Southeast Asia has an urgent need for insurance coverage, while international insurers stand to benefit from the region’s potential. Lim Hng Kiang, Trade Minister of Singapore, made these comments at the inaugural ASEAN Insurance Summit.
Natural disasters have devastated some parts of Asia in the past several years. 2011’s Tohoku tsunami and earthquake in Japan is estimated to have caused US$210 billion worth of damage, which was 3.6% of the country’s total GDP.
Likewise, Flooding in 2012 caused US$30 billion worth of losses to Thailand’s economy – around 9% of its GDP.
However, the ASEAN region remains underinsured despite the region’s vulnerability to earthquakes, flooding, volcanoes and other types of natural disasters. Southeast Asia had an insurance penetration rate of only 3.4% during 2013, while the worldwide average was 6.3%, according to Lim. These numbers were even less for non-life insurance.
“The penetration rate for non-life insurance is under 1 per cent or one-third the global average of 2.8 per cent, and there is a dearth of reinsurance and specialty insurance cover for large complex risks such as catastrophe risks”, said Lim.
He believes that there several key areas which insurance companies in ASEAN should focus on developing. Catastrophe insurance is the first, which can help in lowering the economic impact of ASEAN’s natural disasters, as well as securing emergency funds immediately after their impact.
Insurance Companies in ASEAN Should Target Trade
Another area of importance is Aviation, Maritime, and Transportation insurance. Lim explained that more transportation insurance will help to prevent disruptions in international trade.
There are still several challenges that must be overcome by both lawmakers and insurance companies. More consistency in regulatory frameworks within ASEAN will promote greater confidence in cross-border insurance services, and make individuals more likely to take up coverage.
Lim also mentioned that insurance companies in ASEAN need to develop their expertise in risk assessment and underwriting. She claims the region as a whole suffers a shortage of professionals with a good understanding of country-specific risks in Asia.
“Effective risk assessment, management and transfer are necessary to insure our economic achievements, and the best way forward is to pool our strengths and expertise together in an integrated ASEAN insurance market”.
It’s not just insurance companies which must learn how to do business in ASEAN. Advertisers and marketers also need to understand the region more.