US $1 billion) incentive fund. Mr. Putin proposed an additional medical system monitoring mechanism through the introduction of an annual ratings project, whereby medical institutions and insurance companies would be judged by customers and agencies for the quality service they provide. “I think that the information about the real state of affairs in medical institutions and the results on studying citizens’ complaints should be open,” Putin said, adding that “it is absolutely inadmissible to conceal unpleasant facts and mistakes.” The process of modernization in the Russian healthcare system will be faster, if more comprehensive and objective information is obtained, Putin claimed.
Mr. Putin was adamant that the excessive number of healthcare executives and their inflated salaries would need to be tackled. The salaries available to valued medical staff are often dependent on the number of managers and directors present. There were 28,000 medical superintendents and deputies in the Russian system last year, salaries account for over 15 billion rubles ($530) annually. “Quite a few medical superintendents have up to 10 deputies on top of aides, personal assistants, you name it… At the same time we witness an unjustifiably large gap between the salaries of a medical institution’s directors and its medical specialists. In some regions, it’s a five- to seven-fold difference,” Putin said.
There will have to be a reduction in healthcare officials and executive staff, bringing the number down into compliance with the real needs of the industry. Putin identified that doctors, paramedics and nurses constitute the core of the healthcare system, and “we should base our payroll decisions on this understanding.” Putin further stated that doctor’s work should be made more efficient through the introduction of comprehensive electronic patient database systems, at the expense of the current arduous paperwork process, which delays treatment. Health Minister Tatyana Golikova confirmed that a relevant law, necessitating electronic tracking integration, had been drafted and sent for the government’s deliberation.
In his closing statement, Vladimir Putin remarked that the road to comprehensive reform would be demanding but that Russia must overcome these obstacles to guarantee their future prosperity:
“The accessibility of high-quality health services, doctors’ and nurses’ living and labor conditions, and the way they do their jobs all have a lot to do with the lives of specific patients and their families, and with Russia’s future in general. The price of the purported reforms is very high, but the hopes and expectations of millions of Russian people have an even higher price. Our common goal is to live up to these expectations and the trust of the Russian people. I think we are in a position to achieve this goal.”
Russia is far from the only country currently embarking on substantial healthcare initiatives and reform. The American healthcare system is structured in a fundamentally different manner from Russia’s system. In the United States, health care is predominantly offered through the private insurance companies while public sector facilities provide primary care for the poor. The US system however has encountered problems of its own as more and more US citizens remain uninsured and the disparity of medical services and health outcomes widen along income lines. The 2010 US Health Reform law mandates that by 2014, American citizens must have health insurance coverage or otherwise pay a US$695 annual fine. It is projected that the Health Reform Law will reduce the number of the uninsured Americans from 19 percent in 2010 to 8 percent by 2016.
Although different from the United States, Russia’s healthcare problems are not exceptional. Countries that traditionally have relied on a state healthcare system tend to suffer from shortages and misallocation of resources, declining quality, and as a result: waning health standards. Health care reform in Russia will have to take into account both local expertise and international experience in improving their healthcare system.
Brazil’s insurance industry has been experiencing healthy growth as a result of improving economic conditions and the loosening of market regulations in the country. The Brazilian economy grew by 7.5 percent in 2010. Domestic insurers have benefited from the strong level of economic activity, higher availability of credit, and growth in employment; all factors that have driven strong internal demand for coverage. The Brazilian insurance industry outpaced the country’s GDP and grew 16.6 percent in 2010, with gross written premiums, excluding health insurance coverage, totaling R$99.4 billion (US$ 62.7 billion).
For 2011, estimates recently released from Brazil’s Central Bank point to an expected GDP growth of around 4.5 percent, with the insurance industry projected to grow a further 12 percent.
Brazil’s government has been regulating all insurance and reinsurance operations in the country since 1966. The government founded the National Council of Private Insurance, the Private Insurance Superintendence (SUSEP), Brazil RE and other companies that now operate in the country’s private insurance market. High inflation as well as chronic macroeconomic instability hampered the development of the insurance industry initially. Such fiscal conditions made it difficult for many individuals to construct long-term financial decisions, or to have sufficient confidence in those that might be able to provide for them. In 1996 the Brazilian insurance market was opened up to foreign participants, which brought substantial investment and the introduction of new products, technologies and expertise to the domestic industry. SUSEP has embarked on further modernization reforms for the industry, based on international standards. In 2007, Complementary Law 126 eliminated the previous state monopoly on the reinsurance trade.
A combination of extensive regulatory overhaul, the expansion of new services in the industry and the end of high inflation have opened new opportunities for significant expansion of the insurance business in Brazil; these opportunities have been cited as the reason for the recent movement of foreign companies into the country, who have taken an increased share of the overall market. According to SUSEP’s latest figures, there are almost 160 different companies operating in the Brazilian insurance industry, the most dominant of which tend to be controlled through the big commercial banks.
SulAmérica, the largest independent insurance group in Brazil, 36 percent owned by ING, has intimated that they will be pursing acquisitions to expand their presence in the local market and to further tap into the rising Brazilian middle class.
In July 2010, SulAmérica acquired a 49.92 percent stake in health insurance provider Brasilsaude Companhia de Seguros. In December the company agreed to purchase Dental Plan Ltd. for US$16.8 million, gaining customers in the north and northeast regions of Brazil, and further expanding their client base to over 6.3 million people. Thus far the majority of insurance premiums in Brazil (65 percent, according to SUSEP) have been generated from the prosperous Southeast Region.
SulAmérica CEO Thomz Cabral de Menezes explains the company’s outlook: “The focus is a hundred percent in Brazil. We’re looking for acquisitions that are accretive to our portfolio that are aligned within our business segments, meaning health, dental, auto and distribution channels for our mass- marketing products.”
One additional target for acquisition for SulAmérica may be local health insurance brokerage Grupo Qualicorp. The Caryle Group, who acquired the company in July 2010, plans to sell their shares by midyear. Qualicorp wants to use the proceeds to further finance their own acquisitions.
SulAmérica ended fiscal year 2010 with a net income of R$426.6 million (US$ 270 million), a 3.2 percent increase over 2009’s totals. Consolidated revenue from insurance premiums in 2010 rose by 15.2 percent, outperforming standard industry growth in the period. Average return on equity was 22.4 percent. SulAmérica expects to be able to build upon these figures and increase the number of policyholders throughout the year. Cabral de Menezes added: “The expansion of the middle class, plus the new consumers coming in, you’re talking between 50 to 100 million people that eventually are going to be looking for insurance.”
The Brazilian insurance market is the largest in South America, and offers the potential to become a more prominent international insurance market across all disciplines. Recent economic stability, positive credit trends, and regulatory reforms that have stabilized the currency and promoted domestic savings have produced sound growth across the insurance industry in Brazil. The severe disparity of wealth distribution in the country remains a concern, coupled with the low 3.1 percent penetration of insurance relative to domestic spending. While these problems remain on par with other Latin American countries, Brazil continues to lag more developed economies. However, large multinational insurers cannot ignore the market’s size and growth potential and will be looking to invest themselves further in Brazil, and other emerging economies, to offset the continued static performance of the established North American and Western European markets.
SulAmérica is a Rio de Janeiro-based insurance business that provides a broad range of insurance services to individuals, corporate clients and government entities in Brazil. The company has been active in the insurance business since 1895. In 2002, SulAmérica entered into a joint venture with multinational finance company ING, who as of September 30, 2009, directly hold a 36% interest in SulAmérica.
BrasilSaude Companhia de Seguros
BrasilSaude Companhia de Seguros was founded in 1995 and is based out of Rio de Janeiro, Brazil. The company provides health insurance services in Brazil and operates as a subsidiary of SulAmérica SA.
Grupo Qualicorp is a leader in health benefits management services in Brazil. Founded in 1997, Grupo Qualicorp has around 1,200 employees and represents about 2.8 million policyholders as of June 2010.
Last Saturday at the sixth Annual World Takaful Conference in Dubai, Ernst and Young predicted that the worldwide Takaful insurance market would reach a value of $12 billion USD in 2011; the prediction was announced in the Ernst and Young World Takaful Report 2011: Transforming Operating Performance, and represents an increase of 31 percent from $9.15 billion in 2010. Takaful, an Islamic-compliant insurance concept, is a rapidly growing industry concentrated mainly in Saudi Arabia (making up $3.86 billion USD of the industry in 2009), Malaysia ($1.15 billion USD), UAE ($640 million USD), South East Asia, and North Africa.
In the past year, most GCC Takaful markets have slowed down. “The Takaful industry and its core markets have experienced another challenging year, where positive signs of economic recovery and improved business sentiment were shaken by the socio-political uncertainty witnessed across the Middle East and North Africa (Mena) region in the first quarter of 2011,” said Ashar Nazim, an executive director and Islamic financial services leader at Ernst and Young.
Despite the slowdown in the sector, global growth estimates are predicted to remain on track to reach $12 billion in 2011. “The industry’s not without risk, but its potential remains an important feature of Muslim emerging markets for many indigenous and global insurance players,” said Nazim. He goes on to add, “the (Gulf Arab region) is a competitive market with a large number of players and will drive growth for the industry… Key Takaful markets are characterized by low insurance penetration rates and comparatively high rates of economic growth.”
Other key challenges for the growth of Takaful insurance products include a lack of expertise and the ongoing socio-political instability across much of North Africa and the Middle East. Ernst and Young also said that changing regulations and misaligned cost base also hinder the growth of the market.
The Saudi Takaful market, however, proves to be an exception to the global slowdown in the Islamic insurance market. RNCOS, a research and analytical consultancy, recently released its industry report, which said that, “We have found that Saudi Arabia has emerged as the largest market for Takaful insurance, followed by Malaysia. Takaful insurance is growing at an annual growth rate of 15-20 percent globally, but it will grow at faster rate in Saudi Arabia because premium paid by the insured people is considered as donation and not premium.” In addition, with the recent mandate of compulsory health insurance for private employees, the health insurance market is expected to grow at an even faster pace.
The report forecasts that the general insurance category of Takaful products will grow at a compound annual growth rate (CAGR) of more than 24 percent from 2010 to 2012, due to increasing demand for motor and energy insurance. Property and aviation insurance policies are also expected to emerge as fast growing segments of the general insurance sector.
Similar to Saudi Arabia, other Gulf States’ insurance industries have also experienced a boost, in part due to compulsory health insurance for foreign employees, and a push towards private health insurance. The Kuwait National Healthcare system is currently pushing for a new private health insurance scheme in order to meet overcrowding, long waiting times, and a general growing dissatisfaction with the public health sector.
Bahrain National Holding (BNH) is also growing despite the political turmoil occurring in the country. In its annual shareholder meeting on March 29th, 2011, BNH announced that it remains adamant about continuing with plans on expanding its services throughout the Gulf region.
Sudan, which contributes $340 million USD to the Takaful insurance industry, is currently the largest market outside the Gulf region. However, Egypt, Bangladesh, and Pakistan’s Takaful industries are all growing quite rapidly.
In fact, Egypt could even stand to benefit from the ongoing regional instability. The UAE-based Salama Islamic Arab Insurance’s chief executive stated that turmoil in the Egyptian market has not only resulted in more claims, but has also generated more interest and awareness of Takaful insurance, which creates more demand and unprecedented opportunities for the market.
Regionally, the Indian subcontinent’s Takaful contributions have increased by 85 percent, making it the fastest growing Takaful market in the world. The next fastest growing market is the Middle East, which has grown by 40 percent, followed by the GCC (31 percent), South East Asia (29 percent), and Africa (26 percent).
In terms of individual countries, Indonesia had the largest Takaful market growth rate with 67 percent. It is followed by Bangladesh with 58 percent and Saudi Arabia with 34 percent.
The overall Malaysian insurance industry is also growing at a rapid pace with 12 percent projected growth in 2011. The Malaysian Takaful Association attributes this predicted growth to the expansion of the Takaful industry into rural areas of the country. There is a large interest in Takaful products. With only a 10 percent market penetration, there is much room for improvement and growth.
Generally, the Takaful industry receives a lower return on equity (RoE) because of the intense competition that small local insurers encounter from more established firms who have had experience in the conventional insurance market.
For the GCC, conventional insurers received an average RoE of 11 percent, while the Takaful insurers announced an average of 10 percent in 2010.
In Malaysia, the disparity is even greater with an average RoE of 16 percent for conventional insurers and 6 percent for Takaful companies. This difference, however, may arise from a significantly lower claim ratio than the GCC, mostly because of differences in business lines.
Also, in the GCC, the Takaful market is dominated by general insurance, while in Malaysia it is dominated by family Takaful. In the Mena region, the family Takaful market is still underpenetrated, contributing to only 5 percent of gross global annuals premiums, while conventional life insurance contributed to 58 percent. In comparison, in Malaysia, the family Takaful industry contributed to 77 percent of gross annual premiums in 2010.
Insurance Companies Mentioned
Bahrain National Holding
BNH, established in 1998, is based in Manama, Bahrain. Together with its many subsidiaries, BNH provides insurance and risk management solutions for many industries and individuals in the Gulf region.
The insurance industry in North Africa is in its infancy, and while that is unlikely to change due to political unrest in the short term, analysts project that with many of the appropriate foundations already established within the past decade, the North African insurance sector could be set for pronounced long term growth and development opportunities in the region.
A new research document from Standard & Poor’s, the foremost worldwide insurance rating and information agency, details how the insurance business in the Algerian, Moroccan and Tunisian markets could outpace their countries’ cumulative annual economic growth in the long term. Market penetration for insurance products in the region is low and many standard coverage services remain untapped on the market, including life, property and savings-related insurance options. The insurance premiums collected in North Africa are roughly half a percent of total world premiums, and the contribution of the insurance sector towards the GDP of the region remains small by international standards. This demonstrates that insurance is not yet being used as a vehicle for savings and financing investments in these countries.
As the North African economies grow, urbanize, develop their infrastructure, and further liberalize their markets, demand for life and health insurance services is set to increase. Many countries have been updating their laws and regulation towards the insurance industry: increasing minimum capital requirements, professionalizing risk management systems, and opening up the field to foreign competition. Consolidation among insurers regionally is anticipated to begin over the next few years. This will form entities with the sufficient financial and technical capabilities to benefit from economies of scale. The increase in minimum capital requirements has been seen as a prod in that direction. Insurers who can successfully access this emerging market of potential customers could see “possible volume jumps in insurance businesses in the Maghreb,” the S&P report held.
In an interview, Lotfi Elbarhdadi, Director at Standard & Poor’s, agreed the area was promising: “There is potential for growth,” he added, “Penetration rates are really low, but markets are growing and there are many lines of business that are untapped.”
The unique demographics of the region could represent a further source for prosperity. Around five percent of the North African population is over 65, and 30 percent are under the age of 14. These indicators demonstrate the substantial human capital that the region possesses, and the potential for high economic growth rates if the right policy mix is further utilized in the previously highlighted countries. This could be an opportunity in particular for the life insurance business as Sharia-compliant Takaful grows in the region while the populations in Western industrialized countries are set to decline.
The volatility of the region remains one of the main deterrents against continued industry growth. Much of the prosperity in the region is dependent on high oil prices. This factor coupled with high youth unemployment, and pronounced transparency and corruption issues in governance, could drive away foreign investors and lower the investment rates by the local populace.
Fareed Lutfi, secretary general for the Coordination Commission for Gulf Insurance and Reinsurance Cos., a UAE based regulatory authority for regional insurers, affirmed that current political affairs on the continent were disruptive: “Political unrest will present a challenge for insurers in the medium term and North Africa has traditionally been a closed market,” However the market, he believed, “will present opportunities in the long run as governments become more stable and people begin to seek more medical and life insurance, looking for stability.”
Tunisia has been in a state of political flux since the ousting of longtime president Ben Ali in January 2011. The protracted transition period has had a pronounced effect on the local economy and could further hamper the growth prospects of the domestic insurance industry. The S&P report noted that once the new government is established it is uncertain whether they will institute any new policies that would alter insurance pricing and coverage. Mr. Elbarhdadi explains, “In Tunisia particularly, economic activity has already been impacted by the unrest, so insurers there will have less leeway to do business in 2011,” adding, “The unrest will put brakes on growth for the coming year, but we don’t question long-term growth for the region.”
The Tunisian insurance market had been reporting continued growth over the past three years, with the volume of premiums rising well over 6 percent a year. According to the latest figures from S&P, total premium income in Tunisia exceeded TND1 billion (US $730 million) for 2009. The insurance penetration rate and standard rate for premiums per capita remained low at 1.9 percent and US$70 a head, in 2009.
Analysts also believe that Egypt could present substantial long-term growth potential in the insurance market, despite dealing with its own prolonged political crisis. Managing Director of Kuwait-based Safenet Consultants International, Tony Awad, remarked that in times of pronounced instability, people’s priorities can often shift toward personal planning for the future, especially retirement savings. This presents an opportunity for insurance companies to offer more stable solutions to address Egyptian citizen’s increasing feelings of insecurity. Mr. Awad further commented that these potential insurance customers would take time to develop understanding and utilization of the products, adding, “The effect on insurance will be felt later on; now people will become more critical about the existence of a sufficient social security system and health care system.”
Morocco has been one of the few successes regarding insurance sector development in the region thus far. The country features the second largest insurance market in Africa, and one of the largest among the Arab nations. Mr. Lufti confirmed that “Morocco has one of the most well-developed insurance markets in North Africa, especially when it comes to life and bank insurance. The rest of the region now has a chance to catch up.” Although this feat is commendable in context, the percentage of people covered by insurance policies in Morocco remains just 3 percent, with premiums per capita of US $84 for 2009. These statistics are favorable in comparison to Algeria, where S&P reported that only 0.7 percent of the populace has any sort of coverage and where premiums totaled US$33.8 per capita in 2009.
As the global insurance markets have opened up, multinational insurers are shifting their focal point to up-and-coming insurance industries in emerging markets throughout the world. These emerging economies are projected to offer better opportunities for growth in premium returns to offset the more static performance of the established European and North American markets. While much of the international focus has thus far been on the Asian and Middle Eastern regions, North Africa should present a reasonably attractive business opportunity for multinational insurers over the next few years. Foreign insurers have not yet entered the North African markets en masse, typically focusing on narrow lines of business within countries when permitted. This should all soon change as the governments and regulators of these North African countries will be soon committed to the reform and deregulation of their insurance industries.
On May 23-24 2011 The MENA Insurance Summit is being held in Dubai. The conference will attract many regional and international insurance authorities and will discuss the further development of the insurance market in North Africa and the Middle East. .
Standard & Poor’s
Standard & Poor’s (commonly referred to as S&P) is a business branch of publishing house McGraw-Hill. Operating out of 20 countries, S&P provides the investment community with independent credit ratings on important financial vehicles such as stocks, municipal bonds,corporate bonds and mutual funds. In addition to its risk management, investment research and credit rating services, Standard & Poor’s is known for its indexes, in particular the S&P 500 index.
On April 3rd, 2011, Qatar unveiled their ambitious National Health Strategy 2011-16 (NHS). The six year plan is designed to transform Qatar’s existing medical infrastructure into a comprehensive and integrated world-class healthcare system, accessible to all, that will generate the positive health outcomes set about in the development plan named Qatar National Vision 2030. The strategy was the result of comprehensive year-long consultation and was officially endorsed in December 2010 by Qatar’s Supreme Council of Health (SCH). The Qatari government has set aside QR 608 million (USD 167 million) for the NHS’s management operations.
Read the rest of the Qatar’s National Health care Strategy article
The Insurance Regulatory and Development Authority of India (IRDA) announced that will soon allow private insurance companies to put forth their initial public offerings (IPOs), and raise funds through the stock market to further fund their individual expansion plans.
Speaking at the 14th Annual Conference on Insurance, ‘India Insurance: Turning 10, Going on 20’, IRDA Chairman Mr J. Hari Narayan stated that the IPO guidelines and regulations would be in place by the end of April. “Several insurance companies will be completing 10 years in business, later this year. Our IPO guidelines must be in place by the end of this month,” he said.
The proposal permitting the listing of insurance companies on the Indian stock market has been pending for almost 3 years. The Standing Committee on Finance in India’s Parliament is expected to finally give its report on the Insurance Laws (Amendment) Bill 2008 by the end of the month. The bill is projected to grant the insurance regulatory authority more autonomy and flexibility, in addition to increasing the capacity of foreign equity in insurance joint ventures to 49 percent, significantly higher than the previous level of 26 percent, among other provisions. Chairman Narayan explained the impact of the bill: “The changes in the regulatory environment will not bring in more regulation, but better regulation of the insurance sector with a view to widening and deepening the market.”
The current law technically allows any company to become listed on the Indian stock exchange after successfully completing 10 years of operations in the country. A number of joint venture insurers, including HDFC Standard Life and ICICI Prudential Life Insurance, qualify under the present standards with several more companies set to complete a decade of service shortly. The IRDA is expected to allow public float by insurance businesses that have been in the market for at least 10 years and have demonstrated three successive years of profit.
At present, excluding the State-run Life Insurance Corporation, there are 22 private life insurance companies operating in India. The general insurance sector features 21 companies. Several of these private insurers, including the aforementioned HDFC Standard Life and Reliance Life, have sounded out an interest in tapping the global capital market to improve their resource base. Financial Services Secretary Shashi Kant Sharma forecasts that, once the new guidelines are established, we will see increased movement throughout the insurance sector: “The coming decade will see lot of activities in the insurance industry. Keeping in view the immense business potential in tapping Indian insurance market, we expect more foreign joint ventures to materialize and slew of IPOs in the sector.”
At the conference, the IRDA also discussed impending adjustments on premium rates for non-life insurance policyholders. Insurance companies in India are looking to raise cover prices in conjunction with industry growth, and to better enable themselves to set aside more capital for claim settlements. Several insurers have incurred significant losses in the current fiscal year, particularly in regards to motor insurance. As Chairman Narayan explains, the IRDA has increased provisioning requirements and further supports attempts to help insurers enhance their solvency margin and better insulate themselves from losses. “Because of the requirement of increase in provisioning, there will be a reduction in capacity and because of that there will be a hardening of prices. I think the demand and supply position in the non-life industry will be such that prices should harden… I would like to make it even harder as we go along,” the Chairman said.
The IRDA Chairman conferred that, in the next few years, insurance companies in India will see changes to both regulatory development and distribution channels within the industry, and companies will need to evolve their marketing, pricing and claim settlement systems to remain effective. “The agency model that we see right now has serious deficiencies and that requires to be strengthened. I do not think the agency distribution model is going to last very long.” The Chairman further predicted that Indian health insurance and pension-linked insurance products would eventually gain predominance in the market.
Mr. Sharma further added that the insurance industry would need to work hard to promote its products, and increase awareness about the benefits of insurance among the populace. “It would be difficult to market insurance policies in rural areas purely on commercial or non-subsidized rates as the cost of marketing and servicing in such areas would be much higher,” he said. Insurance consciousness and penetration in India has been particularly low outside the large cities, despite almost 70 percent of the population residing in rural areas.
The insurance industry in India was first opened up to the private sector in 1999. In the following decade, total insurance penetration has doubled, rising from 2.3 per cent of the GDP in 2001 to 5.2 per cent of GDP for 2011. According to industry analysts, premium income for the Indian insurance market is projected to reach $350-400 billion by 2020. There has been a substantial rise in insurance coverage, with both the number of life and health insurance policies increasing many times over.
Despite these promising figures, the insurance sector has been hampered by profitability issues – premium density is currently a paltry US$4.4 dollars – and financial issues aplenty for non-life insurance companies. While insurers in India are trying to improve their underwriting losses through regulating more practical premium prices for certain types of coverage, there remains a heavy reliance on investment to support operations. Raising the foreign direct investment cap from 26 to 49 percent, as proposed in Insurance Laws (Amendment) Bill 2008, would help inject funds, technical knowledge and expertise into these domestic insurers who are looking to grow. In addition to this, the IRDA’s continued stewardship in adapting international best practices will be critical in developing India’s insurance market further.
India has tremendous economic potential due to its large labor force and rapidly growing middle class. The projected increase in per-capita GDP will correlate with an increased demand for a wide variety of insurance and investment products.
Goldman Sachs has successfully bought a 12.02 percent stake in Taikang Life Insurance Co Ltd, China’s fifth-largest insurer by premiums. Announced in a joint statement on Friday, April 8th 2011, the acquisition gives the US Investment bank a long-sought-after foothold in the world’s largest insurance market.
“The two companies will strengthen cooperation in corporate governance, risk management, investment management and product development,” the joint statement read.
The stake purchase was approved by the China Insurance Regulatory Commission (CIRC). The financial details of the deal were not disclosed. Market estimations place the acquisition cost for Goldman Sachs at around USD$900 million for the shares.
Goldman’s purchased the shares from French insurer AXA SA. Last month AXA announced that it has been given regulatory approval to sell its 15.6 percent stake in Taikang Life to a group of investors for USD$1.2 billion. AXA originally inherited the stake through the acquisition of Swiss insurer Winterthur in 2006, and have subsequently been looking to sell their shares since 2009. Regulations in China prevent foreign investors from holding multiple assets in the Chinese life insurance sector, and AXA are also involved in a joint venture with the Industrial & Commercial Bank of China and China Minmetals Corp.
Goldman Sachs was announced as the preferred bidders last year, bidding high and beating out the Blackstone Group and Temasek Holdings, among other notable entrants in the Taikang auction. Japan’s Softbank Corp and two state-owned Chinese enterprises, China Guardian Auctions Co. and New Deal TEDA Investment Ltd, were the other firms who purchased the shares sold by AXA. Goldman Sachs’12.02 percent holding now makes them the second largest shareholder in Taikang Life.
Speaking at the signing ceremony, Goldman Sachs Vice Chairman and Chairman of Asia, J. Michael Evans spoke of his delight at having successfully completed the acquisition. “We are thrilled to have the opportunity to be an investor, to participate in the continued growth of the insurance industry in China,” Evans said. A deal with AXA had been established last year but attaining Chinese regulatory approval has been a protracted process, particularly as it had involved the transaction of an ownership stake in a state-owned asset.
Goldman Sachs has had prior insurance investment experience in China, having previously purchased a stake in Ping An Insurance Co. along with Morgan Stanley in 1994. Goldman’s, however, is now using its own balance sheet in buying the Taikang Life stake, while previous Chinese investments were purchased through the company’s private equity arm. Industry analysts conclude that this direct investment move by Goldman Sachs was made to avoid conflict with new U.S regulations, which will require banks to wind down their positions in private equity and hedge fund activity. Goldman’s is furthermore looking to diversify its investment portfolio to combat the relatively mediocre performance projected in the global commodities and currency trading industry.
Beijing-based Taikang Life stated it had gross premiums of CNY86.77 billion (US$13.22 billion) for 2010. The company has branch offices in 28 different Chinese provinces, assets in excess of CNY290 billion (USD$44.34 billion), and more than 54 million customers throughout the country. Taikang is expected to be China’s fifth listed insurer when the company eventually submits its IPO, alongside existing providers China Life Insurance Co., China Pacific Insurance Co. Ltd., Ping An Insurance Co. of China Ltd., and the Hong Kong listed PICC Property and Casualty Co.
Chen Dongsheng, Founding Chairman and Chief Executive Officer of Taikang Life, said the insurer plans to collaborate with Goldman Sachs to develop investments and expand abroad: “I look forward to working in close cooperation with this world class financial institution as we continue to commit ourselves to the development of China’s life insurance market and strive to become more global.” Analysts predict that, as a shareholder, Goldman Sachs will facilitate Taikang’s initial public offering relatively quickly. An IPO in Hong Kong would look to raise between USD$3 to USD$4 billion.
The Chinese insurance market has been seen as a lucrative investment destination for many large multinational investors from the financial-services sector. Industry analysts predict China and India (both of which presently have a low market penetration rate for life insurance) will become the main drivers of global life insurance premium growth, as persistent economic growth in these large countries will boost the size and purchasing power of their middle class. In 2009, the Chinese life insurance market generated USD$124 billion in premium income. Credit Suisse projects that this figure will grow by more than 20 percent per year for the next decade. Foreign insurance companies have normally found success in China through investing and operating through joint venture partners with another major local insurance conglomerate.
Goldman Sachs’ asset-management rivals have already been generating strong returns through their investments in China. The Carlyle Group’s venture in China Pacific Insurance is projected to have it’s best ever exit, profiting six times on its investment, after it recently sold down a US$2.6 billion stake. TPG sold a US$2.4 billion stake in Ping An Insurance last year, an estimated return of around 16 times its acquisition cost. In February, Zurich Financial Services agreed to sell 5 percent of it’s holdings in New China Life Insurance Co Ltd. for US$500 million, retaining a 15 percent stake in an asset they had invested a reported total of $131 million in, now valued at about US$1.5 billion.
Goldman Sachs Group
Goldman Sachs Group Inc. is a global investment banking and securities firm which engages in investment banking, securities services, investment management and other financial services primarily with institutional clients. Goldman Sachs was founded in 1869, and has offices in all major international financial centers, and provides mergers and acquisitions advice, underwriting services, asset management, and securities services to its clients, which include corporations, governments and high net worth individuals around the world. The firm also engages in proprietary trading and private equity deals. It is a primary dealer in the United States Treasury security market.
Taikang Life Insurance was founded in Beijing in 1996 and offers life, annuity and health insurance through 120 offices throughout China,
AXA Group is a worldwide leader in Financial Services. Headquartered in Paris, the AXA Group companies are engaged in life insurance, health insurance and asset management services among others. AXA’s operations are diverse geographically, with major operations in Europe, North America and the Asia/Pacific area.
Allianz Lanka Ltd., a wholly-owned Sri Lankan subsidiary of financial services conglomerate Allianz Group of Germany, has posted good results for its 2010 operations. The new annual report details the company’s substantial growth in both the life and general insurance trade on the island nation despite being the only Sri Lankan insurer currently without a captive insurance business.
The Sri Lankan economy has become one the fastest growing markets in Southern Asia. Since the end of the protracted civil war in 2009, the country has emerged as an attractive prospect for outside investment. The government of Sri Lanka has been working hard to develop the domestic economy. Per capita income has been steadily rising and the reported GDP of the nation grew to US$ 104.7 billion for 2010. The South Asian country has entered a period of pronounced stability and is now well positioned for further growth.
The insurance industry in Sri Lanka has been improving steadily despite the global economic downturn. Out of the 18 private insurance companies operating in Sri Lanka, 5 are presently involved in foreign joint ventures. Allianz Insurance Company Lanka Ltd. is a wholly owned subsidiary of Allianz Group of Germany. Other joint venture insurance companies operating in Sri Lanka include Aviva NDB, formerly known as Eagle Insurance PLC, Life Insurance Corporation (Lanka) Ltd., and Hayleys AIG, of which the major shareholders are Aviva, the Life Insurance Corporation of India Ltd., and AIG respectively. Takaful Malaysia holds a 15 percent equity sharing in Amana Takaful PLC.
Surekha Alles, CEO and Director for Allianz Lanka confirmed that Sri Lanka was becoming an attractive market for insurers: “The optimism that followed the cessation of hostilities in the country created a healthy environment for growth in insurance business. We are very pleased with the performance of both our General Insurance as well as Life companies, having surpassed our plan in all areas.”
Allianz Lanka began its general insurance business in Sri Lanka in 2005. Incorporating the robust global presence and solid capitalization of the Allianz group, together with a strong regional management team with expertise on the Sri Lankan market has enabled Allianz Lanka to become one of the fastest growing insurers in the country. In 2009, Allianz Lanka became the first local insurer to achieve LKR 1 billion (US$ 9.06 million) in premium income within the first 5 years of operation. For 2010, a year that saw a substantial increase in claims due to adverse weather conditions on the island, gross written premium for general insurance increased 25% to LKR 1.47 billion (US$ 13.3 million) and underwriting profit doubled from 2009’s results to LKR 126 million (US$ 1.14 million). Net assets grew 39% and pretax profit for general insurance was a reported LKR 221 million (US$ 2 million), a 40% growth over 2009’s figures.
Allianz Lanka’s success in the general insurance business in Sri Lanka prompted the company to expand its investment portfolio and enter the life insurance market. In July 2008 the company received certification from the Insurance Board of Sri Lanka to begin providing life insurance products. In the two years since beginning operations, the insurer has likewise achieved remarkable growth in the life insurance sector, with the amount in gross written premiums doubling in 2010 to LKR 205 million (US$ 1.86 million). The successful performance and proactive investment strategy executed by Allianz Lanka’s life insurance division has enabled the company to provide participating life insurance policyholders with a 14 percent dividend yield, which was the largest dividend declared in the Sri Lankan insurance industry for 2010.
Allianz Lanka is currently the only insurer in Sri Lanka that is appropriately structured to meet upcoming insurance industry regulatory requirements that mandate the maintenance of separate businesses for domestic life and non-life insurance operations.
The current penetration rate for insurance services in the Sri Lankan market is low at around 10 percent of the populace. Through an expansive promotion strategy, leveraging Allianz as a renowned global brand, the company has been gaining momentum and has become one of the most recognized insurers on the island. Surekha Alles explains: “Word of mouth has been Allianz Lanka’s main marketing tool, and we will continue to ensure that our products and service standards will be talked about in the years to come.”
Allianz Lanka is able to integrate with the international affiliations of parent company, Allianz S.E., to incorporate global economies of scale that ultimately provide a high quality of service and competitively priced coverage products for the Sri Lankan market. Allianz’s AA accreditation from Standard and Poor further provides confidence to prospective customers, individuals and corporate clients interested in insurance services.
Surekha Alles concludes: “Year over year, we are proud of having created value for all our stakeholders in every area in which we do business. We are also pleased to continue to provide our customers with international standards of risk management advice to mitigate business losses, with the technical expertise of our parent company.”
Allianz Group, as a whole, performed well through 2010. The financial services conglomerate reported in February that annual net income for Allianz in 2010 had increased by 22.4 percent to total €5.2 billion (US$ 6.94 billion), with revenues reaching €106 billion (US$ 151 billion) and total assets under management of €1518 billion (US$ 2.17 trillion), cumulatively representing the best figures in the 120 year history of Allianz. The company has maintained itself at the forefront of the international insurance and worldwide asset management industry while looking towards mitigating policyholder risks and exploring new opportunities, despite operating in a difficult global economic environment.
Asia has become a pivotal market for international insurers. Allianz Group has established a presence in several key emerging Asian economies through joint ventures including: Bajaj Allianz in India, Allianz China Life, PT Asuransi Allianz Utama in Indonesia and Ayudhya Allianz in Thailand. These operations give The Allianz Group prime access to the rapidly developing Asian markets that are driving, in particular, the demand for protection, savings and investment products as the wealth of the substantial populations in these Asian nations increase.
Insurance Companies Mentioned
Allianz Insurance Company Lanka Limited operates as a wholly owned subsidiary of Allianz SE. Since the company’s inception in 2005, Allianz Lanka has been one of Sri Lanka’s fastest growing insurance providers, setting many industry benchmarks for the country.
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.
ACE Limited, the Swiss insurer operating in over 50 countries, has successfully completed the acquisition of all shares in both New York Life’s Hong Kong and South Korean wholly-owned life insurance subsidiaries for a combined US$425 million in cash. The purchase agreement between the two conglomerates was initialized in October 2010 and further amended to permit separate closings for NY Life’s Korea and Hong Kong operations. The Korean half of the transaction closed on February 1st for US$75 million and the sale of the Hong Kong operations was finalized April 1st for US$350 million. Purchase was funded exclusively through ACE Limited’s available cash reserves, involving no financing contingency.
ACE already had a strong presence in Hong Kong and South Korea through property and casualty insurance services (P&C) but has been looking for an entryway into the local life insurance markets and growth through the acquisition of established NY Life operations. ACE will incorporate the newly purchased businesses into their existing local infrastructure, which already involve US$2.15 billion in assets, more than 2,400 captive agents and earnings of US$330 million in incremental life insurance revenues. ACE’s preexisting Asian life insurance businesses include operations in China, Indonesia, Thailand and Vietnam. In October the group entered the Malaysia life insurance market through the US$210 million acquisition of Jerneh Insurance.
The Chairman and Chief Executive Officer of ACE Limited, Evan G. Greenberg commented on the deal: “We are pleased to complete this transaction, which adds the important and dynamic market of Hong Kong to our growing international life insurance franchise,” adding that “Together with our recent acquisition of New York Life’s business in Korea, the addition of a life company in Hong Kong expands our presence in Asia and complements the life insurance business we have been growing organically in the region for the last six years.”
ACE’s success in managing international life insurance businesses coupled with their expertise and existing infrastructure within the Hong Kong and South Korean insurance markets will support the company’s growth targets and maintain operational efficiencies through the transition period. Through 2009 New York Life’s Hong Kong and South Korean branches had 2,448 insurance agents, and a combined 234,505 policyholders generating total revenues of US$327 million. The acquisition of NY Life’s East-Asian holdings is projected to substantially boost sales in ACE’s Asian life insurance business (excluding the joint venture with Huatai Insurance Group in China) and diversify their existing premium base.
Speaking at the onset of the deal back in October, New York Life Chairman and Chief Executive Office Dick Mucci explained that the decision to leave the South Korean and Hong Kong markets was part of the company’s operational strategy: “While these are well-established businesses, New York Life has made the decision, as part of a strategic shift, to concentrate on our operations in the U.S., where we have the leading market share in life insurance, and on our markets in Asia and Latin America where we have strong market positions.” The chairman maintained that this transaction would not affect the quality of cover available in the region: “Consistent with our commitment to policyholder safety and security, ACE Group is a respected and well established global insurer with a strong balance sheet and robust ambitions for growth in Asia.”
New York Life continues to maintain operations in India, Taiwan and Thailand. In January, the company announced that it was selling the remaining 25 percent stake it held in it’s Shanghai-based joint venture, Haier New York Life, to Meiji Yasuda Life Insurance. The global life insurance industry still presents opportunities for growth. According to the most recent annual report, in 2009 New York Life derived 21 percent of its life insurance business from international markets.
Insurance Companies Mentioned
The ACE Group is one of the largest providers of commercial property and casualty insurance in the world. With its core operating insurance companies rated A+ for financial strength by Standard & Poor’s and A.M. Best, and with nearly US$78 billion in assets and more than US$19 billion of gross written premiums in 2009, the ACE Group is distinguished by its underwriting expertise, superior claims handling and global franchise, and has a physical presence in 53 countries and commercial and individual customers in more than 170 countries.
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.