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Latest insurance progress in China, India, Bangladesh And Australia

China: (Shareholding rules for insurers to take effect on April 10)

China formally introduced new rules to restrict the ownership of big shareholders in insurance companies as it seeks transparent shareholding structures to eradicate control of insurance companies by unknown owners.

Under the new rules introduced by the China Insurance Regulatory Commission (CIRC), a single shareholder will only be allowed to hold a stake of up to 33 percent in an insurer, down from the current ceiling of 51 percent. The new rules also prohibit the holding of stakes through proxies.

The rules, which take effect from April 10, 2018, stipulate too that investors must use their own funds to buy a stake in an insurer and cannot use a holding company or the transfer of expected returns to bypass capital restrictions.

Investors are also forbidden from misappropriating insurance funds or changing the purpose of funds meant for investment. All insurers have to build a “clear and reasonable shareholding structure”, and must reveal “the actual controlling entity to the regulator”, say a document published on the CIRC’s website. The set of rules now have 94 provisions compared to 37 previously.

Mr Sun Wujun, a professor with the School of Business in Nanjing University, said that some insurance companies like Anbang have been using complicated shareholding structures, which makes regulating difficult.

The CIRC is in the second year of a drive to reduce risks in the financial system, which includes a crackdown on risky investment products sold by some insurers and probes into whether they are providing covert funding to local governments.

He Xiaofeng, head of the CIRC working group in control of Anbang and a director at the CIRC, said the regulator faces difficulties authenticating funding sources. The management of Anbang, whose shareholders’ structure is opaque, was taken over by the CIRC on February 23.

India: (Inadequate skilled workforce a huge challenge to insurers)

The Indian insurance sector today faces the challenge of limited expertise and skilled workforce, says Mr Antony Jacob CEO of Apollo Munich Health Insurance.

He is quoted as saying in an article in Businessworld, in which he wrote that a skilled workforce is required for risk based underwriting; creating innovative products that will appeal to people. Niche high-end skills in complex and highly-specialized areas such as risk management, credit evaluation and financial engineering are also in demand. The lack of suitable candidates needed to handle such functions is the biggest challenge employers facing today.

A recent survey estimated that there is a need of at least 2.1 million insurance educated employees by 2025. There is also a lack of awareness among students and young professionals about national and internationally recognized certifications and training for skill development.

A recent market research reveals that awareness level of internationally recognized certifications and training is medium among young professionals, though there are many firms offering such courses.

Mr Jacob further says that despite building excellent educational institutions, the insurance industry is struggling hard to meet skill requirements. This is because the current education system does not consider the component of skilling in its curriculum, which in turn fails to churn out a skilled workforce necessary for the industry.

Most Indian educational institutions continue to follow the traditional approach to teaching that is based on content delivery rather than on knowledge delivery. All these have created a huge gap in what the industry needs and the output of educational institutions.

More than 700 million Indians are estimated to be in the working age group (15-59) by 2022, of which more than 500 million will require some form of vocational or skill training. Statistics also show that 47 percent of graduates in India are not employable due to lack of English language knowledge and cognitive skills. For skilling to take wings, integration of skill development and education is essential.

 

Bangladesh: (Insurance regulator to clamp down on excessive commissions)

The Insurance Development and Regulatory Authority (IDRA) is set to crack down on excessive commissions paid by insurance companies in the chase for business. The regulator’s concern is that the practice would create unhealthy competition in the insurance industry and retard its development.

Under the rules, general insurers are allowed to spend 15 percent of their premium income as commissions but many are offering as much as 60 percent.

IDRA will soon serve a notice to insurance companies as the last reminder. After that, if the companies continue to fail to comply with the commission rule, regulatory action will be taken against them. IDRA will find a way by 2018 to stop the unhealthy commissioning.

The comments were made at a roundtable organized by the Bangladesh Insurance Association in collaboration with the news portal insurancenewsbd.com. Concern is that the practice of Mr Nizam Uddin Ahmed, founder chairman of Karnaphuli Insurance, said that the high commission expense is also crippling general insurance companies, making them unable to pay even customers’ claims.

Australia: (Major insurer posts 2017 loss of US$1.25 billion)

Australia’s biggest insurer, QBE Insurance Group, reported a full-year loss of US1.25 billion for 2017 as claims from natural disasters soared and its emerging-markets business underperformed. In contrast, the company reported profits of $844 million in 2016. Gross written premiums fell to $14.19 billion in 2017 from $14.40 billion in 2016.

The insurer had revealed last month that it would record an after-tax loss of $1.2 billion as payouts related to California wildfires, storms in Australia and Hurricane Maria weighed on earnings. There was also a $700 million writedown in its North American unit. Group combined operating ratio (COR) for 2017 increased to 104.1 percent in 2017 from 93.7 percent in 2016.

“Natural disasters were not the only challenge confronted by QBE during the year, with the performance of the Emerging Markets division a major disappointment due to adverse claims experience in numerous portfolios,” the company said in a statement.

In addition, QBE said it would focus on its struggling units in Asia Pacific and North America. Chief Executive Pat Regan said in a statement that fixing the ‘unacceptable’ performance of the loss-making Asia-Pacific business, which was hurt by workers compensation claims in Hong Kong, was a priority.

The unit made a net $179 million loss for the year and reported a COR of 115.5 percent, up from 95.6 percent in the prior year.

“We just need to get a bit better at all of those,” Mr Regan told analysts, referring to the company’s operations in Hong Kong, Singapore and Indonesia.

“Following a strategic review of our footprint in Latin America, we have decided to exit the region in order to focus on our core markets and to improve the quality and consistency of our results,” Mr Regan said.

QBE has agreed to sell its Latin American business to Zurich Insurance for $409 million, making good on its promise to be smaller and less complex.

The Latin American operations, including Argentina, Brazil, Colombia, Ecuador and Mexico, were sold for a pre-tax profit of about $100 million.

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