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Version: Final
Date: 7th November 2012
CEO BriefingThe Study on the impact of ASEAN Market Liberalization on the Non-Life Insurances in Thailand
IS THE INSURANCE INDUSTRY PREPARED?
START THE INSURANCE JOURNEY FOR AEC …
Deregulation process
Liberalization
The regulatory agenda
Growth opportunities
Political and economic outlook
Volatile capital market
Demographics and industry trend
Data
People
Processes
Systems & technology
Transformation
2© 2012 KPMG Phoomchai Business Advisory Ltd., a Thai limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative.
All rights reserved. Printed in Thailand
The EU Experience to Single Insurance Market (SIM)
Intensity of Liberalization
Pat
h to
Der
egul
atio
n
High
Low High
Removal of Barriers
Timeline1970’s 1988-1990 1994 2012
Lega
l fra
mew
ork
Deregulation process
1992
•Freedom of establishment
•Freedom of services
•Freedom of single license & control
•Single European license•Home Country Control•Solvency supervision
New law
“More than 40 Years…” “The Journey still goes on…”
EU Crisis
3© 2012 KPMG Phoomchai Business Advisory Ltd., a Thai limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative.
All rights reserved. Printed in Thailand
Driving Forces from Market and the Deregulation
Impacts of liberalization
Impacts of deregulation
Increase of competition
Easier m
arket access
�Growing presence of foreign companies
�Wider spectrum of new or innovated products
�Higher quality of services
�Investments transfer
�Restructuring on the insurance industry
4© 2012 KPMG Phoomchai Business Advisory Ltd., a Thai limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative.
All rights reserved. Printed in Thailand
Agenda
Terms Of Requirements
Project Overview
Project Team
Deliverable Outlook
� Study
� Analysis
� Identification
� Survey
� Recommendation
� Final report
5© 2012 KPMG Phoomchai Business Advisory Ltd., a Thai limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative.
All rights reserved. Printed in Thailand
Messages from TGIA - Term Of Requirements (TOR)
1. Study� The current situation of Non-Life insurance companies in Thailand
� Market structure including entry barriers, partner and distribution channel� Financial aspects (risk and profitability measures)� Legal and regulatory aspects
� Non-life insurance market in ASEAN countries� Market structure including entry barriers, partner and distribution channel� Financial aspects (risk and profitability measures)� Legal and regulatory aspects � Comparative adjustment
� EU and Japanese market liberalization & employ the past experience that might be repeated
2. Analyze� Strengths, weakness, transition period analysis � Comparative advantage of non-life insurances in Thailand
3. Identify� Threats from free flow of services under ASEAN agreement� Market opportunities in ASEAN market
4. Recommend� The roadmap for Non-life insurance industry based on comprehensive finding
results
6© 2012 KPMG Phoomchai Business Advisory Ltd., a Thai limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative.
All rights reserved. Printed in Thailand
Background
ASEAN Economic Community (AEC) refers to the goal of regional economic integration between the ASEAN member countries by 2015. In establishing the AEC, the member countries shall act in accordance to the principles of an open, outward-looking, inclusive and market-driver economy consistent with multilateral rules
Objective and Goal
Objective: The TGIA is seeking to undertake a study of the impact of the AEC in order to develop a roadmap to assist Thai non-life insurers to respond to the opportunities and threats that the AEC will present.
Goal: The insurers being classified in the different groups have comprehensive study as practical guide in response to their needs to remain competitive for the opportunities and threats incurred by AEC driving forces.
Constraint
Due to the fact that the ASEAN insurance market is highly fragmented, a number of issues over which we had no control are likely to have affected the source data.
Assumption
No fundamental changes in the original goal of regional economic integration among ASEAN member countries during the study period
In Scope
�Country analysis in response to competitive position among ASEAN nations�Benchmarking survey for non-life Thai insurers�Benchmarking research for major non-life insurers in ASEAN nations�Impact analysis of liberalization to ASEAN�Deregulation process taken in EU, Japan
Out of Scope
�Benchmarking and market research in context of life insurance
Methodology and Approach
Study
Project Overview
Assesscompetitivepositioning ofThai insurersagainst the ASEANnations
Identify threats and opportunities for Thai local in light of their current capability and future landscape
Review Thai insurers’internal capabilities and identify the existing and required competencies to achieve the desired market positioning
Analysis Identification Recommendation
7© 2012 KPMG Phoomchai Business Advisory Ltd., a Thai limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative.
All rights reserved. Printed in Thailand
Name Email Title Organization
Project Role
Chuchai Vachirabanchong
[email protected] Chairman of Development and Public Relations Committee
TGIA SC
Puttipong Danboonsute
[email protected] Registrar and Chairman of Legal and Compliance Committee
TGIA SC
Lhuckchai Suttichujit [email protected]
Treasurer and Chairman of Account, Finance and Investment Committee
TGIA SC
Perapart Meksingvee [email protected] Director and Advirsory Director of Account, Finance and Investment Committee
TGIA SC
Thanad Jeerachaipaisarn
[email protected] Executive Director TGIA SC
Noel Aspole [email protected] Audit Partner KPMG SME
Supaporn Tipfun [email protected] Associate Director KPMG PL
Itthipat Limmaneerak [email protected] Advisory Manager KPMG PM
Ruttigan Pransopin [email protected] Advisory Senior Associate KPMG TM
Project Team
TGIAProject sponsor
Subject Matter Experts(SME)
Project Team(TM)
Project Manager(PM)
Project Leader(PL)
Steering Committee(SC)
8© 2012 KPMG Phoomchai Business Advisory Ltd., a Thai limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative.
All rights reserved. Printed in Thailand
Study: Story Lines
Growth drivers
No Story line
Industry trends 1 I want to know key industries driving growth so that I can identify derived demand for non-life insurance.
2 I want to know adoption of social media so that I can identify disruptive impact on insurance industry.
3 I want to know popularity of bancassurance so that I can identify its market stage.
Political power 4 I want to know GDP’s growth trend so that I can identify economy forecast in next 5 years.
5 I want to know nation and proportion of foreign investment to GDP so that I can identify nature of country’s balance sheet.
6 I want to know government’s fiscal/monetary policies so that I can identify country’s growth direction.
Demographic shifts
7 I want to know aging populations’ growth and structure so that I can identify market risk/opportunities.
8 I want to know urbanization and high population size so that I can identify positive impact on demand for non-life insurance.
9 I want to know movement of talent recruitment in industry so that I can identify impact on insurance employer.
Regulatory reform
10 I want to know country’s regulatory initiatives in response to AEC blueprint so that I can identify deregulation path to single insurance market.
11 I want to know regulatory changes issued by insurance regulator so that I can identify regulatory environment in the market.
12 I want to know legal updates in relation to consumer protection so that I can identify degree of consumer protection regulation.
13 I want to know local regulator’s monitoring mechanism so that I can identify level of supervisory imposed on non-life insurance.
Catastrophes 14 I want to know insured catastrophe losses by nature type so that I can identify impacts of climate changes to insurer.
15 I want to know increased frequency of catastrophic events so that I can identify risk model requirements to insurer.
As non-life insurer, I want to know … so that I can identify “so what” of our analysis.
9© 2012 KPMG Phoomchai Business Advisory Ltd., a Thai limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative.
All rights reserved. Printed in Thailand
Study: Story Lines (cont.)
Competitive landscape
No Story line
Market leader profile
16 I want to know gross written premiums of leader s so that I can identify market size/share among non-life insurance companies.
17 I want to know how rating agencies rate the leaders so that I can identify its ranking in relation to standard global view.
Product portfolio
18 I want to know total product offerings of non-life insurance so that I can identify product portfolio in the market.
19 I want to know key products’ growth trend so that I can identify attractive growth market and segments.
20 I want to know regulatory filing requirements and regulator key concerns so that I can identify concerns in relation to new product development and offerings.
Competitive intensity
21 I want to know market growth rate so that I can identify growth opportunities for non-life insurance.
22 I want to know insurance players’ classification so that I can identify degree of competition in the market .
23 I want to know insurance regulator‘s tariff structure so that I can identify gap in comparison with region view.
24 I want to know tax structure imposed on non-life products so that I can identify competitiveness of product offerings.
As non-life insurer, I want to know … so that I can identify “so what” of our analysis.
More if found relevant to …
10© 2012 KPMG Phoomchai Business Advisory Ltd., a Thai limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative.
All rights reserved. Printed in Thailand
Analysis: What’s non-life Insurance Outlook and Impac t from AEC
Social & demographic
Technology Environmental & geographic
Political & legal
Economy
Market Industry Competition
Pricing
Reinsurance operations
Sales and distribution
Claim processing
Capital and risk mgmt
External Analysis – STEEP
Internal Analysis – MIC
Value chain/business activities in focus
Impact Analysis – Value Chain
Underwriting
11© 2012 KPMG Phoomchai Business Advisory Ltd., a Thai limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative.
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Identify: Brick-by-brick Opportunities/Threats for Thai non-life insurers P
rodu
ct li
nes
Market countries
Macro environmental factors
THA KHM IDNLAO SGP
Motor
Fire and Property
Marine and transportation
Accident and sickness
Treaty reinsurance
Other non-life insurance
Social & demographic
Technology
Economy
Environmental & geographic
Political & legal
MYSMMR VNM PHL BRN
12© 2012 KPMG Phoomchai Business Advisory Ltd., a Thai limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative.
All rights reserved. Printed in Thailand
Effective product
Innovative product
Existing market
Market penetration
Product development
New market Market
developmentDiversification
Identify: Mixed options for the future growth in AEC
Product-market strategy matrix
13© 2012 KPMG Phoomchai Business Advisory Ltd., a Thai limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative.
All rights reserved. Printed in Thailand
Introduction
To become market leaders in the emerging markets in ASEAN, the Thai insurers (non-life) should realize how important role of operational excellence in their business strategies. We believe that exceeding in this discipline enables them to achieve the other value disciplines; product leadership and customer intimacy.
Operational, financial, IT, sales and marketing executives must understand current stage of their organization in connection with operational excellence commitments in order to decide which value disciplines to pursue. That choice will shape the future operating model to support business needs for creating, enhancing, and sustaining their competitive advantage over their competitors.
Survey: Market survey message from KPMG (Optional)
Value chain/business activities in focusTarget respondents by classification group
Three Dimensions of value to become Market Leaders
Underwriting
Pricing
Reinsurance operations
Sales and distribution
Claim processing
Capital and risk mgmt
Foreign shareholder companies
Bancassurance companies
Large Thai shareholder companies
Small to medium Thai shareholder companies
14© 2012 KPMG Phoomchai Business Advisory Ltd., a Thai limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative.
All rights reserved. Printed in Thailand
Survey: Questionnaire structure at a glance
1�Section 1: Overview
�Objective: understand overview of company strategy
and organizational structure
�Scope:
2
�Section 2: Function areas in value chain
�Objective: understand key function areas’ activities
and current stage of their performance
�Scope:
�Vision and strategy
�Operating model
�Business lines
�Organizational structure
�Information technology
�Reporting
�Underwriting
�Actuarial
�Product development
�Distribution channels
�Policy serving
�Claim
�Reinsurance
�Risk management and
controls
Section 1: Which of the following statements best d escribes yourcompany’s approach to operational excellence?
Section 2: Is there a mechanism or system to track pre-sales activity management? If yes, what does it track?
Sample
Sample
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All rights reserved. Printed in Thailand
Survey: Activity/Task plan
Approximate timeline within 2 months; Kickoff market survey by 30-Nov-12 and end by 31-Jan-13
1
2
3
“Survey result will be reported by KPMG under confidentiality”
Activity/Task Owner
1
Identify key contact person at company level
Company
Send the company online survey with authorization account
KPMG
Fill in answers Company
Follow up and assist in completing the survey if need by KPMG survey team
KPMG
2
Verify and approve before submission Company
Measure and evaluate responses KPMG
Follow up if irrelevant answer found to quantify the result
KPMG
3
Write report summary KPMG
Submit to the company KPMG
Contact KPMG if further assistance is needed
Company
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All rights reserved. Printed in Thailand
Recommend: Broad directions for framing operating model
“Lean operators”
“Strong brands and distribution”
“Product experts”Underwriting
Capital and risk mgmt
Pricing andcost control
Claim processing
Reinsurance operations
Distribution operations
Either “the one-size-fits-all” or “broker-agent-based” model is no longer default option for either “multiline” or “small and medium” insurers to take the future growth.
As consumers tend to focus on price and competition is
much greater intensity, insurers must be expert in
cost control.
Leveraging existing customer relationships is main focus for insurers
building strong brands and distribution.
Focusing on analytical capabilities to manage risks plus using reinsurance is
key driver.
CRM
Talent
17© 2012 KPMG Phoomchai Business Advisory Ltd., a Thai limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative.
All rights reserved. Printed in Thailand
2
1Final Report: Table of contents
�Executive Overview
�Objectives and scope of the study
�Methodology and approach
�External Analysis
�Social/demographic factors
�Technological factors
�Economic factors
�Environmental geographic factors
�Political/legal/government factors
�Internal Analysis
�Market structure
�Industry trends
�Competition rivalry
�Impact Analysis
�Value chain impact
4
3
�Macro scenarios
�Opportunities
�Threats
�Mixed options for the future growth
�Market penetration
�Market development
�Product development
�Diversification
�Broad directions for framing operating model
�Lean operators
�Strong brands and distribution
�Product experts
18© 2012 KPMG Phoomchai Business Advisory Ltd., a Thai limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative.
All rights reserved. Printed in Thailand
Final Report: Table of contents (cont.)
�Country Analysis
�Brunei
�Cambodia
�Indonesia
�Laos
�Malaysia
�Myanmar
�Philippines
�Singapore
�Thailand
�Vietnam
�Market survey report
�Data Tables
�List of Abbreviations/Acronyms
If you have any questions, please feel free to contact:
Thank You
SUPAPORN TIPFUNAssociate Director, AuditEmail [email protected]
ITTHIPAT LIMMANEERAKAdvisory ManagerEmail: [email protected]
