Development of Insurance Market in Asia and Oceania Countries

Development of Insurance Market in Asia and Oceania Countries

Aminda Methsila Perera [PhD]Senior Lecturer

Wayamba University of Sri Lanka

Developments in Asia and Oceania

• Asia is said to be the biggest market worldwide

• 3 Asian countries are among the 10 largest economies

• India, China, and Japan contribute 26.6 % of

the World GDP [US $ 23,163.4 Billion]


• Average growth rate in Asia and Oceania 3.9% exceeds the that of the World (2.8%)

• 23 countries reported greater than 5%(Average 7.01)

• 3 countries exceeds 10% (Mongolia 11.7%)

• HDI of Asia 0.656 and Oceania 0.857


• Global economic growth will stand at 3% in 2014 and over 3.4% in 2015.

Micro-insurance in Asia and Oceania

• Rapid-growth markets are essential to the expansion strategies of global insurers

• Micro-insurance outreach in Asia and Oceania is

outstanding, more than 172 million low-income

individuals covered by micro-insurance (GIZ RFPI Asia)


• 2010 to 2012, MII expanded

• by 30% - number of people covered, and

• by 47% - premiums generated [GIZ RFPI Asia]

• India is leading the market at over 111 million

[almost 65% of total coverage in Asia and Oceania]

• 2012 India alone generated 66% of all MI premium

of the Asian market.

10 Biggest Micro-insurance Countries [in terms of coverage - millions]

111.1

19.911.9 9.4 9.3

5.3 2.5 1.3 1.1 0.3


• In total, ten top outreach countries’ cover

approximately 99% of total micro-insurance

coverage in Asia and Oceania.

• In terms of contribution to the overall MI growth,

India has been main driver, contributing up to 70%

Contributing the Growth by the Countries

India China Philippines Mongolia Indonesia Bangaladesh Others'

India 70%China 15%

Philippines 8%Mongolia 3%

Indonesia 2%Bangaladesh 1%Others' 1%


• Due to its massive market size, India contributes to

80% of growth in premiums in the region.

• India also registers the highest number of products offered and the highest number of micro-insurance providers.


• Compound annual growth rate in coverage (2010-2012) - Malaysia (185%) and Indonesia (103%) emerged as having the most vibrant micro insurance markets

• Malaysia and Mongolia, since they registered a more

than 50% annual growth rate both in terms of

coverage and premium.


• Bangladesh, Fiji, Nepal, Pakistan China, Cambodia, and Sri Lanka also have shown impressive growth.

• Sri Lanka, Cambodia and Pakistan have attained high (>50%) annual premium growth over the last two years


• Yet, micro-insurance sector today covers less than 5% of the people living in Asia and Oceana.

• Compared with 4.4% in Africa and 7.6% in Latin

America, Asia just covers 4.3%,

• Philippines [20.6%]

• Thailand [13.9%]

• India [09%]

Top 10 Countries on Micro-insurance Coverage Ratio

21.3

14

9.2

6.2

3.8 3.5 3.12.1 1.8 1.5

Micro-insurance in Sri Lanka

• Started as a service to support the Microfinancesector

• Eventually, it developed and now offer wider range of insurance services

• Commercial insurance companies also have started to operate micro-insurance businesses.


• The Agriculture and Agrarian Insurance Boardprovides micro-insurance services to small-scale paddy cultivators and livestock farmers.

• The Social Security Board of Sri Lanka provides pension and social security benefits to its members.

• Several insurers registered under the RII Act offer micro-insurance products


• It is a US$ 700 million worth sector with a 10

percent annual growth.

• Recorded a remarkable Gross Written Premium (GWP) and asset growth

• Yet, its contribution to the GDP is 2% due to the low

penetration level in the market.


• In 2013 the Industry had penetration of 1.1% of

GDP, [1.15% in 2012 and 1.2% in 2011].

• Insurance penetration in most South Asian countries is less than 10%, leaving over 90% of the market untapped.

• The penetration as a % of GDP is on declining trend, and promoting micro-insurance to the rural masses is noted to be an even bigger challenge.


• Sri Lanka has a massive market potential in micro-

insurance, as more than 80% of the population are

in low-income sector.

• Sri Lanka should focus on giving insurance to this sector.

Challenges in Micro-insurance Industry

There are several challenges for insurance companies going down market.

• Lower literacy levels and a lack of awareness about how insurance works.

• The moral hazard, especially in agricultural insurance.

• Widespread confusion about the investment motive and security motive of insurance.


• Most commercial insurance companies are unwilling to step into the micro insurance

• The market for micro insurance in India is estimated to be between 342 million dollars to 448 million dollars for life insurance.

• A mismatch between the priorities of the potential client population and the traditional thinking of trained insurers.


• Low income people unable to manage their risk

• The variable income of the poor and Low capacity of to pay premiums [needs to be complemented by schemes with governmental involvement]

• Convincing insurance companies that insuring the poor could be a win-win situation is an uphill task.


• No special regulatory provisions for micro-insurance in Sri Lanka.

• High administrative costs

• The unprecedented tragedy, such as Cyclone or Tornado, [which was experienced by Philippines]

• Reputational damage

• Attracting and retaining top talent

• Emerging technologies

Developing Micro-insurance Industry

• There is still considerable scope for expanding the outreach of micro-insurance.

• Without insurance, the poor may be inclined to engage in activities and invest in asset portfolios with low risk but low returns, which may affect their long-term income and their ability to rise out of poverty.


• There is money in the rural sector and it is time to focus on this missing market

• Most insurance products have to be sold. Except for health and motor insurance, they are rarely bought or demanded.

• While insurance is hard to sell among the better off, it is even harder to convince the poor.


Sri Lanka is an emerging market in the region,

• Need to introduce new products to the market to attract new customers.

• Therefore, micro insurance is another important area which it has huge market potential in the country.

Thank You!

Aminda Methsila Perera [PhD]

Senior LecturerWayamba University of Sri Lanka

[[email protected]]

• Reference:

• The Landscape of Miroinsurance in Asia and Oceania 2013 by Munich Re Foundation (incorporated with GIZ)

• Insurance Market Outlook - May 2014, Munich Re Economic Research

• 2014 Insurance Market Outlook - Wells Fargo Insurance Services USA

• Annual Report 2013 - Insurance Board of Sri Lanka

Economy & Finance

Development of Insurance Market in Asia and Oceania Countries