The government is planning to open Myanmar’s struggling insurance industry to foreign firms early next year and free local players from an array of restrictions - part of a coordinated push to speed up liberalisation in a sector crucial to economic development, a senior government official told The Myanmar Times.
"We`re going to speed up liberalisation, meaning we are going to allow foreign players," said U Thant Zin, an official in the Financial Regulation Department under the Ministry of Finance and Planning. At the same time the government will remove restrictions on local firms that force them to offer the same - often unpopular - products at the same prices.
Efforts to create an efficient insurance market that can provide citizens with more economic security began under the previous government. That administration broke state-owned Myanma Insurance`s decades-long monopoly in 2012, allowed private companies to enter the market the following year and announced foreign firms would be allowed to compete in 2015.
Over 20 foreign companies subsequently opened representative offices, but they are still waiting for the chance to do business. And Myanma Insurance`s monopoly was replaced by an "oligopoly" of 12 local companies that can only compete on customer service, U Thant Zin said.
Work has already begun on a "liberalisation roadmap" that aims to address these issues, and that needs to be presented to the government in December, U Thant Zin said. But there are many more challenges facing the nascent insurance sector.
An American Chamber of Commerce White Paper published in July noted that in addition to product restrictions, there is a shortage of experienced professionals, IT systems and no set standards on what volume of cash reserves are required for different insurance policies.
"These numerous systemic weaknesses leave the entire system vulnerable to collapse," the paper said.
The US business body noted that allowing foreign firms to enter the market would help bring in much -needed capitalisation and experience to the Myanmar market. But this will involve addressing several key issues in the next few months.
"First, we have to protect our local insurance companies, [making sure] they have enough capacity to compete with foreign players," said U Thant Zin.
Local firms are eager to see restrictions on products and prices lifted, and welcome government approval for an industry association that will be consulted on the process. The previous government prevented firms from forming an insurance industry association, but with the regulator`s blessing an association should be in place in the next few months, said U Thuang Han, director of CB Insurance.
He added that whether local firms need to worry about competition depends on how the government structures liberalisation.
"If we are allowed to create [our own] products and compete freely then we`re not much worried," he said. "The problem is that now local insurance companies can`t create their own products and all have to charge the same."
Private insurers have watched their businesses grow, but progress has been slow. Myanma Insurance is still allowed to offer a far larger suite of products, and private firms complain that around half of the policies they can offer are not popular.
Local firms will need time to develop their own products and pricing structures so that they are well-prepared when foreign firms do start to compete for clients, U Thuang Han said.
U Thant Zin said the government has to balance the need to protect local firms and the need to liberalise the market - something ASEAN and other international players are calling for. Myanmar`s membership in the ASEAN economic community means it has a commitment to liberalise a wide range of sectors including banking, insurance and aviation.
But liberalisation means careful discussions about whether to allow 100 percent foreign-owned insurers or require them to form joint ventures with local firms, and in which sectors to allow competition, he said.
These two issues are the ones foreign insurance representatives are most eager to get clarification on, said the chief country representative of one international firm. Foreign insurers will need licences to operate - just like foreign banks - but there has been no decisions made on how many licences will be issued and what the process will look like, U Thant Zin added.
International lenders have been awarded licences allowing them to make loans to foreign and local-foreign joint venture corporations. But corporate lending is "just one area of business", and allowing foreign insurers to provide services is more complicated, said U Thant Zin.
The sectors where insurance liberalisation is most important are life and health insurance, but these services are intertwined with the health sector, the structure of Myanmar`s population and many other market factors, he said.
"And there are many, many different areas of insurance," he said. "We have to think about many things and still have a long list of things to do."
Liberalising the health insurance sector, for example, will be done in discussion with the health ministry and civil society groups, in addition to local and foreign insurers, U Thant Zin said. Foreign insurance companies will also be members of the new insurance association, he added.
"We want private-sector participation, meaning every stakeholder from the market," he said.
By Myanmar Times
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