Insurers told to plan for growth
The insurance industry in Asia is expected to grow at a fast clip this year, according to an Ernst & Young report.
The company's Global Insurance Center 2011 Far East Insurance Outlook shows that the expansion of the insurance market in Asia, including South and Southeast Asia, will continue to grow steadily this year and easily outpace the world's other regions. But insurers must choose their opportunities carefully and move quickly to take advantage of this expansion, the report says.
'Insurers need to keep in mind that Asia-Pacific is a highly diverse market when it comes to the economic progress of various countries, as well as the factors that drive their insurance markets,' says Jeff Malatskey, insurance practice leader at Ernst & Young, Asia.
'Asia-Pacific features mature regions that are more saturated by insurance products. But developing and emerging markets can be found that offer tremendous growth potential, but only for insurers who are ready to commit financially over the long term.'
The report has identified three key areas for insurance companies looking for growth. The traditional agency distribution model for selling life and health insurance in Asia-Pacific is increasingly challenged by the development of alternative sales channels. The insurers that take advantage of consumer demand for insurance outside the established agency and independent financial adviser channels will gain a competitive advantage in terms of increasing production volumes and more effectively managing expenses.
Secondly, the outlook report says that during this year, regulations will continue to evolve in the wake of the financial crisis.
As a result, insurers must quickly identify the potential business impact of these changes, and change their strategies accordingly.
It remains crucial for insurers to stay abreast of proposed changes to local and regional regulations, as well.
And lastly, given the expected growth of Asia-Pacific markets this year, insurers will need access to dependable supplies of capital to comply with solvency requirements, support organic growth, and seize merger opportunities. Many insurers may also need to invest in the development of back-office systems, new branch offices and hire staff.
Mature markets, such as Singapore, Hong Kong and Australia, are seeking to become regional hubs, the report says. Governments are looking to offer incentives, such as tax concessions and salary subsidies, that are likely to fuel even greater interest in the region.