Today, fraudulent claims pose greater costs to the insurance industry than ever before. Unfortunately, these costs will only continue to rise unless the sector begins to utilize the mountains of data within its access to curb consumer fraud. After all, it is the policyholders who pay through hikes in premium prices. As a result, retaining loyal customers while managing unnecessary costs remains the most difficult challenge for insurers.
In the United Kingdom alone, consumer fraud costs the insurance industry EURO2 billion (USD3.13 billion) annually, which roughly amounts to EURO44 (USD 55) added to each policyholder’s annual bill.
The extra premium costs originate primarily from the motor sector, and continue to increase despite insurers attempts to regulate them amidst modern compensation culture, according to a report by the financial services and investment media company Clear Path Analysis.
Clear Path Analysis’ report also placed stress upon EU insurers to maintain clientele confidence, and to solve the issues of “reducing operational overheads” and “instigating smarter technologies to identify and reduce risk.” Failure to address these problems, coupled with poor customer focus due to disjointed resource and information databases could very well compel clients to change insurers.
The Association of British Insurers (ABI) revealed that within the motor sector, roughly 1,200 whiplash claims are fabricated daily, constituting the largest proportion of excess payment, leading to increased premiums and reducing consumer confidence.
Now, EU insurers are attempting to develop ways to both reduce the amount of fake claims and comply with Solvency II requirements. Nevertheless, fake claimant methods are becoming increasingly effective, forcing claims-management departments to respond quicker to address customer concerns.
Jamie Hutton, Head of Insurance Practice at Detica NetReveal, a world renowned financial loss and crime prevention solution, shared her advice on the path insurers should take to curb fraud. Hutton noted that insurers need to tap into the vast amounts of data its businesses keep, and turn that information into “actionable intelligence”. Next, they need to shift focus from simply detecting fraud to also preventing it. Through analysis of the data held, insurers would be able to piece together patterns and better calculate risk for claims and policies, and therefore learn more about the clients they serve, while distinguishing the loyal customer base from the frauds.
In a recent example, the Supreme Court dismissed an appeal by insurer Zurich UK to discard a claim in its entirety because parts of it were fraudulent. Shaun Summers, the claimant, sustained significant injuries while working on a forklift truck for Fairclough Homes, and exaggerated a claim to ‘entitle’ himself to EURO838,000 (USD1.05 million) compensation from Zurich.
Although multiple components of Summers’ claim were false and “guilty of a serious abuse of process”, the Supreme Court could not deny his entire request because it declared such an action not “proportional or just” to the injuries he did receive, dismissing Zurich’s appeal.
If the opposite occurred and Zurich’s appeal was passed, it would have set a positive beginning for future insurers to reject liability claims on the basis that parts of the claims are false. The court’s verdict was no reason for despair, however, as the Supreme Court unanimously confirmed its power to dismiss fraudulent claims in exceptional situations, but declined to do so in this case.
More importantly, Summers ended up receving only EURO88,716.76 in damages once it was revealed that his claim was blown out of proportion, most of which would pay for his multiple legal fees.
Regarding the ruling, Zurich UK Chief Claims Officer Tony Emms, shared that his firm was disappointed with the final verdict of the case, yet content that the Supreme Court at least, sided with his legal perspective. Emms went on to affirm that Zurich will not rest in the battle against insurance fraud, and that fraudsters should now think twice before trying to scam insurers after the Court advocated its support for sending those convicted to jail.
As is evident, insurers are beginning to get a grip on the resources available to them, and take stronger stances to curb the plague that is insurance fraud. With more innovative security measures to be taken, and more insurance companies to join the effort, fraudsters are sure to be deterred from fabricating liability claims in the near future.
Insurance Companies Mentioned
Zurich Insurance Group
Zurich is a leading global insurance group, with 60,000 employees in over 170 countries. Its goal is to help its customers, ranging from individuals to international corporations, understand and protect themselves from risk. Zurich offers a wide range of insurance products, solutions and advisory services.
The recent annual conference of the UK risk-management association, Airmic, released news of a “10 fold” increase in enquiries regarding cyber insurance products, but trends in take-ups didn’t follow suit. The disparity between enquiries and the take-up of “cyber” products left many wondering when the cyber insurance market will go ‘boom’.
Though market practictioners hold that we will see such promising growth in two years, insurance for digital property is not a new phenomenon. We have already witnessed popular developments in this sector with regards to online gaming in some countries in Asia, such as China, among others. However absurd it may seem, there have been ambitious attempts by some to insure players of Blizzard’s massive multiplayer online role-playing game (MMORPG), World of Warcraft (WoW), when they experience laggy gameplay, long queues, or system downtime. Additionally, we have seen Beijing based Sunshine Insurance Group Corporation, in cooperation with the online game operator Gamebar, offer WoW players monetary compensation for loss or theft of virtual property in the game.
Apart from the realm of digital gaming, there have yet to be big strides in the commercial and strictly business areas of cyber insurance. Due to the ambiguity of such a market, risk factors have made investing in protection of cyber-information a very expensive gamble.
This week a survey was released which indicated that many potential policyholders, who would otherwise have an interest in various cyber-protection products, displayed a lack of knowledge in regard to digital coverage options. The results of this survey have prompted Airmic to begin encouraging communication between brokers, insurers, risk managers, and IT specialists to develop a comprehensive understanding of cyber products with consumers.
Airmic also released detailed research tracking the progression of the international cyber-risk market, during its annual conference in Liverpool this week.
The research revealed that every year, cyber-crime costs the UK economy EURO20 billion (USD31.09 billion), listing intellectual property theft, industrial espionage, extortion costs, and direct online theft as the causes of loss in a decreasing order of cost.
Regardless, Airmic’s technical director, Paul Hopkin, said that the association is happy with the direction of the cyber-risk insurance sector.
“When we took stock of how the market has changed, it was very reassuring to find the cyber-risk market has changed quite considerably and is now much more aligned with what we are looking for,” he said, “The communication issue is one we are focusing on and, hopefully, the market will continue to respond favourably.”
Additionally, Ben Beeson, executive director of global technology and privacy practice at Lockton Companies LLP, said European cyber-risk cover is growing, due to a number of factors beginning to drive the market forward.
Beeson noted that these factors include “legal and regulatory change in the EU and technology and business model change, with cloud computing and outsourcing risks.” He said that intellectual property theft from cyber-espionage, and losses from cyber-warfare are two particularly difficult aspects of the cyber insurance market.
Furthermore, one company to recently jump on the cyber-insurance train is the Bermudian insurer Argo, with a new cyber-liability insurance product. Argo believes that its product will mirror the extent to which businesses depend on information techonology.
The product’s launching tails the newly released data security disclosure obligations from the US Securities and Exchange Commission (SEC), which are expected to initiate expansion in the US cyber-liability insurance sector.
Distributed through Argo Pro, its latest product attempts to appeal to a variety of sectors, such as insurance brokers, motor dealers, retail businesses, and many more.
Argo also plans to combine NetDiligence, a data breach services and cyber risk-assessment company, to allow policyholders to access information regarding cyber losses prevention and support.
Senior vice-president of Argo Pro, Michael Carr, said that “Advances in information technology have revolutionised the ways businesses attract, retain, and interact with customers. Along with benefits in speed and efficiency, these changes have created a variety of new exposures to loss – from liability for content on corporate Facebook pages or YouTube channels to privacy fines to business interruption from systems compromises.”
The recently released information from the SEC targets public companies and their responsibility to inform investors of cyber-risks.
Some speculate that the SEC changes are promoting interest in US cyber-liability insurance, but as with the current UK situation, it is not known whether the changes are effective in actually selling cyber related products.
In support, QBE Australian insurance disclosed data that showed UK companies to be unequipped to deal with cyber-crime. QBE’s survey results indicated that 46 percent of UK companies don’t even have a documented procedure in the event of a security breach.
While the cyber-insurance market is still young and emerging, clients and insurance companies have begun to recognize the importance of such a sector in a world where information technology is one of the fastest growing industries. In the near future, we are bound to see global insurers invent and innovate in the cyber-risk sector, to better provide customers and businesses with truly comprehensive security.
Insurance Companies Mentioned
Argo Insurance Group
Argo Group International Holdings provides specialty insurance and reinsurance products within the property and casualty line on an international scale. All of Argo Group’s insurance subsidiaries maintain an A.M. Best’s “A” rating, and an Standard & Poor’s “A-” rating, both with stable outlooks.
QBE Insurance Group
Sydney, Australia QBE Insurance Group is in the top 20 global insurers and reinsurers by net earned premiums. QBE provides general insurance cover for personal and commercial risks, with offices in 52 different countries.
French insurance company Groupama recently endured a downgrade in ratings by S&P from a BBB to a BB-. Its new rating is considered sub-investment, and is commonly referred to as ‘junk’ status. Such a rating could potentially harm existing business relations with insurance brokers.
Groupama is a mutual insurance, banking and financial services group with over 38,000 employees and 16 million customers and members. It was founded over one century ago, and suffered some of the largest setbacks from Greek soverign debt and stock market investments, with a EURO1.8 billion (USD2.25 billion) net loss in 2011. These losses caused Groupama to lose its position as France’s 5th largest insurer and Europe’s 15th largest by premiums. As a whole, Groupama has EURO5.3 billion (USD 6.62 billion) in net assets, and EURO17.2 billion (USD21.5 billion) in revenues.
The French company maintains a leading presence in France within a number of insurance lines ranging from agriculture, personal health, and home, to motor. It also has a strong international footing in 14 countries in Europe and Asia, including: China, Vietnam, Greece, Turkey, Hungary, Romania, Slovakia, Bulgaria, Poland, Great Britain, Portugal, Italy, and Spain.
Currently, Groupama’s ratings are on on negative outlook, meaning that unless the company’s conditions improve in the coming year, further cuts to ratings are possible.
S&P stated that management actions taken towards asset sales were “unlikely to restore Groupama’s capital adequacy to levels supportive of an investment-grade rating over the coming year, in our view.”
Some of the actions taken include the sales its Spanish operations to Grupo Catalana Occidente for EURO405.5 million (USD 506.7 million). Groupama Espana generates 38 percent of it’s total premiums, EURO904 million (USD1.13 billion) annually, from motor insurance.
Groupama has also sold the property and casualty assets of its Gan Eurocourtage brokerage business to Allianz’s French unit, and is considering the sale of its UK assets. Though Groupama UK’s capital is separate from its parent company, with twice the recommended solvency margin at 218 percent, its rating is not. It’s UK assets include the insurance company, as well as insurance brokers Bollington, Lark, and Carol Nas.
Francois-Xavier Boisseau, the Groupama UK chief executive also added his opinion on the matter. Boisseau emphasized possible misconceptions that may arise from the UK subsidiary’s rating in association with it’s parent, Groupama.
“This is important to understand because based on our current performance, prospects and asset base, it is very clear that the Group’s rating does not offer an accurate reflcetion of our excellent trading position in the UK nor of the level of security we offer to our broker partners and their clients,” he said, “In 2011 we delivered record profits and despite fierce competition our 2012 reveneues remain broadly in line with expectations. Our profitability also remains very impressive. Profit before tax exceed EURO16 million (USD20 million) at the end of May and our combined ratio improved to 97.9 percent.”
On the other hand, Chief executive Ashwin Mistry of Brokerbility, a group of high quality independent brokers, said that Groupama’s downgrading will initiate a complete review of the “whole relationship” between the two.
Insurance broker Seventeen Group has also taken the matter very seriously, and for them, Groupama is already beyond reliability. Paul Anscombe, managing director of SG, said “If an insurer’s rating is below BBB+ from Standard & Poor’s we will not deal with them going forward.”
From a lighter perspective, Bluefin chief executive Stuart Reid said that “Groupama has been a good business to us and a good friend.” The drop in ratings is definitely an issue to look into and consider with utmost importance, but Reid affirmed that his firm will continue to support Groupama.
Overall reactions to Groupama’s predicament are mixed, but nevertheless, all groups affiliated with them are taking the necessary precautions to ensure that Groupama does not pose unnecessary risk in the near future.
Insurance Companies Mentioned
Groupama is a mutual insurance, banking, and financial services group. Over 100 years ago, Groupama began as an agricultural mutual insurer, and has grown and adapted to emerging economic challenges, as well as to the needs of its members.
As ING Group continues to sell off its overall Asian insurance operations in order to repay part of the USD $7 billion in bailout funds that it received from the European Union in 2008, the Dutch company is also getting ready to offload its separate ventures in India.
The news comes as no surprise to many as the sale is part of ING’s global restructuring plan. The plan entails that by 2013, ING will cut its balance sheet by approximately USD $751 billion by selling off many of its businesses outside of Europe, including those in Asia and America. Thus far, ING have been looking to sell a number of its Asian insurance businesses (not including those in India), such as those in South Korea and South East Asia, as a single unit.
A number of factors, including the fact that the firm deals with local Indian players, means that ING has decided to sell its Indian businesses separately. This means that the imminent sale of its three Indian companies will take a while longer as ING are reportedly focusing all its efforts towards getting rid of its other Asian insurance business which are valued between $6 and $7 billion US dollars.
The creation of ING Vysya Bank, one of the three ING companies, was the first merger between an Indian bank (in this case Vysya Bank) and a foreign group. ING currently holds 44% stake in ING Vysya bank, with other shareholders including Aberdeen Asset Management, Morgan Stanley and Citigroup. ING also have an investment management company in the country that is also up for grabs. The company, ING Investment Management India, has a number of interested bidders including Pramerica, and South Korean company, Mirae.
ING Life India is ING’s third company in India. Due to Indian laws that state that a foreign owner can only own 26% stake in any Indian insurance firm, ING are not the majority shareholders. It does however have management control of ING Life India. The majority share holder in the insurance company, formed in 2002, was initially GMR Industries. GMR then sold its stake to Indian battery manufacturer, Exide Industries who now hold a 50% stake in the company, making it the majority shareholder.
While the life insurance company did report increases in its premium three months in a row from January to March, at the start of the new fiscal year in April it saw its premium collection take a huge plunge and drop to Rs14.09 crore (US$4.05 million).
What is even more worrying for ING Life India is that Exide Industries, the major shareholder, is also reportedly looking to sell their stake in the venture. This was almost the case a year ago, but Exide opted to stay on. However, following the recent news of ING’s decision to sell, it seems that Exide have now followed suit. With both sides looking to sell, the future looks uncertain for the company as it will have to look for a new foreign and domestic partner or opt for a merger.
A number of insurance companies have expressed an interest in buying up ING’s 26% stake. They include insurers like Samsung Life, Manulife and Japanese company, Sumitomo. However, as none of the interested companies currently have a presence in India, before purchasing the stake they have to find an Indian partner to enter the market with.
ING Life India operates two distribution channels, Tied Agency and Alternate Channel. The Tied Agency channel has over 30,000 life insurance advisors, while the Alternate Channel contains the company’s bancassurance (BIM) partnership with banks such as ING Vysya Bank.
ING are not the only company selling its Asian operations. Struggling British firm, Aviva have also announced plans to sell its Malaysian operations as the economic crisis’ aftermath continues to affect insurance companies.
Insurance Companies Mentioned
Formed in 1991, Dutch institution, ING, is a group that specializes in a number of financial services including insurance. It currently has a presence in more than 45 countries with a client base of approximately 85 million individuals.
Despite many other European insurers straying away from traditional guaranteed-return saving insurance policies, Allianz Leben’s, the company’s German insurance unit, chief executive, Markus Faulhaber said that the company remained committed to traditional life insurance plans that offer guaranteed returns to holders. Speaking to the Financial Times Deustchland, Faulhaber said that “the criticism of the life insurance policy based on the traditional backup capacity is unjustified.”
Faulhaber’s comments come on the back of the European Insurance and Occupational Pensions Authority (EIOPA) releasing their biannual financial stability report. The report surveyed 20 of Europe’s biggest insurers and revealed that premiums from ‘traditional’ life insurance products fell by ten percent in 2011.
All of this comes at a time where European life insurance firms are experiencing incredibly low interest rates. In previous years, interest rate guarantees on contracts were, on average, 3.3 percent higher than they are now. Due to these low interest rates in the capital market combined with tough new capital rules, many insurers are finding it harder to make enough to cover the guaranteed payments they owe to their clients.
While remaining supportive of traditional methods, Faulhaber did admit that Allianz’s life insurance unit is testing out new products slated to be released in mid-2013. While not divulging any specifics, Faulhaber did mention offering levels of guarantee that the client would be able to adjust at different points during the policy’s life span was a possibility. Speaking on the idea, he said that it would “be very attractive to a customer who expects that in 20 or 30 years interest rates, including the guaranteed interest rate, will be higher than they are today.”
In spite of the financial climate, Faulhaber believes Allianz are in a relatively strong position thanks to its “financial strength and low administrative costs” While Allianz’s competitors are spending approximately 2 to 3 percent on administrative costs, he stated that the German company was only spending 1.1 percent.
Throughout the past five years, Allianz Leben’s market share has increased from 16.3 to 17.5 percent and despite low interest rates and challenging times, Faulhaber remains adamant that the company can “meet all the guarantees for our customers.”
While revealing the decline of the traditional insurance premium, the EIOPA report showed that premiums from Unit Linked Insurance Plans (ULIPs), where the client holds the investment risk, have risen by three percent. It also reported that the average solvency ratio, basically a measure of capital strength, reduced from 211 percent in 2010 to 199 percent in 2011. The EIOPA concluded from the report that “the relatively positive development of insurers experienced in recent years has started to reverse.”
Low interest rates and solvency ratios aren’t the only things that have European life insurers concerned. The Solvency II proposal currently making its way through the European Parliament is causing many, including Faulhaber some worry. Claiming that the “currently proposed rules are not sufficient”, he went on to say that “unless it is substantially changed, Solvency II will lead to very strong swings up and down in the capital needs of life insurers.”
Insurance Firms Mentioned
German company, Allianz are the world’s 12th largest financial services group in the world. Formed in 1891 it specializes in insurance but also deals with other financial services.
European insurance markets are looking increasingly bleak amid news of UK health insurance premiums climbing by 10 percent, and fears of expat health insurance premiums doubling in Greece. The bad news in the Euro Zone’s health insurance market comes at the same time European life insurers are nervously awaiting the outcome of the Solvency II proposal’s passage through the European Parliament. The proposal, which has been ten years in the making, has been designed to ensure insurers have capital reserves proportional to the risks underwritten.
The unprecedented rise in health insurance premiums, specifically in the UK, has left both insurers and their customers worried. In an effort to stop the 10 percent price increases that have been seen in the past couple of years, international health insurers have been trying to reduce costs by pinpointing where they’ve been going wrong. William Russell, an international insurance firm based in the UK, has pointed the finger at surgeons who it claims have radically varying surgical prices.
The firm mentioned an example where a surgeon in Hong Kong requested US$42,000 to perform a knee replacement operation. According to Nichola Duncan, the company’s international claims manager, “We contacted three other well-known surgeons locally and the average fee was US$24,000.” In light of the hike in prices, a number of insurance firms, including William Russell have implored their customers to contact their insurer prior to treatment to ensure that the client will not have to personally foot the bill. Other reasons that have been stated for the increasing cost of premiums has been fraud, over diagnosis and unnecessary medical treatment.
The bad news in the UK comes at time where British nationals living in Spain and Greece are returning home due to the huge economic problems in both Euro Zone stragglers. One of the biggest potential problems that expats are facing is the prospect of their health insurance doubling if Greece decides to leave the Euro Zone. Their worries are centered around the possibility that if a Greek exit, or Grexit , occurs, hospitals may not reduce their prices. Despite their fears, prominent insurance firms such as AXA are confident that if Greece ditches the Euro for the Drachma, hospitals will reduce their costs. Kevin Melton, AXA international’s sales and marketing director admitted that “Premiums will be expensive” but “the cost of claims should be lower because hospitals services will be cheaper.” However, even if hospitals cut their prices, it is very likely that premium rates will still rise, as expats with international cover would rack up claims beyond the Greek border.
The economic problems in Greece are not only proving harmful to expatriates living in the country, but also to visitors holding the European Health Insurance Card (EHIC). The premise of the EHIC is that an individual holding the card has access to the same amount of public health care than a citizen of the EU country the person is visiting. In the past, many have used the EHIC as their main source of travel insurance while traveling in and around Europe. Due to the immense problems that the public hospitals are having in Greece, they no longer have the resources to deal with foreigners holding an EHIC. This means that even if one has an EHIC card, they are no longer guaranteed healthcare and may end up having to pay for expensive private care out of their own pocket. With the EHIC proving to be ineffective in many cases, the need for proper travel insurance has become greater.
The new ineffectiveness of the EHIC in Greece is part of a growing trend of European countries becoming increasingly cagey about other European nationals using their public health services for nothing. The first country that clamped down on this was France. In 2008, former President Nicholas Sarkozy enacted a law where by non-French non-working individuals under retirement age were made to buy private medical insurance and were no longer allowed to use France’s public health system for ‘free’.
As more and more European countries lose money it seems that they are becoming increasingly stingy about their own healthcare systems and following suit. Soon after France enacted their laws, Spain created similar ones, and while the Greeks didn’t exactly intend to cut expatriates out of their public healthcare system they too have effectively done the same. Those who support these moves argue that it was wrong that expats were getting the benefits of a system that they had not contributed to and that cards such as the EHIC were being abused.
The British have now caught on to the general trend and are pressing their government to make it compulsory for foreign nationals to have health insurance to ensure that the NHS doesn’t become a free treatment ticket and that Briton’s have first priority.
While the health and travel insurance markets ride waves of uncertainty, European life insurance firms are keeping their eyes firmly focused on the outcome of the Solvency II proposal. The proposal is intended to protect insurance companies in case of another crippling financial crisis. As the proposal progresses through the European Parliament in Brussels, German insurance companies such as Allianz and Munich Re, as well as many others, have all expressed an interest in implementing a phase-in process for Solvency II as it is claimed that 40 percent of German companies would have problems complying with the new regulations. They claim an immediate introduction of the Solvency II legislation would be detrimental as they would not have enough time to adjust to the stricter measures and a sudden hike in capital reserves.
Most companies use discount rates based on asset yield to calculate technical provision, and according to Karen van Hulle, the European Commission’s Head of Pension and Insurance, the phase in would allow companies to gradually move towards the risk free discount rate that Solvency II requires.
Insurance Companies Mentioned
British firm, William Russell, was founded in 1992 and is an international insurance provider that specializes in health, life and disability insurance.
AXA is a French insurance firm based in Paris, France. Ranking in as the ninth largest company in the world, AXA specializes in life, health and other forms of insurance.
German company, Allianz are the world’s 12th largest financial services group in the world. Formed in 1891 it specializes in insurance but also deals with other financial services.
With the International Insurance Society’s (IIS) 48th annual seminar now at a close, the insurance sector is set to take on new direction with several ambitious plans. The IIS seminar allows senior executives from insurance companies worldwide to share original research by leading academics, participate in idea exchange and debate on critical issues, and discuss current and future prospects for the global insurance industry. This year, 500 delegates from 50 nations gathered in Rio de Janeiro from June 17-20 to implement sustainable development goals, share main concerns about the insurance industry, and determine the future role of insurance companies in emerging markets, among others.
The topic of “sustainable insurance” has been hot in recent months, as environmental issues are increasingly prevalent worldwide. Sustainable development acknowledges that business create social costs (such as pollution), not covered in product costs, that may negatively influence future business opportunities. Sustainable insurance includes this concept, but has potential influence extending far past the insurance business. Insurance provides businesses with a secure foundation for economic activity by taking into account a variety of risk factors.
The 48th IIS seminar reached a historic landmark with the launching of the Principles for Sustainable Insurance (PSI) after 6 years of planning by insurance companies and the United Nations Environment Programme (UNEP). 27 insurance companies, representing 10 percent of worldwide insurance premiums, took the initiative as initial signatories on the PSI, along with 7 supporting institutions. The timing of the PSI’s inception within days of the Rio20+ Earth Summit is no coincidence either.
PSI contains 4 primary principles; First, to embed in decision making environmental, social, and governance issues related to the insurance business; Second, to work with clients and partners to raise awareness of these issues, as well as risk management, and form solutions; Third, to work with governments and regulators to encourage public action on these issues; And fourth, to demonstrate responsibility and honesty in disclosing regular reports of their progress in implementing the four principles.
A second topic discussed at the 48th IIS seminar was current pressing issues within the industry. Based on a poll conducted during the conference, competitive prices and adequate profitability were the main concerns of one third of IIS members present in Rio, and risk management second with 19 percent of the votes.
In terms of threats, regulatory changes were seen as the most critical with 38 percent of the votes indicating that this was a worry, and immeasurable risks came in second with 20 percent of the responses. Within regulatory concerns, anticipating new rules troubled 28 percent of attendees the most, while inconsistent standards across jurisdictions gained over 25 percent of the votes.
Regarding human capital issues, 34 percent of the delegates voted retaining talent as the number one problem, and 24 percent encountered more trouble finding new talent.
Non-life insurance companies struggled most with risk management (24 percent), followed by inadequate premium rates (22 percent). On the other hand, life insurance companies found locating investment opportunities to meet benefit requirements the most pressing issue (28 percent).
Apart from present troubles, Brazil based Patrick de Larragoiti Lucas, among others, shared their visions of future industry growth and direction.
Lucas believes that the recent influx of middle class Brazilians will be the driving force of the country’s market in the near future. Within the past eight years, over 30 million Brazilians entered the country’s middle class. Insurance protection of their family members and assets is a luxury readily available to all in such a position on the social ladder. Lucas plans to develop wealth protection products so that these middle class citizens have incomes when they retire.
Additionally, Brazil’s motor market is also enjoying upward trends. Although over 90 percent of brand new cars are insured for their first year of use, many customers don’t renew, leaving roughly one third of Brazil’s car owners unprotected from such risk.
Brazil’s own secretary of state for economic activity, Julio Bueno, also voiced his opinions, pertaining to Rio de Janeiro specifically.
“Rio is a wonderful market for the insurance and reinsurance industry,” he said.
Bueno’s evident enthusiasm for Rio has, in fact, more than adequate substantiation.
The next few years mark a period of unprecedented growth for Rio, as the country will be hosting the 2014 FIFA World Cup, and the 2016 Olympics, on top of the annual Earth Summit, known as the Rio20+, this year.
Also, Rio de Janeiro is the third-smallest state out of the 27 states in Brazil, yet, maintains the second largest GDP. The metropolitan area alone has over 10 million inhabitants, and a well established industrial economy. Rio has 80 percent of Brazil’s oil production, is the second-largest steel producer, and has a promising petrochemicals industry.
Of course, with emerging markets such as Brazil, the role and effective implementation of microinsurance is of ever rising importance. Populations of less developed countries are especially prone to health risks and natural disasters, however, only a small percentage of these populations have access to insurance.
Brian Duperreault, CEO Marsh & McLennan Cos. Inc. said at the IIS seminar that effective penetration of microinsurance into developing countries would require insurers to take on a collaborative approach. By combining resources and sharing information, the industry would be able to tap into a market with the potential to produce over 1 trillion in annual premiums, and provide protection to billions.
Duperrault strongly suggested a comprehensive, adaptive facility of wide-spread application to each developing nation’s individual government regulations and culture. The first market to have access, in his opinion, should be Brazil, as the country has the ability to generate over 100 million microinsurance policies and generate 1.7 to 4 billion in annual premiums.
Overall, the 48th annual IIS seminar showed much promise for the future of the industry. Stances from hundreds of delegates proved how willing and eager insurance companies are attempting to take new risks, and adapt to a changing world. Out of all the emerging markets, it will be interesting to track the first steps and successes of insurance companies in Brazil. If anything, the state of the insurance market will only improve as companies cooperate with each other and regulators to find new, innovative methods to supply and apply their product worldwide.
As part of a general wave of European institutions putting their Asian operations up for sale, five insurance firms have expressed an interest in purchasing British Firm, Aviva’s, 49 percent stake in its joint venture with Malay bank, CIMB. These sales come on the back of an increasingly unstable European economy which has affected both Aviva and Dutch company, ING, also currently looking to sell their Asian insurance business.
While some European companies are leaving APAC, the increasing number of potentially attractive acquisitions in Southeast Asia has paved the way for a number of large global insurance firms, including AXA and Manulife, to increase their exposure in the region’s relatively small but rapidly growing life insurance market.
According to Norton Rose, a law firm that specializes in insurance, Southeast Asia holds less than 0.25 percent of the world’s insurance market share. However, this year alone life insurance premiums are expected to grow by 9.6 percent, 5.9 percent greater than the world’s average. These positive predictions follow the Southeast Asian life insurance market growing 15.4 percent in the last ten years, a lot more than the 5.7 percent growth seen worldwide.
Aviva’s imminent exit comes only five years after the firm entered the Malaysian insurance market in June 2007. According to CIMB, the Malay bank that it entered into a joint venture with, Aviva paid 500 million ringgit ($164 million) to purchase the 49 percent stake that it is now looking to sell. Their decision to sell their Malaysian venture is part of larger plans to sell their underperforming businesses globally, including those in Sri Lanka and South Korea in an attempt to raise money to protect it against Euro Zone exposure.
Aviva has had problems with their insurance products in Asia, specifically their range of Global Lifecare plans which the company has since canceled.
Sources have indicated that the sale of Aviva’s stake could result in a new bancassurance (BIM) deal between CIMB and any potential buyer, who will also control the future of the venture. Furthermore, depending on the nature of the sale, competition between foreign and domestic companies could increase in the Malaysian life insurance market currently dominated by local life insurance company, Great Eastern Life.
According to sources with knowledge of the Aviva-CIMB auction being handled by Morgan Stanley, the five interested parties, AXA, AIA, Prudential, Manulife and Sun Life have all submitted non-binding bids that will be considered by Aviva and CIMB in “a week or so”. Of the five, Prudential boasts the strongest presence in Southeast Asia as it is currently an industry leader in Indonesia with 1.4 million policy holders.
Low life insurance penetration rates throughout Southeast Asia have been identified as one of the reasons for the huge amount of interest in securing slices of market share. In Indonesia for example, where Swiss, Japanese and Korean insurers have expressed an interest in investing in its insurance market, the life insurance penetration rate is a mere 1.3 percent. The attractive nature of the Southeast Asian markets has also been compounded by the relatively easy foreign ownership regulations. In Malaysia, foreign owners are allowed to buy up 70 percent of a domestic insurer, while in Indonesia they’re allowed to purchase 80 percent.
Insurance Companies Mentioned:
British firm Aviva is the sixth largest insurance firm in the world. Based in London, it has approximately 43 million customers in 21 countries. In the United Kingdom, Aviva leads the market in general, life and pension insurance in the UK.
Formed in 1991 Dutch institution ING is a group that specializes in a number of financial services including insurance. It currently has a presence in more than 45 countries with a client base of 85 million individuals.
AXA is a French insurance firm based in Paris, France. Ranking in as the ninth largest company in the world, AXA specializes in life, health and other forms of insurance.
Over the past year, the Middle East & North African (MENA) Region has experienced stable A.M. Best ratings for its insurers and reinsurers, as well as an increase in A.M. Best rated entities. This has been occurring against a tumultuous backdrop of political and public unrest, making the relative stability of the MENA market an achievement in its own right.
Although there has been a 3 percent drop in the number of financial strength rating (FSR) “A” (Excellent) companies, the overall ratings remain consistent.
Three companies to maintain an “A” rating, all based in the UAE, include Oman Insurance Company, Abu Dhabi National Insurance Company, and Arab Orient Insurance Company. Additionally, the number of A.M. Best rated companies in the MENA region has increased by 40 percent, from 25 insurers to 35 insurers. These ratings exhibit the resilience and untapped potential of the insurance market in the MENA region, specifically in the following countries: Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, Tunisia, Turkey, and the UAE.
More recently, A.M. Best’s Europe Rating Services Limited accredited the Gulf Insurance Company K.S.C. (GIC) (Kuwait) and it’s subsidiary, Gulf Life Insurance K.S.C. (GLIC) (Kuwait), with an issuer credit rating of “a-“ and an FSR of “A-“. These solid ratings are a result of GIC and GLIC’s respected profile in many MENA regions, risk-management, and profitability.
Through numerous acquisitions and subsidiaries, such as Bahrain Kuwait Insurance Company B.S.C., Arab Orient Insurance Company, Arab Misr Insurance Group S.A.E, and Dar Al Salaam Insurance Company, to name a few, GIC maintains a strongly supported presence in Bahrain, Jordan, Egypt, and Iraq, above Kuwait.
Furthermore, GIC’s underwriting profits (profits after deducting business and claims expenses) grew 15 percent from 2010 to 2011, totaling KD 9.8 million (USD 35.4 million).
Similar growth occurred in Lebanon with insurance premiums totaling US 317.6 million in the first quarter of 2012. This 4 percent increase is primarily due to expansion of the fire, life, and cargo businesses. The Association of Insurance Companies in Lebanon (AICL) reported a 14 percent increase in fire premiums, and an 11 percent increase in life and cargo premiums. During the first quarter, premiums were distributed as follows: medical insurance premiums at US 96.9 million (30.5 percent), life premiums at US 80.1 million (25.2 percent), motor premiums at US 75.7 million (23.8 percent), fire premiums at US 29.7 million (9.3 percent), workmen premiums at US 10.5 million (3.3 percent), and finally cargo premiums at US 8.8 million (2.8 percent). Insurers in Lebanon also dished out 11 percent more in benefits and claims to their clients during the first quarter.
The forward movement by insurers in the MENA is in part due to reconfigurations in risk management systems. GIC, for example, is part of a respectable group reinsurance program. The company holds most of its capital in equities, and acted to de-risk such investments through practice of new risk management principles, ultimately lowering its need for capital.
While over 90 percent of Qatari companies believe in the importance of risk management in management priorities, only half of these companies have the required resources to run risk management systems. This fact highlights one of the biggest obstructions for MENA insurers over the next year, and while Qatar may be the obvious example, risk management strategies across the region should be addressed in a consistent manner.
Back in Qatar, “risk confusion” and “lack of clear vision” are the biggest obstacles Qatari insurers encounter when dealing with risk management systems, according to a survey conducted by Ernst & Young in co-operation with Qatar Foundation (QF). It seems that most companies implement risk management systems because of regulatory compliance, rather than utilizing risk management as a means of improving the business itself.
The survey also included characteristics of ideal risk management: internal methods to communicate risk and identify risks relating to objectives, active Board involvement, and clear ownership of risk.
Among the events of the Arab Spring 2011 and global financial slowdown it is comforting to witness ratings for insurers, such as GIC, remain excellent on a consistent basis, and as number of A.M. Best rated entities in the MENA continues to grow there are signs that the Market has never been more prosperous. Better ratings for like insurers may be encouraged by improvements in primary financial measures, efficiency, and risk management. Downward movements in ratings could be caused by degradation of risk management systems from excessive expansion or of overall financial performance. Under current circumstances, the trends are promising as more insurers and reinsurers enter A.M. Best’s radar, and the more established companies improve their ratings.
Insurance Companies Mentioned
Gulf Insurance Company
Formed in 1962, Gulf Insurance Company K.S.C. (GIC) continues to provide a broad range of creative insurance solutions. GIC is a public shareholding company, and is the largest insurance company in Kuwait in terms of premiums, covering risks related to Motor, Marine & Aviation, Property & Casualty, and Life & Health insurance.
Oman Insurance Company
Oman Insurance Company (OIC) is based in Dubai, UAE, and one of the leading insurance companies in the Middle East. OIC was founded in 1975, and maintains and excellent FSR rating of “A” from A.M. Best. OIC provides coverage for Life, Health, Motor, and Personal Lines, as well as medium to large industrial and commercial enterprises.
Abu Dhabi National Insurance Company
Established in 1972, the Abu Dhabi National Insurance Company (ADNIC) is a public shareholding company based in Abu Dhabi. ADNIC has established itself as a leading and reliable provider products through its quality and affordability.
The Asian insurance markets continue to witness positive changes in the insurance industry in the form of Swiss giants Ace finalizing agreements for an Indonesian acquisition and the Aetna group expanding its products within the Singaporean market.
Zurich based Ace Group was established in 1985 when it was created by its policyholders to provide excess liability and directors and officers coverage. It has constantly evolved and expanded since then and now offers global public insurance to all corners of the globe.Read the rest of the Indonesia and Singapore: hot spots for latest health insurance developments article.
Malaysia, one of the world’s most populated Islamic Countries, is experiencing something of a renaissance on the insurance front. However, it’s not just any insurance products which are doing well in the country however, although the Malaysian insurance market is attracting large amounts of interest from some of the world’s largest insurance companies, but specifically Takaful Insurance which is thought to hold the key to the nation’s future development and expansion of the domestic insurance market.
According to Etiqa Insurance & Takaful, the insurance arm of Malaysia’s largest bank by assets, Malayan Banking Bhd, the Malaysian Takaful industry is expected to increase to a total value of RM 7.2 billion (US$ 2.2 billion) over the next three years. Malaysian Takaful insurance is currently valued at RM 4.2 Billion (US$ 1.3 Billion), having grown an approximate 27 percent from 2005 to 2010.
Etiqa’s Chief Commercial Officer Shahril Azuar Jimin, citing the low levels of insurance coverage and penetration rates across the Malaysian population, and specifically pointing to extremely low levels of uptake within the country’s Muslim community, was optimistic about the potential the country held for Takaful providers.
One of the key reasons why Mr. Jimin saw success for Malaysian Takaful Insurers over the next two to three years was due to ever increasingly sophisticated distribution methods. “Ten years ago, there were less than 100,000 agents for takaful, whereas conventional insurance had about 250,000,” he went on to state that Etiqa alone now has a distribution force of approximately 100,000 agents, vastly improving the company’s, and industry’s ability to improve on the currently low levels of coverage being purchased around the country.
At present, only 54 percent of Malaysians hold either a Life Insurance or Takaful Family Insurance product, with Takaful penetration standing at a slightly underwhelming 11 percent.
Mr. Jimin was speaking to reporters on the sidelines of the World Takaful Conference: Asia Leaders Summit (WTC:ALS), which opened on Wednesday June 13th in Kuala Lumpur. The conference has revealed that good times may be in store for Asian, and Global Takaful Insurers.
Global Takaful premium contributions in 2010 were up 19 percent from the previous year. While Malaysia and the rest of South East Asia may hold promise for Takaful Insurers down the road the region still lags behind the Middle East in terms of Takaful contributions, with the Gulf Cooperative Council member states holding the lion’s share of the market with premium contributions equal to US$ 5.68 billion; Asia, including Malaysia, saw total 2010 Takaful premium contributions valued at US$ 2 billion.
The largest single domestic market for Takaful products is, unsurprisingly, GCC country Saudi Arabia, with US$ 4.3 billion in Takaful contributions, the KSA represents more than 51.8 percent of the global Takaful industry.
With the ongoing emergence of previously under-developed and underserved markets in the forms of Indonesia, Bangladesh, and Pakistan, it is expected that the global Takaful Industry will post premium contributions in the region of US$ 12 billion by the end of 2012. There may, however, be a slight Takaful slowdown in some GCC nations – specifically the United Arab Emirates – where the market is mainly General Takaful Insurance products, with Family Takaful accounting for just five percent of the total volume in certain areas.
In fact, there was a general GCC Takaful slowdown in 2010 which went largely unnoticed. Growth in the GCC Takaful market was only 16 percent in 2010, significantly down from the annual growth rate of 41 percent recorded from 2005 – 2009. While this may be due to saturation of the market in certain GCC countries, and an already high uptake, some analysts have cited the installation of compulsory Takaful Medical Cover in Abu Dhabi and Dubai as possibly causing an artificial inflation in the GCC’s overall Takaful growth and are of the belief that current growth levels are more realistic; reflecting the actual market outside of government regulations and legislation.
However, even with the slowdown of growth in 2010, Takaful insurers remain optimistic but cautious. Mr. Jimin of Etiqa was bullish on the 5 year growth rate of Family Takaful products, expecting around 20 percent; which would see Family Takaful insurance outpace both General Takaful and Conventional life insurance in Malaysia. Mr. Jimin also highlighted the fact that there was a massive amount of expansion potential in the Malaysian Muslim Community stating that “The immediate market [for family Takaful], which is the Muslim community, is very much under-insured. We’re also seeing more acceptance from the non-Muslim market because of the equitable aspect that Takaful offers.” Non-Muslim uptake of General Takaful Insurance products was close to 40 percent in the country, with non-Muslim Family Takaful lagging at 25 percent uptake.
Although, it should be noted that it is not all roses and sunshine for Takaful. As is true in any industry, success breeds competition and it is this competition, in addition to a shortage of expertise in Takaful and ever evolving regulations for the industry which have been identified as the major risks for the market around the world. One WTC:ALS attendee was critical of new industry providers stating that the younger organizations attempting to crack the market and compete with more established organizations may not be making use of sustainable business strategies. Aggressive pricing is seen as a key factor putting pressure on overall Takaful profitability, and while there has been a shift towards tying down the tactics which will translate market potential into profitable growth, the fact that there is increasing competition on the back of the attractiveness of the product does mean that there are some minor doubts about the industry’s ability to continue on its current growth track.
A number of new developments in the International Private Medical Insurance (iPMI) market were announced recently, which will see at least two internationally renowned insurance providers enhance the scope of their available coverage options. ALC Health has expanded and improved the coverage and benefits of the international health plans in their Prima line of products. Meanwhile Clements Worldwide, a company focused on insurance for expatriates, has added a new international private medical insurance plan to their portfolio.
ALC Health has reworked some of the coverage details and benefits on their Prima international health insurance plans, with most changes being made to the Premier, Classic plans and the European Ibérica plan. This plan modification happens to come at a similar time as other international health insurers improve their coverage offerings. Whether this is due to moves from competition, or simply the result of internal reviews of their policies and how they can be made more appealing to consumers is unknown.
The Prima Classic, Ibérica and Premier have all had their overall annual limits increased, with the Ibérica and Classic plans having their overall annual limits raised to GB£1.25 million (US$1.94 million) from GB£1 million (US$1.6 million), while the Prima Premier plan has been lifted to GB£2.5 million (US$3.9 million).
ALC Health has also included newborn congenital cover with a lifetime limit of GB£100,000 (US$ 155,542) as part of the basic cover for all three plans. The benefit was previously only available under the Prima Premier plan.
In addition, the optional pregnancy and childbirth coverage for the plans has been altered so Premier now has 4 options for coverage limits, where the Classic and Ibérica plans have 2. All of ALC’s Prima plans now cover the complications of pregnancy as part of their core coverage. These changes have taken effect as of the beginning of June.
Clements Worldwide, a company that has previously focused on international life and other insurance lines for groups and individuals, has introduced a new international private medical insurance plan for individuals and families. Dubbed GlobalCare Plus, the plan is intended to provide expatriates with global coverage that will limit their out-of-pockets expenses.
Each policy comes with a minimum US$250 deductible, although for customers who would like to further reduce the annual premium, deductible options include US$500, US$750, US$1000, US$2500, and US$5000. After the deductible has been reached, there is no coinsurance for treatment received outside of the U.S., whereas inside the US there will be a 20 percent coinsurance if the policyholder receives treatment outside of Clement Worldwide’s preferred provider network.
The GlobalCare Plus plan will also provide coverage for outpatient prescription drugs, with a US$10 deductible on a 30-day supply of generic medications and a US$30 deductible on brand name medications that will last for the same duration. The plan also includes a wellness benefit that offers up to US$250 in cover a year. GlobalCare Plus also includes emergency medical evacuation cover, although only up to US$50,000 over the lifetime of the policy. Optional benefits for the plan include cover for war and terrorism, accidental death and dismemberment and dental coverage.
Insurance Companies Mentioned
ALC Heath is an international medical insurance company providing insurance to private clients companies and organizations worldwide. ALC Health was built and continues to grow on a philosophy of ensuring that private clients, corporate and intermediaries are all offered a high quality personal service.
Established in 1947, Clements Worldwide offers worldwide life and health, motor, property, high risk and specialty insurance solutions to expatriates and international organizations. Operating out of Washington, D.C. and London Clements offers policies throughout 170 countries worldwide.
As the Euro zone debt crisis continues to take its toll on economies and industries, some European insurers may be experiencing a decrease in their solvency ratios and recent credit ratings appear to be reflecting this as a result.
Low interest rates and unstable markets have impacted the means by which insurers generate their income, and whilst Europe’s top 20 insurers are currently maintaining stable overall financial health the current economic climate and the rocky Euro currency remain a constant threat.
A.M Best Company analyses the credit ratings of companies within the insurance industry and has been keeping a close eye on the effect of the debt crisis on European insurers in particular.
By stress-testing the balance sheets of insurers against factors such as their corporate bonds, equities and exposure to the debt crisis, A.M Best Co is able to evaluate investment risk exposure and assess financial strength and creditworthiness.
A.M Best performed such tests in 2011 and placed many insurers under review with a negative outlook. Since then, the company has continued to closely analyse European insurers and reviews have been re-examined but results still appear to reflect the current unstable climate.
Italy has been hit particularly hard by the debt crisis and Italian insurance giants Generali have been greatly exposed to the unstable markets as a result.
A.M Best has noted that whilst Generali (and other European insurers) are still showing strengths and are deserving of their current ratings, the instability of the European situation can still only allow for them to be placed with a negative outlook.
The solvency of the European banks offer significant risks to the insurance sector and with the now very real prospect of a Greek exit from the eurozone, which would in turn have a domino effect on the peripheral countries, the chances of the situation improving any time are slim, to say the least.
With such a bleak future for Europe, it is expected that further rating actions could take place in the upcoming months and it is unlikely that these will be moving upward in a positive direction any time soon.
Financial markets do not normally take a ‘wait and see’ approach and as a working solution to Europe’s debt crisis is still yet to surface, A.M Best expects to witness further instability in European markets and the financial institutions involved within them.
As Europe remains to be a place of economic uncertainty, Asia continues to provide Health insurers opportunities for investment and expansion.
Asia is home to the largest number of high net worth individuals and with 3.3 million people now owning liquid assets worth at least USD $1 million, the continent has overtaken Europe and is second only to North America in terms of wealth.
Several of the less developed countries in Asia in particular though, are showing significant amounts of promise and could be the escape route established international companies need to avoid the financial quagmire in much of Europe and the USA.
A survey carried out by economic consulting firm, Nathan India, has indicated that one in 10 people living in India could end up buying health insurance products by 2015, inevitably increasing the existing 2 percent of the entire population to 10 percent.
As greater numbers of the country’s population are becoming increasingly aware about health insurance and the benefits it can bring, it is predicted that the industry will grow from USD $1.6 billion to $7.6 billion by 2015; the Indian health insurance industry witnessed a growth of 36.9 percent in 2011.
Those considered most likely to purchase health insurance products are those who are married, have a graduate degree and have a steady income. As India continues to bloom in business, these sectors of the population will surely continue to grow alongside the nation’s GDP.
The Indian health insurance industry has already been experiencing a steady growth over the past 6 years and so far, growth has mainly been concentrated within the public sector of the market where companies such as New India, United India Insurance, National Insurance and Oriental Insurance have all played significant roles.
Improvements in Information Technology have played their part too, and more companies have developed e-platforms which have enabled individuals to understand more about insurance coverage and compare different plans and policies.
Some international insurance giants have honed in on the vast potential in the Indian market and companies such as Star Health, Apollo Munich and Max Bupa already have a strong foothold in the private sector and are witnessing a growth in the number of Indian hospitals registering with them.
In the meantime however, the Joint venture of ICICI Lombard between India’s ICICI Bank Limited and Canadian Fairfax Financial Holdings Limited still hold the title of largest providers of general insurance in the private sector.
Sri Lanka has experienced similar growth patterns in the insurance industry recently and also shows great promise for growth.
According to the Insurance Board of Sri Lanka (IBSL), the gross written premium of the country’s insurance sector rose 18.5 percent last year to USD $464.4 million dollars with general and life insurance sectors recording the most substantial growth.
The IBSL regulates 21 insurance companies which are separated into the combined general and life insurance, and life insurance. The total assets of these companies was USD 2.3 billion last year and this is a marked improvement from the USD $1.7 billion they witnessed in 2010.
May 2009 marked the end of the 26-year armed conflict in Sri Lanka, and since then the nation has been on the right path to becoming a middle income country. To ensure it continues on in this direction, Sri Lanka is focusing on long-term solutions and is looking towards international markets more frequently.
Several international insurance names have sought out such investment opportunities in Sri Lanka and even though British Aviva has had to put its share in Sri Lankan based Eagle Insurance on the auction block, other insurance giants such as Manulife financial and Prudential are likely to be among potential bidders and could continue to inject the industry with the financial boost it requires.
The Asian market in general, whilst offering great promise, is a tricky arena to enter. One reason is as previously mentioned; very wealthy individuals live alongside those who are not so fortunate. As a result, it is a challenge for insurance companies to reach all audiences and experience sufficient growth which could explain why some international companies are less inclined to experiment with Asia and concentrate on maintaining their existing performance levels instead.
When trying to target those in the higher end of the personal wealth scale though, many local insurers in Asia struggle as they do not appear to have the underwriting experience and expertise required when dealing with the higher level claims that are expected by individuals with a large net worth.
This is where acquisitions and mergers with global companies are much appreciated and where great opportunities lie for foreign investors.
It has taken a few years to really get going, but the market for insurance products targeted at high net worth individuals is certainly growing and some life insurers are flagging this area in particular as their focus area for significant growth.
AXA in particular hopes to develop substantially in this area after its acquisition of HSBC’s general insurance business in both Hong Kong and Singapore while AIA has already proved it has a good grip on the high end market situation and is moving in a positive direction.
Asia appears to be continuously developing at both ends of the wealth spectrum, more so than other continents it would seem and it therefore remains to offer great opportunities to both local and international insurance companies alike who are looking to experience expansion and significant growth levels.
Following our October 26th, 2011 announcement in relation to the planned cancellation of AVIVA Global Lifecare plans, Globalsurance.com can now confirm that policyholders are being denied the option to renew their Global Lifecare policies.
AVIVA customers who have developed pre-existing conditions whilst on their policies are having to find new coverage options due to the company’s decision to no longer continue protection under the Global Lifecare product line. However, Globalsurance.com can reveal that the decision to deny renewals on these policies is not universal – a number of customers have been able to successfully renew their AVIVA coverage in direct contrast to the announcement made by AVIVA last year.
More on this story can be found at Yahoo Finance.
If you are an AVIVA Global Lifecare customer who has been affected by this situation, or if you are a Global Lifecare customer who has been able to renew their policy since the cancellation announcement, Globalsurance would like to contact you in relation to this story.
As always, feel free to let us know what you think in the comments.
Fortis Healthcare has received board approval for their plans to list their Religare Health Trust on the Singapore stock exchange. Meanwhile, the bidding process for the Asian insurance business of ING Groep has moved into the second stage, with a number of contenders making the short list.
As a business trust, the Religare Health Trust will contain assets from Fortis’ radiological testing and outpatient clinical services and will focus its investments in healthcare, medical-related services and assets around Asia, Australia, New Zealand and other emerging markets. The listing of Religare Health Trust has been approved by the Singapore Exchange on Friday and is expected by Fortis to raise approximately US$ 360 million.
The listing of Religare Health Trust on the Singapore Exchange will be the second by an Indian business after Indiabulls Properties Investment Fund did so in 2009. Fortis is waiting for appropriate market conditions to launch the IPO, however, once finished Fortis should hold 33 percent of the trust with the remaining shares going to international investors.
In the bid for some of the Asian assets of ING’s insurance business, at least four companies have made the shortlist for the second round of bids. Reports have indicated that Manulife Financial, AIA, Korea Life Insurance and KB Life Insurance have all been given the opportunity to make binding, second-round bids.
ING must sell off its global asset management and insurance businesses as part of their bailout agreement with the EU in 2008, in which they received US$7 billion from in government loans. However, given the regional issues in Europe, ING has decided to sell its Asian and European insurance and asset management divisions separately.
Reports indicate that ING is seeking between US$6 to 7 billion for their Asian insurance business, while one analyst from Rabobank International, Cor Kluis, has estimated that ING will garner close to €4.6 billion (US$5.8 billion) after paying down some of their debt.
ING’s sale of their Asset Management has also progressed to the second stage of bids. The asset management business has been valued at approximately US$500 million, and similarly to ING’s insurance business, has attracted the attention of Manulife and AIA among other companies. The procurements of ING’s Asian assets are seen as a great way for a number of companies to expand business into new countries or grow market share in locations where they may already have a foothold.
Founded in India in 1999, Fortis Healthcare is a healthcare provider that currently operates 46 hospitals in India, which are organized as a hub and spoke model around their specialty hospitals. They offer laboratory, wellness, information technology, travel and financial services through the wholly owned Religare Enterprises Limited
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.
Manulife (International) Limited is a member of the Manulife Financial group of companies. Manulife Financial is a leading Canadian-based financial services group serving millions of customers in 22 countries and territories worldwide. Operating as Manulife Financial in Canada and Asia, and primarily through John Hancock in the United States, the Company offers clients a diverse range of financial protection products and wealth management services through its extensive network of employees, agents and distribution partners.
AIA is a Hong Kong-based life insurance company doing business across Asia that has been in business since 1919. They service over 20 million policies through 23,000 employees and 300,000 agents throughout markets in Asia, including: Vietnam, Thailand, Taiwan, South Korea, Singapore, Philippines, New Zealand, Malaysia, Macau, Indonesia, India, Hong Kong, Mainland China, Brunei and Australia.
Sun Life Assurance has formed a joint venture with PVI holdings in Vietnam, while Zurich Insurance Group is eyeing an entry into the highly profitable Saudi Arabia insurance market.
Zurich Insurance Group has had a stellar start to the year. The group has posted Q1 2012 net income at US$1.14 billion, significantly improved from the US$640 million that Zurich reported as net income in Q1 2011. Zurich’s business operating profit is also sharply up from the first quarter of 2011, where the organization reported US$854 million, reaching US$ 1.38 billion so far in 2012.
The company has attributed its accomplishments to the success which it has experienced in executing a globally based strategy; accessing developing economies and relatively underserved markets in order to capitalize on the opportunities these places represent. For example, Zurich has recently entered into a 10 year distribution partnership with HSBC in Gulf Cooperative Council (GCC) Countries, has obtained the relevant licenses for life insurance distribution and underwriting in Singapore, and acquired the life insurance arm of Latin American banking giant Santander.
However, keen to keep the momentum going, Zurich is also preparing to enter into talks with the Saudi Monetary Authority (SMA) in an attempt to enter the Kingdom’s life insurance sector.
The SMA, which approves licenses and takeovers for foreign companies to enter the Saudi insurance market, is not currently issuing licenses to new insurers. This means that Zurich would likely have to purchase an existing local provider and that provider’s existing Saudi insurance license. Whilst this may seem like a straight forward case of identifying, and then acquiring a company with the capability to significantly add value to the Zurich Group, a potential stumbling block exists in the fact that the SMA must approve all foreign company takeovers in the local market.
This is not deterring Zurich, which has been in talks for the last 18 months to identify a suitable candidate. Zurich’s interest in the country is understandable considering that the International Monetary Fund (IMF) expects the Saudi GDP to increase by an estimated 6 percent this year – primarily due to the rising prices of crude oil.
Geoff Riddell, Zurich Chairman for APAC and MENA, commented on the attractiveness of Saudi Arabia from the company’s perspective in the Gulf Times, stating “it’s wealthy, it’s got a huge population, there’s a massive planned infrastructure spend to try and create new cities and work for that large population… There’s zero penetration and there’s a huge upside.”
It seems as if the Middle East is going through something of a renaissance in the insurance market at the moment, with a number of GCC and MENA countries posting strong indications of growth for the coming year. In light of the uncertain economic conditions in the USA and Europe, the decision by Zurich to further attempt an entry into Saudi Arabia makes a large amount of sense.
On the other side of the world, Sun Life Financial Inc. subsidiary, Sun Life Assurance Co. of Canada, has signed a Joint Venture agreement with PVI Holdings in Vietnam to form PVI Sun Life Insurance Co. Ltd., or PVI Sun Life.
PVI Holdings is a Hanoi listed subsidiary of Petrovietnam, the state controlled Gas and Oil titan. PVI Holdings is the largest non-life insurer in Vietnam and generated a 25 percent increase in gross written premiums during 2011 for total premium revenues of US$ 202 million. The company currently holds 21.3 percent of the Vietnamese non-life market, positioning PVI to become a valuable partner to Sun Life in the country for many years down the road.
Because Sun Life deals with life insurance and PVI is a non-life insurer the decision by the two organizations to form a JV opens up significant avenues for both. In-line with PVI’s domestic development goals and expanding the Sun Life footprint in South East Asia, PVI Sun Life will be primarily focused on life insurance distribution in Vietnam.
Sun Life Assurance Co of Canada will own 49 percent of the new organization, with PVI Holdings owning a majority 51 percent. By utilizing PVI’s exceptional local knowledge and existing sales and distribution channels and leveraging Sun Life’s 150 year history of life insurance underwriting PVI Sun Life will be in a prime position to lead the market in one of Asia’s most undervalued yet vibrant economies; at present only 5 percent of the Vietnamese population holds some form of life insurance protection, a figure which PVI Sun Life will be keen to increase.
Sun Life has been present in the nearby Philippines since 1892, and will use its experience in that country to further the goals of the newly created organization. Similar to the Vietnamese market, Filipino Life Insurance products tend to be far more flexible than similar products available in countries like the USA or United Kingdom, and are priced to be more competitive in a region where the average monthly income is only US$ 185.
Sun Life Phillipines CEO, Rizalina Mantaring, was extremely bullish towards the partnership and the ability of the Filipino arm of Sun Life to have an impact on Vietnamese operations. Ms. Mantaring said “we are truly excited about this new partnership. The Philippine operations has been highly successful over its 117 years in the country, and we look forward to providing support to PVI Sun Life through the sharing of our experiences, capabilities, and know how with our counterparts.”
With both Zurich and Sun Life choosing to seek ever more countries in which to expand their respective operations this could be an indication that more major providers in the international market will follow close behind. With the levels of economic uncertainty currently being seen across the globe, specifically in “developed” countries, the less developed “developing” markets are starting to hold significant potential for insurers looking to boost their bottom line.
On October 15th 2011, China’s Ministry of Human Resources and Social Security put in place new regulations which required foreign employees working in China to contribute to the country’s Social Insurance System. The regulations stated that foreign employees would have to register after employment and start paying towards five types of insurance policies, including basic pension insurance, endowment insurance and unemployment insurance.
This brought about both positive and negative repercussions as while expats could now enjoy many of the same insurance benefits as local citizens, they were often already paying towards similar schemes in their home countries.
In light of this, China has now started negotiations with 11 countries so far including Singapore, Spain, Finland and Japan with hopes to simplify social insurance payments both for Chinese citizens working overseas and expats working in china.
Both employers and employees pay towards these endowments with workers contributing 8 percent of their wages and employers paying an amount equaling 20 percent of their workers wagers each month. Often, salary levels of foreign employees are high and result in a heavy financial burden for companies each month.
A simplified Social Insurance System could help China and other countries involved in the negotiations to avoid double payment of social insurance contributions as well as deciding which types of insurance policies should or shouldn’t be included in the system.
South Korea and Germany have already signed agreements with both deals exempting workers paying endowment insurance in the country where they do not reside. As a result, 2000 Koreans, 4500 Germans and 10,700 Chinese working in these countries have already benefited from these negotiations.
Other foreign nationals surely also hope that such agreements will be made with their home countries as expats working overseas tend to do so on a temporary basis and therefore would not benefit from paying endowment insurance, especially as the system requires an individual to work 15 years before they can collect their fund.
On the other hand, some expats may plan on retiring in China and would therefore appreciate being entitled to these benefits but could already be enjoying coverage from previous insurance policies of their home country and therefore negotiations could result in the exemption of certain policies within the system.
Negotiations may still take a year or two to reach final agreements but they will undoubtedly remain a hot topic as China becomes an increasingly large hub for international business and foreign employment opportunities.
Two international health insurers have made minor adjustments to their health plans. Both AXA PPP International and Now Health international have made changes, mostly to their international group health insurance plans, in order to increase their appeal to corporate customers.
Now Health International has moved to modify their mid-range group insurance plan, WorldCare Advance, to offer routine dental and maternity coverage options based largely upon responses from intermediaries. Available to companies with 10 or more employees enrolled on the policy, the options include coverage for routine dental care, complex dental care and routine maternity care.
Routine Dental benefits will provide cover up to UK £ 312 (US$ 500), while complex dental benefits will cover up to UK £ 625 (US$ 1,000). Both optional dental benefits packages come with a 20 percent co-insurance. The added routine maternity coverage options will provide benefits up to UK £ 4,375 (US$ 7,000), and will provide policyholders the option of taking out the benefit with or without a 20 percent co-insurance.
In a slightly different approach, AXA PPP International is making policies written on a medical history disregarded basis more available to group applicants. AXA PPP has reduced the number of people required to be on the plan in order to receive the medical history disregarded benefit from 10 to 5.
Medical History Disregarded, also known as MHD, is a highly attractive benefit for providing coverage to individuals with pre-existing conditions. Under an MHD benefit all pre-existing conditions present within the group can receive coverage under the plan, even if they would normally be excluded from protection. The move by AXA PPP to lower the entry point through which groups are able to receive MHD coverage is being welcomed by intermediaries and policyholders worldwide, and means that organizations across the globe now have a more flexible option on the table in relation to this coverage without having to have the normal 20+ employees enrolled on a policy.
AXA PPP International have also amended their rules, making it possible for individuals who are currently underwritten by a different insurer to switch over to AXA PPP’s Chanel Islands or International Health Insurance plans while still maintaining the same terms of underwriting. In order to take advantage of the ability to switch providers to AXA PPP, the individual must simply turn in a declaration form verifying they have not received treatment in a hospital or visited a specialist within the last 12 months, have not had cancer within the last 5 years and do not have any treatment scheduled in the near future.
Both of the modifications to plan benefits or structure made by AXA PPP and Now Health should provide added appeal to consumers, especially those looking for group plans. While this may be a point in time where AXA PPP and Now Health have both seen areas there they can improve upon their products to increase membership, it will be interesting to see if other insurers further refine their offerings as well.
Insurance Companies Mentioned
AXA PPP International
Originally known as PPP Insurance, the company became part of the Global AXA Group in 1999 and changed its name to AXA PPP in 2002. AXA PPP is now an international health insurance company with over 2 million customers around the world.
Now Health International
Now Health International is an international health insurance provider that was founded in 2010. Now Health is based in Hong Kong and also has regional service centers in Dubai and the United Kingdom. Its plans are underwritten by members of the AXA group.
Hong Kong’s Office for the Commissioner of Insurance (OCI) has released provisional statistics of the city’s insurance sector for the first quarter of 2012.
Hong Kong, recently named the world’s most competitive economy in the IMD World Competitiveness Ranking report, has a vibrant financial services industry in which the insurance sector plays a major role. According to the report from the city’s OCI this role is still vitally important in contributing to the overall strength of the territory’s financial clout.
An indication of the relative health of the city’s insurance market can be seen in the top line numbers; total HKSAR insurance premiums for the first quarter of the year came in at a staggering HK$ 62.8 billion (US$ 8.9 billion). This figure is an increase of 11.7 percent over the same period in 2011.
General Insurance lines were the biggest contributors with net premiums increasing by 6.4 percent to HK$ 10.9 billion (US$ 1.4 billion) and gross premiums rising by 8.6 percent to HK$ 7.6 billion (US$ 929 million) over their Q1 2011 numbers. Total underwriting profit for general insurance lines rose by an almost unbelievable margin, climbing from HK$ 482 million (US$ 62 million) in Q1 2011 to HK$ 853 million (US$ 109 million) in Q1 2012.
Hong Kong has long been considered an oversaturated insurance market due to the city’s relatively small population of only 7 million people and the number of large, international brand name insurers present in the local industry. However, the numbers contained in the OCI’s report reveal that there are still, very real growth prospects present for insurance providers, agents and brokers within the domestic market.
In tandem with general insurance lines, direct insurance business also posted strong growth figures for the first part of 2012 with gross premiums in direct business increasing by 10.5 percent to HK$ 8.4 billion (US$ 1.1 billion) and net premiums gaining 11.1 percent to HK$ 6.3 billion (US$ 811 million) over the same reporting period in 2011.
According to the OCI, direct business is primarily being driven by General Liability lines, which includes Employee Compensation (EC) coverage, in addition to Accident and Health Business including Hong Kong Medical Insurance. Hong Kong based analysts have speculated that a rise in the uptake of locally available health insurance coverage is, in part, being spurred by constricting availability of healthcare services within Hong Kong’s public medical system and the system’s lowered levels of financing over the last 5 years – despite Hong Kong’s high ranking in the IMD ranking report the city still lags many other nations in terms of public healthcare expenditure.
Accident and Health product lines saw gross premiums increase to HK$ 3.2 billion (US$ 412 million) while net premiums rose to HK$ 2.7 billion (US$ 347 million).
The only insurance line which did not experience the same type of growth in 2012’s first quarter were Pecuniary Loss products, which actually fell 14.7 percent to HK$ 303 million (US$ 39 million) in gross premiums and dropped 39.5 percent to HK$ 126 million (US$ 16 million) for net premiums. Pecuniary Loss lines include Mortgage Guarantee products, which have been adversely affected by a major slowdown in the Hong Kong real estate market.
However, Pecuniary Loss lines represents one of the few dark spots in an otherwise gleaming report. Underneath overall premium increases across the majority of insurance businesses are indications that the city’s underwriters are in for a stellar year.
Direct Business underwriting saw a major profit for the first quarter, increasing from HK$ 370 million (US$ 47 million) in 2011 to HK$ 634 million (US$ 81 million) in 2012, and Marine and Ship insurance has bounced back from a disappointing 2011, where the product lines saw a loss of HK$ 121 million (US$ 15 million), to a strong HK$ 27 million (US$ 3.4 million) profit so far in 2012. The OCI indicates that improved claims procedures and customer claims experience was a key factor in the rejuvenation of Ships business.
It’s not just Ships business which is seeing the benefit of refined claims procedures; both Motor Vehicle and Accident and Health business lines have experienced the benefit of improving claims experiences, which has helped the underwriting profit for both these lines of coverage.
The underwriting profit for Accident and Health business lines increased from HK$ 85 million during Q1 2011 to HK$ 137 million (US$ 17 million) in Q1 2012, while Motor business saw underwriting profits increase from HK$ 2 million (US$ 257,706) to HK$ 45 million (US$ 5 million) over the same reporting period. Again, this is mainly due to a refinement in these lines’ claims handling, pointing to significant upside for all locally situated insurers, across all product types, should they choose to refine their claims methodology.
There is good news on the Long Term product front as well, premiums for Long-Term In-Force products rose by 12.9 percent over the first quarter in 2011, coming in at HK$ 51.9 billion (US$ 6.6 billion) in quarter 1 2012. Premium revenues for Life and Annuity Non-linked plans came in at HK$ 36.2 billion (US$ 4.6 billion), a 20.9 percent increase over Q1 2011, while Linked Life products (along with Pecuniary Loss devices) actually saw a contraction of 6.3 percent with premium revenues standing at only HK$ 11.5 billion (US$ 1.4 billion).
With the vibrancy of the Hong Kong economy, and the healthiness of the first Quarter figures, it is increasingly looking like the Hong Kong insurance industry is set to record a bumper year for growth. With business up, ever increasing foreign investment, and the fact that the city is now standing at the pinnacle of the economic system, the growth in the HK insurance sector represents the growth of Hong Kong as a whole; this Asian financial juggernaut is going to keep rolling on.