For international insurers looking at future growth and geographic diversification, Asia remains on the agenda for discussion in most Boardrooms. And whether you make the decision to jump into the market, or, as some have done, leave the market; the growth numbers in Asia are just too big to ignore. But some still think of Asia as one large homogenous region, while others use the term emerging markets far too liberally to describe a set of countries at very different stages of development.  Singapore, South Korea, Hong Kong are well developed markets with high penetration ratios for insurance.  Other countries like China, India, Thailand and Malaysia are developing markets rather than emerging markets. So the first principle is to look at each country case by case.  Even with a slow-down this year, GDP is projected to grow in China at around 7% and Life insurance premiums even higher at around 11% - numbers we can only dream of in Europe. 

Trends driving growth opportunity

So, having established that Asia cannot be viewed as one single market from an investment perspective, what is it that makes Asia an attractive place for insurers to invest?  A quick look at the economics and the key demographic trends provides a clue. While some of the Asian economies are showing signs of slow down, it is still a fast growing region economically and the growth of the insurance sector correlates strongly with GDP growth.   Other criteria include: shifting demographics with a relatively young population, the development of new financial services, a changing regulatory framework, low penetration ratios and often low awareness.  The growing middle class in China creates a large base for new target customers with more wealth to manage and assets to protect.  By 2020 that middle class will grow to around 1.75 billion people with huge potential for savings and wealth management products. Another important trend is the ageing population.  The one child policy in China for instance has important long term implications.  The absence of well-funded social security systems drives high savings ratios throughout the region.  The need for healthcare products and long term savings designed to fund retirement will grow beyond the traditional support within the family. By 2030 around 18% of the population will be over 65 – double that of today.  This is driving the huge growth and transformation of traditional state-led pension provision. Governments are actively seeking collaboration with insurers to build the social security network, while limiting the cost burden on national budgets. 

Searching for best practices

With the right political will to support regulatory reform, many Asian regulators are in search of best practice to combine the challenges of social welfare with private sector support.   And as markets become more globally accessible, they look to what Europe has already done. As a consequence, their journey will be a shorter and perhaps less painful one.   This search for excellence extends to identifying good examples of product transparency, service standards, and ways to help educate consumers on the importance and value of insurance.  Because of the sometimes limited awareness, insurance products are still “sold”, rather than “bought” in Asia.  That requires investing in a large sales force or distribution capability, complemented by innovative marketing techniques and strong education.  The latter is something that Asia does exceptionally well.  So, understanding how markets differ is critical for success.

Lessons learned

So what can we learn from the experience of those who have already ventured into the region?  Ageas entered Asia 14 years ago, and today the group is represented in 5 countries across the region, the fastest growing segment within the Group.  We learned that it is important to carefully select your market based on the value-add you can bring to that specific market in terms of products and expertise; embrace the optimism of the Asians and deploy your best resources;  acknowledge that each market is different and embrace  the local culture;  choose your partners carefully and nurture relationships on the basis of trust and respect;  allow the local partner to lead the way in the local market and understand what each party brings to the success; be open and willing to share expertise;  and invest time in assisting in the development of the sector from working with regulators to helping to educate consumers and build consumer confidence in insurance.

In conclusion, slow down or not in Asia, for many insurers venturing east can provide an important opportunity to secure future growth.