Asia's insurance market, except Japan, will see premium growth rebound in 2019, propelling premium growth to almost 11 percent - Photo: AsiaGlobe.

JAKARTA (TheInsiderStories)Asia‘s insurance market, except Japan, will see premium growth rebound in 2019, propelling premium growth to almost 11 percent, according to forecasts by Allianz Research, the world’s leading insurance, and asset management company.

Long-term prospects look a little brighter. Allianz Research expects insurance markets to continue to recover, with global premium growth forecast to reach around 5 percent in the next decade.

Given the accelerating demographic change, particularly in emerging markets with underdeveloped social security systems, life insurance should again grow a tad faster than the property & casualty (p&c) business (5.5 percent vs 4.4 percent).

Growth expectations for Asia are notably higher – the region should achieve growth of 9.4 percent p.a. over the next decade (life: 9.8 percent, p&c: 8.5 percent). All in all, around 60 percent of additional premiums will be generated in Asia.

In 2018 was the third year in a row in which property-casualty insurance outgrew life insurance worldwide (4.7 percent vs 2.5 percent). The gap was, even more, pronounce in Asia: The p&c market clocked an increase of 7.5 percent whereas the life market stagnated (+0.2 percent). Last year’s growth in p&c, however, was the weakest since 2013.

Globally, the insurance premium volume last year rise to 3,655 billion euros (excluding health insurance). Compare to 2017, the nominal increase adjusted for exchange rate effects is 3.3 percent.

It was the third year in a row (or the 12th out of the last 15 years) that global premium growth lagged behind the expansion of economic activity (+5.7 percent nominal growth in 2018). Insurance penetration (Premiums as a percentage of GDP) has thus fallen to 5.4 percent- the lowest value in the last 30 years.

“It is actually a paradoxical situation,” commented Michael Heise, Chief Economist of Allianz SE. “On the one hand, the risks in the world are constantly increasing – just think of climate change, demography, cyber or politics – but on the other hand, people worldwide are spending an ever-smaller proportion of their income on insurance. A great joint effort by politics and industry is needed to close this ‘protection gap’.

It was also an unusual year for Asia: Premiums rose by a meager 2.3 percent in Asia, only the second time since the turn of the millennium that it trailed behind global growth. Moreover, with an increase of 4.0 percent, even Japan grew faster.

The upshot: In 2018, the region accounted for only 16 percent of global growth (after a whopping 81 percent in 2017). The global growth engines for 2018 were two old acquaintances: the United States (42 percent) and Japan (11 percent).

The culprits for this dismal performance are easy to pinpoint: Life markets both in China and Korea – which account together for 40 percent of the total regional premium pool – shrank in 2018. In China, this was mainly due to a regulatory crackdown on insurance intermediaries selling wealth management products.

In Indonesia, the market premium grew low in 2018. This was due to a decline in the growth of life insurance premiums. In contrast, P&C premiums grew well and doubled in the past two years. Nonetheless, the P&C segment contributed only a quarter of the total premium collection (excluding health insurance).

Joos Louwerier, Country Manager and Managing Director of Allianz Life Indonesia said that throughout 2018 several events had an impact on the market, such as the trade war between the US and China, rising oil prices and rising US interest rates. This has an impact on the life insurance market in 2018.

However, Allianz can overcome this challenge with positive growth by providing innovative protection solutions and excellent services. Allianz is also committed to supporting the government to increase financial penetration and provide protection to more Indonesian people (to ensure more people). ”

“Top line and Net Earned Premium Allianz Utama has grown very well this year compared to the previous year. However, natural disasters have reduced the financial performance of 2018. Nonetheless, our digital retail transformation is going well. This can be observed from the level of satisfaction of our customers, through measurements of the Net Promoter Score, which increased significantly,” said Peter van Zyl, President Director of Allianz Utama Indonesia.

For this year, Allianz Research expects higher growth, with premium growth of around 9 percent overall. Indonesian insurance market still has plenty of room to catch up. Percapita premium reaches EUR 50 in 2018 (equivalent to India) while penetration is only 1.5 percent, (for comparison, penetration has reached 3.7 percent in China).

Allianz Research hopes the insurance market will continue to recover, with global premium growth estimates that will reach around 5 percent in the coming decade. Expectations
growth for Asia (except Japan) is higher – this region can grow by 9.4 percent per year over the coming decade.

In Indonesia, market growth is predicted at 12.5 percent (13.0 for life insurance and 10.7 for P&C). Overall, around 60 percent of the additional premium will be generated in Asia.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com