Oct
31
A new study released this month by worldwide consultancy firm Mercer has found that leading employers in the Asia Pacific region are continuing to adjust to the challenges present in their rapidly developing markets and have earmarked rising employee healthcare risk and demand for benefits as a particular concern going forward. Regional employers are increasingly recognizing the value of having a healthy, happy and engaged workforce, and are working hard to improve their benefits packages to recruit and retain their prized staff.
Asia Pacific businesses generally experience high levels of employee turnover and absenteeism due to considerable workplace stress and this has fostered growing talent gaps in many important industries across the region. Many of these employers are becoming increasingly aware that maintaining a healthy staff is a key factor to ongoing success and overall competitiveness of their business internationally and that there are considerable costs associated with failing to engage with their employees on these important matters. With a fervent war for talent present in many of these emerging Asia Pacific markets, companies are looking to differentiate themselves with broader employee value propositions, including improved options for health insurance and other family savings plans. However, while many regional firms would like to do more and provide benefits and distinguish themselves from their competitors, rising worldwide healthcare inflation, restricts the capabilities of many employers to offer adequate workplace coverage.
The ‘Asia Pacific Total Health and Choice Benefits 2011 Survey Report’ was commissioned by Mercer to identify and examine regional changes in employer risk attitudes. Between 21 February and 22 April 2011, almost 900 businesses participating throughout the Asia Pacific region were surveyed. The study covered 14 major countries across the region, with China, Hong Kong, India, the Philippines and Singapore, being the principal market respondents. Overall, eight industries and organizations of various size were represented in the study. Of those polled, 87 percent were multinational companies, and 44 percent of those had more than 500 local employees. For this year’s report, Mercer combined employer health and choice issues of past, present and future, to provide a unique insight into how Asia Pacific businesses will continue adapt to rising employee healthcare demands to compete in a challenging regional and global marketplace.
Mercer’s survey results confirm that healthcare continues to be a chief concern amongst Asia Pacific employers, with 81 percent of all companies polled indicating that they were apprehensive about the current and future health and general well-being of their employees. The study found that while a significant majority of employers across the Asia Pacific region do not have an overall integrated strategy for their staff’s health and wellness management, over half the respondents realize that is an issue going forward and indicated a desire to update their approach to employee health and implement more sophisticated benefits programs. For these Asian companies, the three primary drivers for promoting better health and wellness within their organizations were to improve office productivity and performance (60 percent respondents), to retain their best workplace talent (52 percent), and to promote protection and good lifestyle habits (40 percent).
This widespread concern about employee health has manifested itself in increased company spending on benefits over the past few years. According to the report, health benefit costs as a percentage of a company’s payroll across the Asia Pacific is on the rise. Mercer revealed that 35 percent of employers are now spending more than 6 percent of payroll on their company health benefits package, and a further 10 percent of respondents were allocating over 15 percent towards medical cover. This trend towards an increased benefits outlay is expected to continue as over half the Mercer survey respondents indicated that they were looking to improve their health and wellness benefits package within the next three years. Many of the larger organizations polled noted however that they would expect to share any upcoming increased health benefits expenditure with their employees.
According to the survey data, the most popular health programs currently in effect amongst Asia Pacific businesses are annual employee health checkups (84 percent response), biometric screening tests (59 percent) and health lectures/conventions (49 percent). Going forward, these same firms told Mercer that they play to implement more efficient, interventional and hopefully preventative healthcare programs, including expanding medical risk assessment questionnaires, stress management programs and chronic disease management programs. In addition, Asia Pacific employers are also increasingly recognizing the importance of including a worker’s family members within company group insurance policies, both as a valuable recruitment mechanism and highly regarded retention tool. The study showed that 52 percent of the companies polled provide some health benefit to their employees’ children, and 40 percent offer cover for spouses as well.
Being able to provide employees with a more diverse array of health benefits opportunities has also become a key area of focus for Asia Pacific businesses. According to the survey data, while 81 percent of employers currently do not offer choice in their company benefits package, 59 percent indicated that they would plan to do so soon, within three years. Employers had long seen variable care plans as an unnecessary business expense, especially considering the high rate of medical inflation present in many of the countries participating in this survey, but are now recognizing the value a choice in benefits programs can have in attracting and retaining the diverse groups of workplace talent needed to succeed in modern international commerce. Across the Asia Pacific region, Mercer saw that 39 percent of employers still provide a more rudimentary one-size-fits-all approach to employee benefits, while another 42 percent vary their benefits program by employee status but still without any real consumer choice. Of the principal markets surveyed, a greater proportion of China’s business respondents provide some form employee benefit choice, with 20 percent confirmed, followed by Singapore (19 percent), Hong Kong (17 percent), Taiwan (16 percent), India (15 percent), and the Philippines (12 percent).
Among the minority of companies that had already implemented a broad choice program, Mercer revealed that market competitiveness (21 percent), meeting diverse employee needs (20 percent) and moves toward an incentives strategy (17 percent) were among the key reasons for diversifying their benefits package. The most common choice benefits offered by companies in this category were medical and life insurance coverage. Other benefits like dependent coverage, and lifestyle and wellness incentives were also typically included by firms to cater to the mounting needs of Gen Y employees, who are increasingly risk averse and benefit savvy. The study furthermore found that the choice program issued by these companies had made a noted difference in meeting various employee needs (43 percent), company branding (35 percent) and total rewards strategy (34 percent) since its implementation.
While these same respondents noted that the complexity in administering customized benefits continues to be a key challenge, the vast majority will be continuing their employee choice program now that it’s launched. Of these surveyed firms, 81 percent agreed that their choice benefits programs had met their original objectives and their employees indicating similar support. Of the key industry sectors surveyed, the BPO/Call Centre and financial services industries have been among the quickest adopters of choice health benefits programs in Asia, with 76 percent and 65 percent of respondents expecting to diversify their employee package in the future if they have not done so already.
Mercer was pleased to note that most Asian employers are already providing benefits well above the statutory health requirements required by their respective governments. The study perhaps shows that regional employers are finally making the important linkage between employee health, company productivity and cost.
Companies Mentioned
Mercer LLC
Mercer is a New York-based, internationally reknowned human resources consulting firm that provides consulting, outsourcing, and investment services for it’s clients around the world.
Oct
28
US, China Insurers Post Q3 Earnings
Filed Under Uncategorized | 1 Comment
As November approaches, many of the world most prominent multinational insurers are releasing their third quarter earnings reports, the cumulative results of which could present some interesting insights on the future of the international insurance industry.
Metlife, the United States’ largest life insurance group, posted the most considerable gains this week. The New York based insurer announced on Thursday that net income had grown more than tenfold during the third quarter reporting period, beating market estimations on the back of substantial investment gains and the continued development of its international sales division from its Alico acquisition last year. For the three months ending September 30, Metlife earned US$3.55 billion, or US$3.33 per share, a significant improvement over the US$286 million, 32 cents a share, earned during the corresponding period in 2010. Total revenues meanwhile hit US$20.46 billion for the period, up from US$12.34 billion in the same quarter a year ago. The insurer also reported US$4.2 billion in total net derivative gains for the quarter, compared with a US$244 million loss last year.
Metlife attributed much of their quarterly success to their Alico acquisition and the impact this has had on the investment portfolio, which was up from US$383.2 billion a year ago to US$493.2 billion now at the end of the third quarter 2011. Metlife had long been looking to expand its international presence and distribution platform, and in 2010 the company decided to purchase American Life Insurance Company (ALICO) from AIG for US$15.5 billion to achieve these objectives. The acquisition of Alico, which operates out of 50 countries, has given MetLife immediate access to new Asian, European, Middle Eastern, and Latin American insurance markets and they been rewarded already as the international segment reported operating earnings had increased by US$578 million from US$189 million in the year-on-year for the quarter. This has come while the operating earnings in Metlife’s home US market have fallen 23 percent to a comparable US$655 million, due to increased insurance reserves, high catastrophe losses and flagging consumer confidence.
This influx of new international business, led by the ALICO deal, has helped MetLife’s premiums grow by a remarkable 41 percent year over year to a record US$12 billion in q3 2011. As the global economic order subtly changes in the wake of the 2007-2008 financial crisis, multinational insurers such as MetLife are finding value in re-positioning their activities to ensure that they have greater access to the emerging markets that are now providing all insurers with the most profound sales and earnings growth opportunities.
Companies active in the US health insurance sector have also put forth their third quarter earnings. This week, Aetna Inc reported US$490.4 million in earnings as well as a US$117 million after-tax gain for the period, due primarily to reduced claims exposure in the United States. The nation’s third largest health insurer noted that while revenue and medical enrolment dropped during the quarter (by about 1 percent to US$8.4 billion and 18.2 million policyholders), disciplined underwriting and cost management trumped performance expectations and have enabled the company to raise its 2011 earnings forecast. The company’s overall healthcare costs have in turn dropped by 5 percent to US$5.36 billion, mainly because insured Americans in general are choosing to file fewer health insurance claims.
The declining utilization of healthcare benefits in the US has been a recurring issue for the past few quarters as more Americans choose to abstain from elective treatment, doctors visits, and any other absence from work during these uncertain economic times. Aetna’s total medical-benefit ratio, which is the amount of premiums actually paid out in patient medical costs, has fallen from 81.8 percent to 78.9 percent this year. The ratio was aided by a considerably higher reserve development, which indicated that the company had overestimated what it would in fact be paying out in patient claims. Because this lower-than-expected claims ratio has not however put any serious downward pressure on premium pricing, Aetna and its health insurance competitors are able to keep turning in strong performances. Analysts expect Aetna’s 2012 operating earnings to further improve, due to an expected decline in medical claims trends coupled with constructive regulatory adjustments in medical claims expenses.
Aetna’s two largest rivals based on enrolment and revenue, WellPoint and UnitedHealth, have also reported better than expected third quarter earnings and have raised their 2011 earnings reports in tow. On Tuesday, WellPoint noted that company enrolment had increased by 2 percent to 34.4 million members amid strong revenue performance for the quarter, with particular growth witnessed its newly acquired senior business. The demand for Medicare-supplement insurance services offered by private companies will increase as the burgeoning ranks of US retirees have come to expect similar benefits to those they have enjoyed throughout their career and appear willing to pay for them. UnitedHealth were also able to beat quarterly performance expectations but warned that medical costs are expected to increase in the fourth quarter and will bite into earnings throughout 2012.
Insurance groups from America’s greatest economic partner and rival China also presented quarterly performance figures this week. China Life Insurance Co, The mainland’s largest life insurance firm, said that its net profits declined by 45.7 percent to CNY3.75 billion (US$586 million) during the third quarter. In a statement filing to the Shanghai Stock Exchange on Thursday, the company acknowledged that the decline in profit came as a result of declining investment returns and losses from asset devaluation. Overall, China Life’s profits for the first three quarters have dropped by 33 percent annually to CNY 6.72 billion (US$1.03 billion), according to Chinese accounting standards. As this has happened however, the company’s total insurance premiums have continued to rise, amounting to CNY262 billion (US$41.2 billion) at a 2.6 percent annual growth rate. China Life’s performance relies heavily on investment income and thus it is more sensitive to stock-market swings than some of its domestic rivals. Going forward though, low interest rates and national and global economic volatility will require the company to be more disciplined than ever in their underwriting and investment decisions.
Ping An Insurance, the mainland’s number two insurer, also reported a considerable 44 percent decline in third quarter profits this week. However, the source of these shortfalls was different to that of their big domestic rival China Life. According to a company filing, Ping An’s earnings were hit by the one time CNY1.95 billion (US$310 million) acquisition cost of Shenzen Development Bank(SDB). Ping An completed its restructuring with SDB in July, with the banking business now contributing CNY5.32 billion (US$840 million) in earnings during the reporting period. Excluding the cost of the acquisition, Ping An said it would have recorded a 29.1 percent year-on-year rise in net profits attributable to shareholders worth CNY16.47 billion (US$2.59 billion). Ultimately the acquisition could prove fruitful to Ping An as having a more diversified business portfolio will ultimately help protect the Chinese insurance giant from adverse global financial market volatility in the future.
Insurance Companies Mentioned
MetLife
With over 140 years of insurance expertise, MetLife aims to be an innovator in the field of international Life insurance. Globally, MetLife is able to offer its clients accident and health insurance, life insurance, disability income protection, and retirement and savings products.
ALICO
The American Life Insurance Company, known as Alico, provides a broad, innovative range of insurance and savings products for individual customers, corporate customers and high net worth clients. Their products include; health insurance, life insurance, savings plans, accident insurance, retirement planning and travel insurance among others services.
Aetna
Aetna international health insurance Aetna is a leading global diversified health care benefits company head-quartered in the U.S., serving approximately 35.8 million people with information and resources to help them make better informed decisions about their health care. Aetna offers a broad range of traditional and consumer-directed health insurance products and related services, including medical, pharmacy, dental, group life and disability plans, medical management capabilities and health care management services for Medicaid plans.
WellPoint
WellPoint is the largest health benefits company in USA, with more than 33 million members in its affiliated health plans. As an independent licensee of the Blue Cross and Blue Shield Association, WellPoint serves members as the Blue Cross licensee for California; the Blue Cross and Blue Shield licensee for Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri, Nevada, New Hampshire, New York, Ohio, Virginia, and Wisconsin. In a majority of these service areas, WellPoint does business as Anthem Blue Cross, Anthem Blue Cross Blue Shield or Empire Blue Cross Blue Shield. WellPoint also serves customers throughout the country as UniCare.
China Life Insurance
China Life Insurance Company Limited (China Life) is a People’s Republic of China-based life insurance company. The products and services include individual life insurance, group life insurance, accident and health insurance. The Company operates in four business segments: individual life insurance business, group life insurance business, short-term insurance business, and corporate and other business.
Ping An Insurance (Group) Co. of China Ltd.
Ping An Insurance is the first integrated financial services conglomerate in China that blends its core insurance operations into services including securities brokerage, trust and investment, commercial banking, asset management and corporate pension business to create a highly efficient and diversified business profile. The group was established in 1988 and headquartered in Shenzhen, Guangdong Province, China.
Oct
27
Swiss Re Steps Up Microinsurance Initiatives in Developing Countries
Filed Under Uncategorized | 2 Comments
Global reinsurer Swiss Re have added to their impressive international microinsurance platform this month with the announcement of a new three-year partnership with USAID to provide customizable, market-based insurance products for vulnerable communities throughout the Americas, Africa and Asia.
Microinsurance refers to insurance products designed to provide basic, inexpensive cover for low-income individuals and families who require protection for typical risks including the affects of severe weather conditions, healthcare, crop, life and non-life products. Microinsurance offers vital security options for populations that need insurance protection but until now have been unable, or even aware of, the ability to afford the relatively high cost of coverage. The premiums and coverage are kept at a low level in order to make the products affordable and attractive to these first time policyholders. For the insurers meanwhile, microinsurance presents a key commercial opportunity due to the high volume of available policyholders combined with low cost margins. Insurers also benefit from working with local partners in largely under-penetrated markets and through mircoinsurance they can establish a substantial market presence, putting them in a good position to sell traditional insurance policies going forward. According to a Swiss Re sigma study, the global microinsurance market is estimated to be worth over US$40 billion. The Asia Pacific region is cited as the fastest growing region for microinsurance development, with Africa and Latin America both having smaller, but growing, markets.
Swiss Re’s three-year partnership with USAID, a federally funded humanitarian organization, will target poor farmers in vulnerable communities on three continents. The two organizations will work together to develop cost-effective strategies that enable these farmers to prepare for and efficiently manage the cataclysmic impact that upcoming droughts, floods and other severe events could have on the livelihoods of themselves and their families. Overwhelming scientific evidence suggests that large natural disasters and other catastrophic weather events have and will become increasingly more common worldwide as a result of climate change. Unfortunately many of the areas that will be most affected by the considerable rise in worldwide temperature will be farming lands, and the communities that rely almost exclusively on them for subsistence. The results of climate change and extreme weather conditions are becoming apparent to insurers too, with floods, droughts, earthquakes, hurricanes and tornadoes all having had a significant impact on insurers’ claims and loss ratios over the past few years. It thus becomes incumbent on aid organizations and insurers to build resistance to climate change in these areas and reduce the future costs of natural disasters if possible.
Both Swiss Re and USAID recognize that providing farmers in poor areas with the appropriate tools and information to manage risk will enable them to more easily obtain the loans necessary to invest in technologies that improve their crop yields and productivity, a considerable benefit to the whole community. Swiss Re has agreed to contribute its substantial risk management expertise towards assisting two ongoing USAID initiatives in particular. Swiss Re will first address weather-related risks through The Global Climate Change Initiative, which focuses on resisting extreme climate events and accelerating the global transition into a more sustainable low-carbon economic environment to reduce the occurrence of natural disasters in the future. The world’s largest reinsurer will also work with USAID on the United States Global Hunger and Food Security effort, which helps emerging market countries develop more stable and productive agricultural sectors to deal with the root causes of widespread hunger and mal-nutrition. More resilient farming systems are urgently required due to the predicted increasing preponderance of extreme weather events and the instability that reaps on agricultural output.
Swiss Re’s partnership with USAID has come amid a flurry of similar venture activity for the company. In September, the reinsurance group announced two new microinsurance initiatives at the Clinton Global Initiative (CGI) Annual Meeting in New York, USA. At the meeting Swiss Re outlined plans for a new cholera insurance scheme for female entrepreneurs in Haiti, which is designed to tackle the outbreak of the disease on the island nation. Working in conjunction with a local Haitian operation, Swiss Re will offer insurance policies that provide a guaranteed payout once certain health and sanitation conditions are met. It is hoped this policy will build off an effective catastrophe microinsurance scheme developed by Swiss Re earlier in the year.
The second plan outlined at the CGI is designed to protect farmers in Senegal from potential crop losses due to climate change and other adverse weather events. To accomplish this, Swiss Re has partnered with Oxfam America, the World Food Program and USAID again, to establish an innovative ‘insurance for work’ scheme that would give farmers the option to pay for their insurance premiums with their hard labour instead of cash. The initiative was first brought into Ethiopia earlier in the year and is part of Swiss Re’s overall US$1.25 million commitment to reinsurance in the region. Participants in the program will work on irrigation and forestry projects in the local area, which are intended to ultimately reduce the impact of climate change and strengthen their communities.
Other multinational insurers have come to recognize the importance of microinsurance and want to capitalize on this relatively new line of business for the mix of opportunities it offers, both in business and, of course, in ethics. Canadian insurer Manulife recently announced its intentions to expand its microinsurance operations in Vietnam, a product line that has become integral to their success in the Southeast Asia country. To date Manulife has already sold around 80,000 microinsurance policies in Vietnam, far exceeding the company’s expectations. Microinsurance alone made up 6 percent of Manulife’s total sales in Vietnam last year. German insurance giant Allianz has also had success in the region, securing over 230,000 new Indonesian customers with microinsurance policies last year. Insurers clearly have the opportunity now to develop policies to meet the protection needs of the more vulnerable element of the world’s population. As Michel Liès, Swiss Re’s chairman of global partnerships, explained, there is an obligation to increase insurance penetration across the world as it is a frequent contributor to overall economic development.“Insurance is a cornerstone of economic growth and stability, and [we at] Swiss Re are proud to contribute our expertise so that even the poorest farmers and their families can cope when crops are ruined by drought, flood or other climate related impacts.”
Companies Mentioned
Swiss Re
The Swiss Reinsurance Company Ltd was established in 1863 and is present in more than 20 countries. Swiss Re provides reinsurance products and financial service solutions. It offers various reinsurance products covering property, casualty, life and health insurance as well as special lines such as agricultural, aviation, space, engineering, HMO reinsurance, marine, nuclear energy, and special risks.
Allianz
Allianz Insurance 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.
Manulife in Vietnam
Manulife Vietnam was the first 100 per cent foreign-owned life insurance company in Vietnam, beginning its operations in September 1999 as a joint-venture called Chinfon-Manulife Insurance Company (CMIC). Manulife in Vietnam has grown rapidly to become a world class company providing a competitive array of financial protection products and services to Vietnamese customers. Since commencing operations, Manulife has helped more than 300,000 middle to upper-income Vietnamese plan right for their life
Oct
26
Industry Consolidation and High Prices Pose Concerns for American Health Insurance
Filed Under USA Health Insurance | 1 Comment
American consumers who have noticed the dwindling number of private health insurance coverage options made available to them in recent years have perhaps had their concerns verified this week. A new report released by the American Medical Association (AMA) has found that four out of five metropolitan markets in the United States lack a truly competitive commercial marketplace for health insurance. This fresh analysis could go a long way in explaining why insurance industry performance in the US has stagnated while international markets continue to grow.
For the AMA’s 2011 edition of ‘Competition in Health Insurance: A Comprehensive Study of U.S. Markets’, the leading US trade body for physicians examined private health insurance market shares against new federal concentration measures in 368 prime metropolitan markets across 48 states. Researchers incorporated the most recent insurance enrollment figures from Health Maintenance Organizations (HMO) and Preferred Provider Organizations (PPO). The dataset excluded research relating to public healthcare programs, such as Medicare and Medicaid, was excluded, but included Americans who choose to pay for private coverage on their own.
The AMA study revealed that there is a “significant absence” of competition amongst American health insurance firms in a staggering 83 percent of all domestic metropolitan markets surveyed. According to the AMA, these health insurance market environments would be classified as ‘highly concentrated’ based on the recently revised Horizontal Merger Guideline that was issued by the U.S. Department of Justice and the Federal Trade Commission last year. Under the previous version of the federal market concentration measures the results would have been even worse, with 98 percent of metropolitan markets classified as ‘highly concentrated’ due to one player holding at least a 42 percent market share. Clearly, the AMA argues, years of industry consolidation has had the effect of restricting competition and limiting consumer power, and could in fact raise anti-trust implications for several of these large companies.
Broken down more succinctly, the AMA report found that in about half of all metropolitan markets surveyed, there was at least one health insurance company with a majority commercial market share of 50 percent or more. Indeed, in 24 out of the 48 states reviewed, the two largest health insurers in their sate would have a combined market share for health insurance consumers of at least 70 percent or more. According to the data, Alabama was the state with the least competitive health insurance market and had two insurance companies controlling roughly 95 percent of the marketplace. In order, the next nine states with the least competitive health insurance markets were Alaska, Delaware, Michigan, Hawaii, Washington DC, Nebraska, North Carolina, Indiana and Maine. Oregon’s health insurance market meanwhile was the most competitive in the US, with the top two insurers only controlling a 39 percent share combined.
So competition in the US health insurance industry is deteriorating as more commercial markets across the country becoming dominated by one or two insurance groups. In 2009 AMA found that just 18 of the 42 states it polled had two insurers with a combined market share of 70 percent or more. In markets that are dominated by only a few health insurers, company revenues have been growing faster than the average health inflation index. Insurers have been able to maximize the rates they charge employers and families in these markets and ultimately create real cost barriers to healthcare. The authors of this year’s report believe that the monopolistic tendencies of large health insurers have been largely ignored and that this would continue to restrict marketplace competition without more critical oversight. “New data presented by the AMA demonstrates the degree of anti-competitive market clout that some health insurers have gained through mergers and acquisitions,” said AMA President Dr. Peter Carmel, in a news statement, adding that “our new report is intended to help regulators, lawmakers, researchers and policymakers identify markets where mergers among health insurers may cause competitive harm to patients, physicians and employers.”
The concentration levels now present in US health insurance markets have been largely the result of heightened consolidation efforts taking place within the American health insurance industry. Indeed, according to some reports there have been over 400 mergers involving health insurance companies over the past fourteen years in the United States. While merger and acquisition activity can yield improved industry performance, it can also lead to the exercise of market power and this in turn can negatively affect both healthcare providers and consumers. The AMA believes that healthy competition in the marketplace is a key way of keeping costs and premiums down. The numbers present in their report, meanwhile, should raise anti-trust concerns for the US health insurance industry.
It cannot be argued that Americans are paying more for health insurance and healthcare today than ever before. A report released by the Kaiser Family Foundation in September showed that the average annual premium for family coverage through employer-sponsored insurance hit US$15,073 in 2011, a 9 percent rise over the previous year. Kaiser noted that the overall cost of family coverage in the US has doubled in the past decade; health insurance premiums in 2001 averaged out at US$7,061 per year. The steep hike in insurance rates has come in conjunction with only a 34 percent gain in real wages over the same period, leaving many to absorb healthcare costs through debt or having to avoid vital medical treatment altogether. In a recession with high unemployment rates, many employers find themselves in a position where they no longer need to provide cost-effective health benefits to attract or retain employees. Employers have also attempted to shift rising healthcare costs to workers, making insurance less affordable. According to the recent US Census Bureau data, 14.3 million Americans, or 15 percent of all full-time employees, were uninsured last year.
It is unclear how the Obama Administration’s Affordable Care Act will impact health insurance costs, coverage and competition concerns at present, as many important facets of the healthcare law are still being debated on a political level and in the courts. Under the Affordable Care Act nearly all American citizens would have to carry health insurance in 2014 or else face a fine. The federal law requires that the general public have insurance policies which meet certain minimum benchmarks, more sufficient than basic catastrophic coverage and preventive services. This individual mandate is currently facing legal challenges in 26 states which contend that the United States government cannot compel its citizens to engage in such commerce. Several federal courts have already ruled that the individual mandate violates the US Constitution, and the US Supreme Court is ultimately expected to decide upon the controversial issue soon.
Cost and competition concerns have not been as apparent for companies focused on providing international insurance policies. While American health insurance policies face a bevy of restrictions based upon the insurer and available health network, including limited choice of medical facilities, doctors, and treatment options, many international health insurance plans feature two areas of coverage, worldwide and worldwide excluding the US, to avoid the skyrocketing healthcare costs in America. In general, these international health and medical insurance plans will offer access to any hospital or healthcare professional available, no age/pre-existing condition refusals with guaranteed renewals, and even provide emergency cover in the United States if certain events come to pass. Indeed because the market in the international health insurance industry has remained more open, health inflation is kept down and plans have become more competitive when compared to what has happened with traditional local American plans. US-based insurers have taken note of the demand for this type of product and are expanding into international markets themselves through merger and acquisition activity in emerging international insurance markets.
Company Mentioned
The American Medical Association
The American Medical Association (AMA) is the largest physician organization in the United States and plays a key role working on the most important professional, public health and health policy issues facing the world. The AMA was founded in 1847 to establish a code of medical ethics and today has some 228,000 members.
Oct
26
Aviva Global Lifecare Plans to be Shut Down
Filed Under Aviva, Expat Insurance, Health Insurance, Hong Kong, Medical Insurance | 4 Comments
Aviva Life Insurance Company Ltd, part of Aviva PLC, has announced to its brokers and agents in Hong Kong that the company will be cancelling its line of Aviva Global LifeCare products.
The Aviva Global LifeCare plan is an individual international private medical insurance policy licensed out of Hong Kong SAR.
In a recent communication to the Aviva distributor network in Hong Kong the company has stated that ”we have decided to discontinue any new business of our Aviva Global Lifecare products with immediate effect and also the renewal of all existing Aviva Global Lifecare policies.”
This means that any policyholders in possession of an Aviva Global LifeCare plan will be unable to renew their policy. However, until the plan reaches the renewal date, now the cancellation date, Aviva has confirmed that customers will be able to seek coverage under the plan.
This poses a grave concern for many individuals and families currently covered by the Aviva plan, as the cancellation will force them to seek alternative health insurance options. Any medical conditions developed by the policyholder while enrolled on the Aviva policy would subsequently be treated as Pre-Existing with any new health insurance application.
Pre-exsiting medical conditions are normally not eligible for coverage under an international health insurance policy.
As of the time of publishing, Aviva has offered no solutions for continuing coverage to Aviva policyholders currently suffering from severe chronic conditions whose plans will be cancelled. This means that individuals experiencing life threatening medical conditions, such as cancer, are now no longer to obtain coverage from a plan which they have been enrolled on for a number of years.
Additionally, many Aviva policyholders are finding that they have only just completed the waiting periods associated with coverage benefits such as Maternity, and are now being told that their policy is no longer being offered. These individuals must find new coverage and complete a new set of waiting periods before they are able to start their family with the protection they deserve.
A current Aviva policyholder, who did not wish to be named for this story, said of the cancellation:
“This is horrific; I’m absolutely outraged at the decision. This belies an utter lack of commitment to the customer and is, quite frankly, extremely disappointing from one of the world’s, supposedly, ‘premier’ insurance providers… How am I meant to get coverage now?”
Upon being asked if he had any pre-existing conditions which would require continuing coverage the policyholder stated:
“Yes, and it’s definitely a condition which will be excluded from my next plan – if I’m even accepted. The whole situation is verging on the criminal, in my opinion.”
One woman, asking to be called Mrs. S in this article, who had purchased the policy expressly for the maternity coverage said of the news that “this is insane! My husband and I were going to try to start a family this year…. We now have to wait another 10 months on a different policy before we can give birth? How can Aviva do this?!”
Aviva entered the international health insurance market with the Aviva LifeCare plan in 2007 and it is unknown at this moment why the company is choosing leave. Additionally, it is also unknown whether Aviva’s offerings in the United Kingdom or Singapore will be affected by this decision.
However, it should be noted that Aviva has had a history of extreme premium increases over the last 2 years with the LifeCare product, with average plan costs doubling for 2 consecutive years. This is unusual for Health insurance and may indicate a structural unsoundness at the core of the Aviva LifeCare business.
At this time International Insurance News recommends that any person holding an Aviva Global LifeCare Health Insurance policy should contact their agent, broker, or representative to establish continuing coverage options.
Oct
25
Chinese Insurers to Face Tighter Debt Rules, Foreign Competition in Auto Market
Filed Under Auto Insurance, China, China insurance | 1 Comment
There could be changes afoot in China’s powerhouse insurance industry as the country’s national regulator looks to address the capital position, debt, and other competitive issues amongst players active across multiple business lines in the market.
Last week Mainland China’s insurance regulator, The China Insurance Regulatory Commission (CIRC), released a statement outlining tighter credit rules for domestic insurance companies who have been looking to raise further capital through subordinated debt issues. The CIRC has been looking to strengthen its oversight over insurer financial matters to mitigate the threat of systemic risk spreading from the insurance industry to the banking sector and vice versa during these volatile macroeconomic times. Subordinated debt is a lower priority bond tool, which is only made repayable after all other debts (from government tax authorities, senior creditors etc.) have been collected. While the technique offers investors less insurance in the event an issuer can’t repay, they remain attractive because they provide markedly higher yields than regular bonds due to the increased inherent risk. Subordinated debt has proven to be a popular fundraising mechanism for many Chinese financial institutions. Banks and insurance groups have typically held onto each other’s subordinated debt despite the extra risk. Indeed, China Life Insurance Co, the nation’s largest insurer by premium, was approved to raise CNY30 billion through a debt issue this week.
Under the new CIRC regulations, only insurance companies that have been active in the market for at least 3 years and have not incurred any significant administrative penalties will be eligible to issue subordinated bonds. Previously there had been no such requirements and many insurers used proceeds raised through subordinated debt issues to mask operating losses. The amount of outstanding subordinated debt these Chinese insurers can now hold will be limited to 50 percent of their net asset value going forward, versus 100 percent allowed earlier. Parent companies will also be barred from issuing debt on behalf of any insurance subsidiaries they own. The CIRC are certain these moves will all work to lower the default risk present in the Chinese insurance industry, and prevent contagion with the banking and financial services sector. “The changes were made to prevent systemic risks and maintain financial market stability,” the CIRC statement read.
The Chinese insurance regulator reiterated concerns about insurer capital positions again this week. According to the Wall Street Journal, the CIRC are worried that domestic insurance companies are continuing to struggle to make payments to policyholders. The CIRC is now looking at ways to help insurance companies replenish their capital base and intimated that they may help them tap into the offshore Yuan market in Hong Kong for supplementary funds. Despite the growth potential of the Chinese insurance industry, there remain many challenges to the market due to inflationary pressure, macroeconomic policy changes and weak global capital markets. Insurance companies will need to adapt to changes in the Chinese economy, adjust their business models and increase both equity investments and bank deposits, all while making sure to maintain a healthy solvency ratio.
Insurance companies rely on both bank deposits and securities investments to settle policy claims and payouts. Because of this dependency, a sagging stock market (China’s share market down 16 percent on the year) has affected the ability of domestic insurers to make payments on outstanding policies. When you combine these macroeconomic worries with the rapid rise in demand for insurance business in China, it becomes apparent that more capital is necessary for insurers to maintain their trajectory. This was supported in a July report by credit analysts from Standard & Poor’s Ratings Services, who project that Chinese insurance companies will need to raise more than CNY110 billion (US$17 billion) of fresh external funding to sustain their industry’s further growth and development over the next three years. Although the credit outlook for China’s life and property insurers will remain stable to positive, the ratings agency expects the industry to gradually slow down.
Speaking at a forum in Beijing, Chen Wenhui, CIRC vice chairman, said that the regulator would help domestic insurers raise cash through bond issues in Hong Kong, which would fall in line with existing Chinese government plans to accelerate the development of the Special Autonomous Region into the premier offshore yuan center. Despite their sizeable client base, Chen noted that insurers will face moderate industry risk in the long term without extra capital due to their relatively low capitalization, unrefined risk management practices, limited asset and liabilities management options and any adverse macroeconomic developments. If insurers are able to make their debt appear more attractive they could quickly capitalize on the country’s fast-growing bond market and supplement their operations.
Mr. Wenhui also noted that the CIRC would study the relaxation of certain insurance regulations to promote new channels of business growth in China. Among these regulatory changes could be the potential introduction of foreign entrants into the country’s humongous motor insurance market for the first time.
According to Bloomberg, the CIRC has put forth a measure to China’s State Council which would allow international insurance companies that meet select criteria to sell compulsory third party liability auto insurance. The proposal originated as a response to an American Chamber of Commerce complaint, which alleged that restricting mandatory motor lines effectively blocked AIG and other insurers from competing fairly in the market, as consumers tend to purchase their optional and compulsory motor insurance from the same company. While tightened regulatory price controls have lifted China’s motor insurance sector into overall profitability since 2009, the industry still faces a barrage of infrastructure and service problems, particularly in mandatory lines. In opening the country’s motor insurance market, the CIRC looks to both tap foreign expertise and stimulate domestic competition to address these issues and improve service standards.
The Chinese insurance industry has experienced pronounced growth in the past decade and still has plenty of room to grow due to generally stable economic indicators and an under-penetrated protection market. Despite volatile global financial market conditions, Chinese insurers remain attractive investment targets, for large multinational insurance companies and investors from the financial-services sector, amongst others. Indeed, almost US$25 billion in dual share offerings in Hong Kong and Shanghai could be coming to the market over the next year from Chinese insurance companies. PICC have plans to raise between US$5 billion and US$6 billion in a dual listing this year. New China Life Insurance, China’s third-largest life insurance firm has also recently applied to the Hong Kong stock exchange for a dual listing. The insurer is aiming for US$4 billion in fresh funds by the end of the year. Taikang Life Insurance, China’s fifth-largest insurer by premiums, has also targeted between US$3 billion and US$4 billion from a Hong Kong listing in the next couple of years as well. Market observes will be watching closely to see if these insurers can all dual list successfully and build on their enormous domestic customer base to establish a more international presence.
Oct
24
Malaysia’s Etiqa Targets Insurance Growth
Filed Under Asia | Leave a Comment
Etiqa Insurance, one of Malaysia’s largest composite insurers and takaful providers, is considering further merger and acquisition activity going forward to boost its business, both locally and overseas.
Etiqa is a joint venture insurance operation that was formed in 2007 by a merger between Malaysia National Insurance and Takaful Nasional. The company is 69.05 percent owned by Maybank, with Ageas Insurance International holding the remaining stake. Etiqa now distributes conventional insurance and Islamic takaful proucts under a unified brand name. The company has progressed quickly since its inception and now believes it could vie for the top spot in the Malaysian insurance industry.
Etiqa officials outlined the company’s business ambition through a series of media events in the past week. The Malaysian insurance conglomerate wants to become the overall industry leader by 2015 and intend to leverage their position as the country’s largest takaful distributor and to continue developing a fast growing conventional life insurance business to meet these objectives. Etiqa expect their overall gross written premiums to amount to MYR7.5 billion (US$2.37 billion) by 2015, up from the MYR4.3 billion (US$1.36 billion) projected for this year. Etiqa Chief Executive Officer, Hans de Cuyper explained to the press that hitting these premium targets was achievable given the Southeast Asian country’s growing appetite for insurance and investment solutions. “Based on our own extrapolation, we can be the largest insurer by 2015 by growing top line to MYR7.5billion from MYR4.3billion currently. That alone will be sufficient to be at the top,” de Cuyper said.
Etiqa’s current premium levels place them as the number two insurer in Malaysiam behind market-leading Great Eastern Life, who project MYR5.6 billion (US$1.77 billion) in gross written premiums for 2011. Despite trailing Great Eastern, Hans de Cuyper told reporters that there was plenty of space in the Malaysian insurance market to expand and that the company remained in a solid fiscal position to facilitate growth. “It is definitely an achievable target for us considering our solid financial strength and as we increase our GWP from MYR2.8 billion (US$886 million) in 2006 to MYR4.3 billion (US$1.36 billion) this year, making us a strong number two in the market,” he said. The sovereign financial woes affecting the US and the Eurozone are not expected to have a negative impact on the group’s investments.
Through 2012, Etiqa plan on gaining market share through the development and launch of various new life and family insurance products in Malaysia. This reflects an overall industry trend in the country, which has seen life and family protection products become increasingly more popular, as more people look to cost-effective savings and investment-linked solutions, over just general insurance. A new study released last month by ING Insurance Berhad revealed that 83 percent of all Malaysian consumers believe that there was a greater need to protect their lifestyles now than compared to just 12 months ago. Rising healthcare costs and lifestyle expectations has enabled the attitude towards and awareness of insurance to change quickly. Overall, the rise in income, healthcare, education and housing opportunities across most of Asia, have given families in the region greater access to a lifestyle they would now like to protect.
Etiqa is also working to upgrade its infrastructure, optimize operations and implement bold new marketing strategies to humanize insurance and takaful for a still largely unaware Malaysian populace. By year’s end, the company is also aiming to secure a wealth management license under the private pension framework, which was announced as part of Malaysia’s 2011 Budget. In addition, Etiqa remain open to growing their operations in Malaysia either organically or through mergers and acquisitions with smaller domestic players, but as de Cuyper explained, this would depend on market circumstances going forward. “If any potential acquisitions can add to our strength, fit into our financial ambitions and culture, then we may consider it,” de Cuyper said.
Any upcoming acquisition activity for Etiqa will likely come through the company’s dominant takaful branch. Etiqa Takaful has been at the forefront in the development of the takaful insurance industry in Malaysia, and could become the first company of its kind in the world to exceed MYR2 billion in annual Islamic contributions this year. Etiqa Takaful command roughly 45 percent of the domestic takaful market at present and have also now established Islamic insurance operations in Brunei, Singapore and Pakistan as well. According to Etiqa Takaful officials, Indonesia has been earmarked as the next likely destination, and could become part of the Islamic insurer’s regional portfolio by the middle of 2013. After gaining almost half of the takaful market share in Malaysia it has become important for the company to balance its insurance business through further acquisitions. Indonesia offers significant potential for takaful insurance products due to its large predominantly Muslim population. Etiqa Takaful will also be able to leverage their relationship with Maybank, who already have a significant presence in the country. Maybank owns a full fledged Islamic bank (PT Bank Maybank Indocorp) and a full fledged commercial bank (Bank Internasional Indonesia) in Indonesia. Through their affiliation with Maybank, Etiqa thus gains an extensive regional distribution network, to aid sales of their bancassurance and takaful insurance products. “With an institution like Maybank behind us, we are definitely going to achieve and maintain our leadership in takaful and insurance,” de Cuyper said.
The takaful insurance market has become an important business line for multinational insurance companies searching for new sectors and opportunities for growth. In April, Ernst & Young’s World Takaful Report forecast the takaful market to be worth US$12 billion in 2011, growing 31 percent from US$9.15 billion in 2010. Key takaful markets are characterized by low insurance penetration rates and comparatively high rates of economic growth. Major foreign insurers have duly taken note of the huge growth potential from this brand of products. While the outlook in more established international markets remains quite static, demand for takaful insurance products, targeted towards predominantly Muslim populations in Middle-East, North Africa and South Asia, has grown significantly, particularly in Indonesia, Qatar, Saudi Arabia, the UAE and, of course, Malaysia
Insurance Companies Mentioned
Etiqa
Formed in 2007, Etiqa is the second largest combined insurer in Malaysia and the number one Takaful operator in the country. Etiqa today features the most robust distribution platform in Malaysia with a 23,000-strong agency force, 30 Insurance and Takaful branches, 450 Maybank branches and a host of other third party affiliates, all tasked with providing full accessibility and total convenience to customers.
Oct
21
Asia’s Life Insurance Gap Widens as Risk Aversion Rises
Filed Under Asia, Life Insurance | Leave a Comment
The aggregate mortality protection gap across 12 insurance markets in the Asia Pacific region has expanded significantly over the past decade, from US$16 trillion in 2000 to US$41 trillion in 2010, according to a new study published by global reinsurance company Swiss Re.
Swiss Re’s “Mortality Protection Gap: Asia-Pacific 2011” study is the first of its kind to track the mortality protection gap across multiple developed and emerging markets in the Asia Pacific region. The mortality protection gap is a deficit measurement that represents the difference between the income needed for a working person to maintain living standards for themselves and their dependents versus the actual amount of savings and life insurance in force that would be readily available to beneficiaries when the policyholder dies. Thus the mortality protection gap grows when the proportion of protection needed is not yet covered through either adequate insurance or savings plans. Swiss Re intend for their study to encourage the life insurance industry to better engage with the general public in Asia and to better educate them on the importance of life insurance matters.
Swiss Re found a sizeable gap in mortality protection across all developed and emerging Asia-Pacific insurance markets covered by the study, with China, Japan, India and South Korea tabling the greatest long-term savings deficit estimates. Overall the aggregate mortality protection gap in Asia grew by 10 percent annually over the past decade, from a US$ 16 trillion deficit in 2000 to US$ 41 trillion in 2010. According to the data, the Chinese mortality protection gap has widened the most in this time, moving from US$ 3.7 trillion to US$ 18.7 trillion at an 18 percent compound annual growth rate. India’s mortality protection gap also expanded at double digit rates, rising from US$ 2 trillion to US$ 6.7 trillion during the same period. Of the so-called developed Asian insurance markets surveyed, Japan has consistently posted the largest coverage gap, now at an estimated US$ 8.4 trillion, although South Korea’s deficit is now expanding at twice their pace, moving from US$ 1.8 trillion to US$ 3.6 trillion at a 7 percent annual growth rate in the past ten years. The life insurance gap in Australia meanwhile grew from US$ 540 billion to US$ 927 billion between 2000 and 2010, which was the fifth largest increase seen in the region.
According to Swiss Re, a typical family breadwinner should reserve around 10 times their annual salary towards life insurance protection for their spouse and children. However, the amount of protection currently in place for many Asians is simply not enough to protect their families should the primary wage-earner unexpectedly pass away. If you were to use India’s 2010 data for example, for every US$ 100 in protection income needed there is only on average US$ 7.4 available in savings and insurance, which equates to a massive US$ 92.6 mortality protection gap. Meanwhile, these gaps in coverage present an enormous opportunity for the international insurance industry, with Swiss Re calculating the cumulative value of Asia Pacific’s mortality protection gap to be worth US$ 124 billion in potential premiums.
Concerns about the extent of adequate life insurance protection across the Asia Pacific region have also been reflected in the results of another Swiss Re study conducted between April and May earlier this year. According to ‘Survey of Risk Appetite and Insurance: Asia-Pacific 2011,’ 20 to 40 year olds in the Asia Pacific region have become much more risk averse in the past few years, with medical costs and longevity concerns fuelling the need for greater insurance coverage and financial planning. The survey found that 40 percent of those polled across Asia believed that their families could struggle financially if adverse events, like an unexpected death, transpired. The same respondents identified insurance as an important protection too, despite policy uptake of pure life insurance products remaining quite low in many Asian markets.
As the economies of the Asia Pacific region continue to grow and develop, the demand of sufficient life insurance protection will rise in tow. While the large protection gaps apparent in populous Asian markets like China and India certainly offer significant premium growth opportunities for life insurers, developing attractive products and effective distribution channels is still proving to be a challenge. In the more mature markets such as South Korea and Japan, despite the insurance industry growth potential being more limited, large mortality coverage gaps will work to drive the development of protection and savings insurance products that are targeted at more high net worth customers.
Swiss Re’s research also revealed what life insurers need to do themselves to understand and attract the next generation of consumer in Asia. The main barriers to purchasing insurance in the region are cost and lack of available funds. However while this perception that life insurance is expensive remains, over half of Swiss Re’s survey respondents indicated that they would be willing to pay at or even above market value for a life insurance product that fit their needs. In fact, many respondents revealed that once the underlying cost of cover was known, it was less than what they had expected to pay for insurance. Paul Turner, Swiss Re Head of Client Management, Global Division believes that this gap in customer perception in Asia presents a clear opportunity for the international life insurance industry to promote the benefits of insurance and their strong value propositions in order to meet the specific needs of consumers, who put strong importance on value, reputation and financial security. “This perception gap in customers’ minds is an opportunity for the life insurance sector to reach out and provide greater clarity to consumers on the relative cost and value of pure life insurance, for example, by comparing the cost of insurance with that of a cup of coffee a day,” Turner concludes.
Companies Mentioned
Swiss Re
The Swiss Reinsurance Company Ltd was established in 1863 and is present in more than 20 countries. Swiss Re provides reinsurance products and financial service solutions. It offers various reinsurance products covering property, casualty, life and health insurance as well as special lines such as agricultural, aviation, space, engineering, HMO reinsurance, marine, nuclear energy, and special risks.
Oct
20
UK Inflation to Hit Pensions
Filed Under United Kingdom | 1 Comment
New research published by savings, investment and insurance specialist Standard Life warns that a substantial increase in inflation could cut the average spending power of a pensioner in the United Kingdom by over 60 percent when as they enter retirement,
The UK Office for National Statistics (ONS) reported on Tuesday that inflation had spiked to 5.2 percent in September, a 20 year high, and well above an economists’ consensus forecast of 4.9 percent. According to these statistics, the cost of living in Great Britain is rising faster now than in any other country in the European Union, barring Estonia. The ONS attributed the rise in inflation primarily to skyrocketing gas, electricity and fuel prices although food and transport costs were also considerably higher that last year as well. Overall, prices in the UK economy rose by 0.6 percent from August to September, with utility bills leading the way. The average UK gas bill went up by 13 percent while electricity rose 7.5 percent during the month. These price increases not only draw the immediate ire of households, politicians and consumer groups, but also affect UK savings and budgeting strategy going forward. By law, the government is forced to evaluate next year’s state pension payments in conjunction with the previous September’s inflation figures. With a 5.2 percent inflation rate, the UK treasury could incur a £3.4billion bill for benefits starting in April next year.
The record rise in inflation is particularly troublesome for pensioners and those that are entering the final years of their working lives because they must increasingly live off savings, devote more of their budget towards energy and utilities, and of course cannot work harder or hope for salary bonuses to offset reductions in the real value of currency. In fact, because more of their spending is tied to fast-rising energy bills, the real-term effect of inflation on those aged over 75 in Britain has been 20.2 percent over the past four years, compared with just 4.4 percent for the whole population. All told, as energy bills and food prices increase, pensioners remain considerably more vulnerable, particularly those on low incomes who rely on greater state support.
To make matters worse, a majority of UK pensioners have been lured by greater immediate benefits to opt for a level ‘inflation-proof’ annuity when they cash out their policy. As a result, many pensioners are seeing their monthly income gradually decline as the value of the pound wavers. What many have failed to understand is that ultimately the value of one’s pension could plummet if they live long enough and inflation stays high, and both events are considerably more probable nowadays than just a decade or so ago.
New data released by Standard Life this week works to confirm long-term pension fears and warn of the effects inflation could have on retirement wealth. According to Standard Life, a 90-year-old British man who retired at age 60 in 1981 with a level pension of £10,000 (US$15,800) a year would have the equivalent purchasing power of just £3,207 (US$5,067) a year today, a drastic 68 percent decline in 30 years.
Standard Life Head of Pensions Policy John Lawson wrote in the report that inflation would continue to have a considerable impact on the spending ability of pensioners in the UK. Vital utilities such as petrol, for example, now cost about £1.34 (US$2.12) a litre, compared with just 35p (US$0.54) a litre 30 years ago. These cost increases come as the average life span continues to lengthen, with a 60 year man retiring in the UK today expected to live for another 26 years on average. As people live longer, retirement incomes will need to stretch farther and more innovative and efficient savings plans will need to be utilized to guarantee elderly Britons a stable quality of life.
Standard Life’s research found that 57 percent of people somewhat understood the threat of inflation to their pension and would find a retirement income scheme that could better keep pace with the cost of living in the UK particularly attractive. However, of those surveyed only 3 percent had purchased an inflation-linked annuity in 2010. The majority of respondents indicated that they had chosen a flat-rate annuity because of the higher starting income available when compared with inflation-linked alternatives. Despite lower annuity rates, Standard Life advises people approaching retirement age to consider the full spectrum of impending cost considerations and that their own personal inflation rate will be considerably higher in the future compared to the average person in the UK due to the types of products and services they will consume. “10 years in retirement, a 60-year-old man who had purchased a RPI linked annuity with a fund of £100,000 (US$158,000) could achieve a higher annual income than someone who had purchased a level annuity,” John Lawson commented.
While the UK has experienced low inflation over the past decade, there has never been any guarantee that it could continue. The rising global demand for food and fuel, driven by emerging Asian powers like India and China, has come without a corresponding surge in supply and thus prices for the basic necessities across all markets have soared. A report issued by the OECD issued earlier this year confirmed that aging populations will cause global spending on long-term care to double or even triple by 2050. Those planning for their retirement today will need to save early and often to ensure they can afford food, fuel and other essential goods for a long time into the future. The cost of these basic items will likely grow as we approach a global population of 7 billion. Standard life concludes that while pension deficit spending is indeed a national problem that needs to be confronted promptly, individuals should take action into their own hands to prepare for the future.
“There are many options to consider at retirement which could minimize the impact of inflation on your income, so seeking financial advice is vital,” Lawson concluded.
Insurance Companies Mentioned
Standard Life
Standard Life was founded in 1825 and is headquartered today in Edinburgh, Scotland. The Standard Life group encompasses savings and investments businesses, which operate across its UK, Canadian and European markets. Through Standard Life Investments, the company manages assets of over £157 billion globally, including its Chinese and Indian Joint Venture businesses. At of April 2011 the Group had total assets under administration of £198.4billion and over 6.5 million customers around the globe.
Oct
19
British United Provident Association (BUPA) have seen their overall revenues increase by 6 percent in the first half of 2011, overcoming the global economic downturn largely on the back of the continued strong performance from its expatriate insurance and overseas healthcare operations. Bupa now intend to build upon this momentum and further develop their international medical distribution network, expanding the scope and rage of their operations in the Asia Pacific region in particular.
Bupa’s interim report showed that overall half year revenues were £3.9 billion (US$6.14 million), with underlying surplus rising sharply up by 35 percent from £162.1 million (US$255.16 million) to £247.2 million (US$389.12 million) for the period. These figures came as Bupa’s home UK market experienced a slight contraction, while their worldwide customer base rose by 1 percent to 10.7 million. International sales from Bupa’s Asian, Australian, Latin American and Middle Eastern operations have helped the company offset the loss of growth in previously dominant markets. The British healthcare conglomerate is now exploring new ventures to move forward with its international development strategy.
Bupa has long identified India as a prime target for further business development. The health insurance market in India is in a nascent stage, with low coverage rates and the majority of expenditure on healthcare coming out of patients’ pockets. However, with a population exceeding 1.1 billion people and a projected 600 million in the middle class by 2025, the country offers significant potential going forward. Bupa wants to capitalize on this huge demand. By their measurements, over seventy percent of healthcare expenditure in India is private and over 90 percent of what is spent is not insured.
Bupa entered the Indian health insurance market in 2010 through a joint venture partnership with Max India Ltd, launching a standalone private health insurer named Max Bupa. The Max Bupa Health Insurance joint venture now has a presence in nine large cities and has established a network link with over 700 hospitals across India. For the financial year 2010-11, Max Bupa’s premium from direct business written stood at Rs 254.6 million (US$5.18 million) and profit before tax was Rs 1162.4 million (US$23.65 million). Bupa has found themselves in a strong position in India through their MaxBupa venture already, with a sound reputation and over 100,000 insured customers in a market that is set to expand as economic conditions strengthen.
Max Bupa are now shooting for Rs 700 million (US$14.25 million) worth of new business premiums in India by the end of the fiscal year. To help achieve these goals, the insurer has been in negotiation with rural banks, co-operative banks and post offices this month to expand its distribution network and effectively engage the rural, largely underinsured, masses across India. Max Bupa has traditionally offered and promoted its insurance products through its agency force, telemarketing, direct sales or online channels. However, in order to reach the more remote areas of the country, gaining access to more entrenched business network, like community banks and post offices, becomes a vital tool. Mr Neeraj Basur, Chief Financial Officer of Max Bupa, explained to the press on Tuesday that establishing bancassurance relationships would allow the company to progress considerably. “Bancassurance is a good model for distribution of insurance products. Regional and co-operative banks have the kind of reach and expertise in this area so we want to tap them,” Mr Neeraj Basur said.
Talks are already well underway to distribute Max Bupa insurance policies through a tie-in with five regional and co-operative banks in Maharshtra, India’s second most populous state. Further expansion has been curtailed however by national regulatory roadblocks. Under existing Insurance Regulatory Development Authority (IRDA) law, commercial banks in India are only allowed to distribute the insurance products from one life and one non-life insurance company to bank customers. This has proven to be a particularly big obstacle for standalone health insurers like Max Bupa, as the non-life sector encompass a wide array of business lines, including automobile, property and creditor insurance, and thus could have a multitude of companies with differing products competing to fill a bank’s allocation. Max Bupa’s Chief Executive, Dr Damien Marmion, assured reporters that the company would work with regulators to address this regulatory issue, and that they would not be the last insurer to suffer from it “We are in talks with IRDA to allow banks to sell products of standalone health insurance companies alongside those of the life and non-life companies. The industry is in talks on this issue and something could emerge soon,” Dr Marmion said.
Indian state governments will want regulation dissuading private health insurance investment to be dealt with as well. Many states are keen to rope in private insurers to help bring scores of poor and unorganized workers into the fold of health insurance. For these reasons the Rashtriya Swasthya Bima Yojana (RSBY) scheme was launched by the Indian Ministry of Labour and Employment on April 1st 2008, tasked with providing sufficient health insurance coverage for families living Below Poverty Line (BPL), and to better protect them from the financial liabilities that arise out of health shocks involving hospitalization. The RSBY scheme is a cooperative venture between the Indian government and private health insurance companies. Insurance companies offering RSBY coverage are vetted and selected by the State to administer health insurance policies on behalf of the Indian government. Premiums are subsidized by the Indian government with the Central and State organizations splitting costs 75 percent and 25 percent respectively.
Max Bupa wants to provide health insurance cover under the government-sponsored healthcare scheme and to ultimately make it a commercially viable activity for the company. The insurer is currently bidding for the RSBY distribution rights in three states, with plans to design more appropriate cost-effective products for the unorganized labor market. If Max Bupa is able to find success through the RSBY scheme it could prove that health insurance products and providers can achieve results in what was previously considered to be an unprofitable market.
Insurance Companies Mentioned
MaxBupa
Max Bupa Health Insurance is a 74:26 joint venture between Max India Limited and UK-based Bupa. Bupa is a leading private healthcare provider with more than 10 million customers worldwide and over 60 years experience in the health sector. The Max India Group has expertise in both health and insurance related services including hospitals, clinical research and life insurance.
Bupa
Bupa is a leading international healthcare provider, offering personal and corporate health insurance, workplace health services and health assessments. The insurer today has ten million customers in over 190 countries, and over 52,000 employees around the world.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.
Join us on Google +
