THAILAND - Finance
Chairman, Bangkok Insurance
Chai Sophonpanich is the Chairman of Bangkok Insurance. Before joining Bangkok Insurance, he served as Director of Bangkok Life Assurance and as Director of the International Insurance Society. Sophonpanich has over 45 years of experience in the field.
We are working to increase business in personal lines segment. Traditionally, we have emphasized commercial lines. Over the past five or six years, we have been trying to gain more share in personal lines. That is an area where the market is much bigger and the growth potential is sharper. Currently, commercial insurance products have limited growth potential, especially when the economy is in a bad shape. Whereas for our personal lines, we have a number of products, including fire, health, personal accidents, and, of course, motor—everything except life. In the motor segment, the margins are currently low in comparison to other areas. There has been no growth in the last two years in motor because the demand has dropped a lot. First-time buyers contributed to a lot of the growth two or three years ago, and right now we are witnessing a downward trend, which is why we are hopeful of boosting non-motor segment while focusing on personal products.
Over the last two years, especially in motor where there is no growth, there have been a lot of companies that are struggling to gain clients. As such, the sector has been experiencing a price war in a bid to secure new premiums. Therefore, Bangkok Insurance is trying to boost other segments of its portfolio, while also being innovative with the motor products it offers. For example, we hope to put more emphasis on female drivers, or to calculate premiums according to distance travelled. We install telemetric systems at the request of the customer and it measures how much they travel and where they go. The less they travel, the less premium we will charge them. Now, we are looking at regional factors, i.e. which part of the country has the fewest accidents. Certain parts of the country are better than others, so we are hoping to reflect our rates in those areas.
It’s not as simple as that. Every country has different requirements in order to do business, such as setting up a representative office and entering the business with a certain amount of capital. Myanmar announced a year ago that foreign-owned companies are allowed to open in Myanmar on the condition that they have market capitalization of USD50 million. This is more than the premiums of companies, which makes it difficult for insurance firms to expand there. However, for example in Cambodia the required capital is USD7 million, which makes it much easier. We have had operations in Cambodia for about 10 years and in Laos for four or five. We have also had about 25 years in Indonesia and 15 years in the Philippines. All of our operations overseas are joint ventures with local partners. We do not have anything in Malaysia or Singapore, as they require high capitalization. Nonetheless, it is possible that the AEC will encourage these markets to relax their regulations. This will depend on how the local companies operate; if they do a good job and expand reasonably well, they will be able to compete with the foreign firms.
There is a law being discussed by the parliament to raise the minimum capital requirement from THB30 million to THB500 million over the next five years by gradually increasing the requirement, which will end up reducing the number of companies in the market. At the moment, we have 60 non-life insurance companies, which is a lot for a small market like Thailand. Malaysia is much bigger and has about 20 companies and Singapore only has about 15. Especially if you are going to allow foreigners to open companies freely, you need strong local companies to compete with the foreigners. The only way you can strengthen the local market is to have fewer, but stronger companies.
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