Allianz expects the life business to be the major growth driver for the insurance sector over the next decade, averaging around a 9.3% growth rate annually.
Thailand’s old-age dependency ratio is set to leap from 15.2% today to 52.5% in 2050, against the backdrop of an ageing population. Life insurance makes up 70% of total premium income in Thailand. This is in line with the results of a World Bank survey, in which 65% of adult respondents said they saved for old age, reported The Nation.
Dr Michael Heise, Chief Economist of Allianz SE Germany, the major shareholder of Allianz Ayudhya Assurance, said that since 2012, the insurance market has been losing some of its momentum.
For the fourth year in a row, premium income growth slowed in 2016, to 3.9%. According to preliminary figures, property and casual insurance shrank by 2.1% for the first time since 1999, while life insurance growth picked up slightly to 6.6%.
Despite the fairly modest growth however, premium income reached 4.9% of GDP in 2016, putting Thailand on par with Germany with respect to insurance market penetration. Regarding per capita spending, which amounted to THB10,290 (US$303) Thailand lost its lead and is now level with China, which closed the gap thanks to a 23.1% surge in insurance premiums last year.
Economic recovery
According to Allianz’s research, Thai economic growth will remain resilient above 3% this year and next.
Dr Heise said that the country’s strong competitive advantages—such as competitive prices and strategic location—and rising foreign demand will support a rise in exports and tourism-related revenues. With public debt at 43% of GDP (lower than the 60 per cent public debt ceiling), the existing fiscal space will be used to support growth in the form of public investment, he believes.
However, it is boosting private confidence which will be pivotal to initiate a sustainable growth pace. For now, private expenditures are the main Achilles’ heel of the economy with limited growth of private credit, weak corporate confidence and low foreign direct investment inflows.