Health Insurance Exchange Subsidy Programs - Changing Face Of Distribution

Health Insurance Exchange Subsidy Programs

Life insurance distribution in Asia has long been dominated by the tied-agent model. While we are convinced that this will remain an important channel for the future, we have already seen bancassurance capturing shares of up to 50 percent in some markets. Furthermore, we will continue to see alternative and broker channels grow faster than the market - although from a still very small base.

Revamping The Agency Force

Asian insurers have typically built up large "tied" agency sales forces that rely heavily on relationship-based selling. These agents are often managed in a multilevel marketing, or pyramid, sales-force model. At the bottom of the pyramid are the new agents who have just entered the sales force.
 

As these agents recruit others to join the sales force and attain some stated standards (usually a minimum number of recruits as well as some level of personal sales), they get promoted to the next level. At this level, their compensation will depend on the sales of their recruited agents, which are often called the override commissions, as well as their own sales. These pyramids can continue to grow up to several layers, with the agency manager at the top of the pyramid managing a sales force of a few hundred agents.
 
Due to the strong relationships in these sales forces (that is to say, most of the agents are in some way linked to one another), each of these pyramid agencies can take on unique characteristics that are highly dependent on the philosophy and charisma of the agency manager. For example, in a large insurer in China, one of the largest agencies has over 800 agents, occupies a few floors in its own location, has its own internal rules, and even has its own chauffeured vehicles!
 
These sales forces have been extremely effective in these fast-growing markets, as the local networks of these agents can penetrate all levels of society and geography. However, as one can imagine, the quality of these sales forces varies greatly. Ranging from part-timers to neighborhood housewives to more professional financial advisers, insurance agents come in all sorts and forms. Many of these agents are high-school dropouts, most do not come with a strong financial background, and many have not done sales-related jobs before. 

As such, trial-and-error is the modus operandi for recruiting agents. For example, in rapidly growing sales forces like those in China and India, it is not uncommon to see agent turnover rate of up to 70-80 percent per year, with up to one-third of the agents selling less than one policy per month. Health Insurance Exchange Subsidy Programs
 
Most of the traditional insurers have begun to revamp their sales forces in one way or another. One of the main themes is the ongoing standardization and upgrading of the agents, and the elimination of part-timers. For example, in Taiwan, the total number of agents dropped from nearly 250,000 in 2001 to 190,000 in 2006. At the same time, the proportion of part-time agents decreased by 4 percent, translating into an increase in first-year premium sales per agent of 3.85 times. 

In South Korea, the largest domestic insurers have been slowly adjusting their housewives model through a process of elimination and upgrading in order to be more competitive with the foreign insurers' younger agents. In Japan, the traditional insurers have been shrinking the size of their sales forces every year over the past seven years.
 
However, given the size and the history of these sales forces, this revamping process will be long and painful. For many of these large insurers, this upgrading of their sales forces will be their main challenge for the next several years. While those that can adapt quicker will be able to participate in the market growth, there will be many that will see their competitiveness and market share erode as the legacy issues prove too much to overcome. While these large sales forces are still very valuable assets for local insurers, it is imperative that they understand the urgency to revamp this model.
 
Growth of Alternative Channels and Brokers 

Compared to Western markets, independent financial advisers have not made much of a dent in Asia despite having gradually increased their presence in most markets from a low base. We do not expect this channel to become as significant as it is in many Western markets, where regulation encourages this form of selling. In the more mature Asia markets, such as Japan and Singapore, this channel has been growing fast, but it will take many more years for this channel to have any meaningful share of the overall market.
 
Other forms of alternative channels, such as direct sales, are also being experimented with. Insurers in South Korea and Japan have been quite innovative in this area, trying out new distribution channels such as home shopping channels. In the Philippines, players have tried selling micro-insurance policies via text message since 2006. In China, companies such as MetLife and Ping An have set up direct outbound call centers, which, although small in size, have had encouraging results. While all these experiments make up interesting case studies, it is unlikely that any of these channels will challenge tied-agency distribution any time soon. They do, however, represent a rapidly growing part of the market.

The Bancassurance Revolution
 
The one channel that has captured a very significant share from tied agents across Asia is bancassurance, meaning sales of life products by banks. Baacassurance is emerging as a strong distribution channel across all Asian markets after regulators opened this channel for banks to get involved in life insurance. This has been a recent phenomenon: China, Taiwan, and India opened up bancassurance in 2000. Between 2001 and 2007, bancassurance activity increased across all 12 countries studied. In five of these countries bancassurance sales accounted for 30-50 percent of new life premiums sold in 2007. In South Korea, for example, bancassurance sales accounted for 40 percent of new life premiums in 2007. Health Insurance Exchange Subsidy Programs
 
The success of bancassurance can be attributed to the following factors: 

i) strong credibility of banking institutions; 
ii) extensive branch networks with long customer relationships; and 
iii) products that cater to depositcentric, Asian customers. 

Consumers appear to be quite willing to accept a bank as a credible channel for buying insurance. For example, 33 percent of Asia ex-Japan survey respondents indicated that they "prefer to buy life insurance from the bank." Banks are seen as the bedrock of the financial system, and, even in countries like China, where banks were under stress in the early 2000s due to nonperforming loans, consumers never doubted that the banks would always be backed by the government. 

Compared to the product-oriented agency channel whose agent turnover are extremely high in many Asian markets, the banking channels are perceived to be a more stable and trustworthy channel. Furthermore, in most Asian urban areas, bank branches are plentiful. 

For example, in Taipei, one of the most heavily branched geographies, there are 3.2 bank branches for every 10,000 people, compared to two bank branches per 10,000 Londoners and 0.3 bank branches per 10,000 Sydney residents. The extensive coverage of the bank branches in Asia makes bancassurance a particularly convenient channel. 

Finally, many bancassurance products were designed as deposit substitutes that could be easily sold over the bank counters. As interest rates went down during the initial years of bancassuvance deregulation, these products became quite popular with banking customers looking for a slightly better return on their large deposit holdings. Health Insurance Exchange Subsidy Programs
 
The vapid growth of bancassurance warrants the question "Will banks eventually crowd out the agent sales forces?" Globally, there are some examples of markets where bancassurance has become the dominant channel, such as Italy and France. At least in the initial phase, this has mainly been driven by tax incentives making simple, single-premium investment products with little or no protection cover more attractive than alternative investments. Banks sell these products as a key component of customers' investment portfolios to optimize from a tax perspective. Consumers have a limit of tax-exempt funds they can contribute on their insurance products, and they usually purchase up to the limit in quite an automatic fashion.
 
This has created enormous growth in the life insurance market and led to the dominant position of banks as the largest channel in the life industry. However, a closer look reveals that even in these markets agents have continued to grow. Bancassurance has virtually created a new market within life insurance but agents, especially the better qualified ones, keep growing their traditional business which is more focused on protection and recurring premium products. 

In other global markets, where life products are more on a level playing field with other investment products, such as Germany or the UK, bancassurance has also grown but agents - or independent financial advisers in the UK - have very much defended their space, especially the better qualified and independent ones.
 
Likewise in Asia, while bancassurance took a significant proportion of total market share, the agent channel kept growing. Tax incentives for life products in this part of the world are scarce and the fast growth in bancassurance has been driven primarily by simple investment products. This has effectively been a kind of deposit conversion--fueled by higher interest rates for life products. 

We believe that bancassurance in Asia will remain a key channel but growth rates will soon plateau. Some countries, such as India, will continue to see fast growth, especially where markets are not fully deregulated yet or banks have not all taken up this product, but in general we think that in many markets the banks have captured the lowhanging fruit with simple investment products and will find it much more difficult to sell more complex regular premium and protection products.
 

For the insurers, bancassurance is both an opportunity and a threat. On the one hand, insurers can extend their reach into previously untapped customers through partnering with banks by providing products and expertise. In particular, for those insurers without a large agency sales force, the banking channels can provide them with a quick way of ramping up volume. On the other hand, bancassurance does pose a threat. Overall, banks have recognized their superior bargaining position vis-a-vis the insurers.
 
Consequently, they are demanding a much bigger share of income from bancassurance sales. In many markets, profitability of bancassurance products has deteriorated sharply - in some markets, for instance in China, the bancassurance channel barely breakevens for the insurers.
 
Recently, in some markets where regulation has allowed integration between banking and insurance, banks have actually started their own life insurers, thus shutting out traditional insurance companies from this channel altogether. The global experience of insurance/bank mergers has not been overly positive though, with many large, integrated, financial conglomerates spinning off the insurance entities after a few years (such as Citibank/Travelers, Credit Suisse/Winterthur, and Allianz/Dresdner).

Most of these integrations have failed due to the difference in culture of the insurance and the banking entities, limitation of the cost and revenue synergies beyond the obvious distribution benefits, and different economic models, which are incredibly difficult to communicate to shareholders. To find out more, you can check out Health Insurance Exchange Subsidy Programs.

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Alliance Life Insurance Malaysia - The Rise of the Multinational Insurers in Asia

Alliance Life Insurance Malaysia

Multinational insurance companies (MNCs) are not new in Asia. The best known example is AIG, which has its roots in Shanghai, and a large presence across most of the region. However, the recent bailout of AIG by the US government in late 2008 will likely change the ending of this story. Apart from AIG and a few other large MNCs that have a true pan-Asia business, most MNCs have a much smaller footprint across Asia, and are mostly active in the financial centers of Hong Kong and Singapore.
 
In the last decade though, we have seen a strong rise in the foreign presence in Asian insurance markets. Across all markets, foreign players have increased their market share substantially, often at the expense of local incumbents. Several changes in the marketplace fostered this growth of foreign participation in Asia markets: deregulation, economic conditions conducive for entry, and superior capabilities which allow foreign insurers to grow once they have arrived in the market.

Of all the factors driving the increasing market share of MNCs, deregulation was the most critical. In some markets, deregulation created access where there was none; in other cases, deregulation allowed foreign players to exploit new channels or market niches and enter markets that were technically open but de facto monopolized by local incumbents.

India was the slowest nation in allowing the entry of foreign players. The insurance sector was deregulated in 2000 after over 40 years of market domination by a single government entity - Life Insurance Corporation (LIC). Since deregulation, over 20 private life players have entered the market, most of them joint ventures with MNCs such as Alliance, Prudential (UK), and New York Life. It is important to note that while the deregulation happened very late, once deregulated, there were very few handicaps preventing the foreign joint ventures from expanding across the country. This is in contrast to China, where expansion into new cities requires regulator approval on a case-by-case basis, which is the single largest deterrent to growth in China for foreign insurers. 

At another end of the spectrum is South Korea where foreign players had been permitted to operate but the market was so locked up by the domestic "Big 3" players - Samsung Life, Kyobo, and Korea Life - that foreign insurers could make little headway. However, the competitive landscape shifted with the introduction of variable (investment-linked) products in 2001 and bancassurance the following year. Once these products and channels were opened, MNCs took advantage of their superior know how and experience from other markets, which helped them grow market share significantly. Alliance Life Insurance Malaysia
 
This phenomenal growth in Asia for MNCs happened at a time when growth in their home markets was slowing down. Coupled with higher profitability in Asia compared to their home markets, Asia has quickly become a high priority for many MNCs. For example, Prudential (UK)'s new business profit from Asia is already at more than half of the company's total and is rising in line with the region's rapid growth. "It is an Asian story," says Barry Stowe, the chief executive of Prudential's Asia business. "And it is happening at a phenomenal pace."

There are operational factors that also make MNCs competitive in Asia. MNCs can leverage their product knowledge across markets, often coming up with the more innovative product features compared to the locals.
Another important skill is sales force management. A survey of insurance agents showed that across six markets - South Korea, China, Taiwan, Hong Kong, Singapore, and Indonesia - agents overwhelmingly preferred to work for MNCs, with better training and sales force management being the most frequently cited reasons.
 
In addition, MNCs also tend to recruit higher quality agents capable of selling more sophisticated products. In South Korea, for example, MNCs revolutionized the agency channel by moving away from the "housewife" model, where insurers employed housewives to sell insurance during their free time - often to friends and family. In contrast, MNCs targeted college educated candidates who were dedicated to the job full-time, and were savvier in selling more sophisticated products such as investment-linked insurance. Similar approaches were also observed in Japan and Taiwan.

An interesting question is whether MNCs who operate across several Asian countries have advantages over those who only have operations in a few select countries. The diversity of the Asian markets with the myriad of languages and local regulations may suggest that synergies across markets are limited, and therefore operating across more countries does not give MNCs additional advantages. However, this narrow view misses a very important point: executive talent. 

One of the key success factors in Asia is the quality and depth of the top executive bench. MNCs without scale across Asia have generally found it tough to atua~ a high-caliber executive team. Without a strong team at the top, it is very difficult to redeploy resources, leverage high value-added activities across countries (for example, investments and risk management), and develop a truly pan-Asian business for the long term. Alliance Life Insurance Malaysia

The difference between those who have critical mass and accelerating growth in the region and those who have a few operations and are barely keeping up with the market, stands in stark contrast. This is not to say that the large players are always performing better or always attract the top performers, but without scale ambitions, it is difficult to see the smaller MNCs consistendy attracting the right talent across the board to bring them to the next level.
 
The entry opdons for MNCs are greenfield setups, joint ventures, and acquisitions. While most MNCs have entered Asia as greenfield operations, there has been a handful of acquisitions over the years. For example, Prudential (UK) bought Chinfon in 1999 as a way of gaining access to Taiwan. 

Alliance bought First Life in South Korea in 1999, But given the scarcity of deals and the complexity involved in dealing with local insurers' legacy issues (for example, high guaranteed policies and aging sales forces), acquisitions remain difficult, if not impossible, as an entry method. Forming joint ventures, on the other hand, is a common strategy, especially in markets where it is mandated by regulations (such as China and India). 

Since opening its market to foreign participation in 1992, China has only granted AIA a license to operate independently. The other 24 companies entering after AIG all operate on a joint-venture basis. Under China's WTO commitment, foreign insurers can hold up to 50 percent stakes in the joint ventures. Meanwhile, the Indian government has banned outright wholly-owned foreign insurers.
 
Foreign players must tie up with a local enterprise, with the requirement that foreign investment should not exceed more than 26 percent of the joint venture's equity. The industry has been pushing for an increased proportion of 49 percent but it is unclear when this will be allowed.
 
As of December 2007, among the top 10 largest non-Asian insurers - life, non-life, and reinsurance - in the world measured by market capitalization, eight were already present in Asia, with six operating in more than five markets. The two exceptions are Berkshire Hathaway and State Farm. As Asia life insurance enters an era where outperformers will dominate - the future has never looked brighter for those MNCs who are able to find their competitive edge in these markets.

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Nippon Life Insurance Company Japan - The Emerging Middle Class

Nippon Life Insurance Company Japan

The second trend across Asia is the rapidly changing complexion of life insurance customers. This is a trend that is more prevalent in the nascent markets of China, India, Indonesia, and Vietnam, and describes the expansion of the insurance market into previously untapped territory. The numbers are staggering: There are 110 million households earning US$10,000 per annum in the 12 countries we studied; by 2012 there will be over 200 million. In the US there were 107 million households with the same income level in 2007 and is expected to increase to 113 million in 2012 the same year, there will be slightly more than 110 million US households with that same income level. This translates to an influx of approximately 200 million new customers into the Asian market over the next five years.

Where do these new customers come from? As Asian countries become wealthier at their breakneck pace of growth, a large middle class is emerging in many of these markets. In China, for example, where 99 percent of urban households were considered "poor" in 1985, by 2005, 22 percent of urban households were considered "middle class," and it is projected that by 2025, about 80 percent of urban households will be in that category. In absolute terms, that means an additional 250 million middle-class households in China! Similarly, in India, the middle class currently only constitutes 5 percent of the population but is expected to be more than 40 percent of the population by 2025.

It is important to note that middle class in Asia does not connote the same absolute wealth levels as in the developed countries. For reference, a household that makes between US$3,500 and US$14,000 a year is already considered middle class in China. The United States Department of Health and Human Services set the 2008 poverty guideline for a four person family at US$21,200. That is to say, all households who fell into the "middle-class" definition in China would be considered poor in US. Nippon Life Insurance Company Japan
 
However, when accounting for purchasing-power parity, a household income of US$14,000 would buy a Chinese family the same lifestyle as that of a household earning US$40,000 in the United States. For these consumes - Chinese, Indians, and Vietnamese - this growth in wealth means they will, for the first time, have money to spare for items beyond the basic necessities. We are already seeing spending patterns shifting towards discretionary items in both India and China.
 
Continued urbanization is a key factor driving the creation of this new middle class. In China, the McKinsey Global Institute estimates that by 2025, there will be over 200 cities with over one million inhabitants, compared to around 120 today; in Europe today, there are only 35 cities of that size. Consequently, China's urban population will grow by more than 350 million within 20 years, which is roughly the same population size as the United States today. By 2025, it is estimated that two-thirds of China's citizens, or nearly one billion people, will live in cities. Even with conservative assumptions, urban GDP will more than quadruple between 2005 and 2025, reaching around US$8,200-9,600 per capita from today's figure of less than US$3,000.
 
What is the impact of this rapid urbanization and emerging-middle-class customers on life insurers? We believe there are two main implications.
 
The first implication is access - how can insurers get to these customers before everyone else? Since many of these new middle-class households will be first-time buyers of insurance products, a large sales force with a strong focus on consumer education will be needed. Our proprietary survey results showed that many consumers are seeking financial advice and are not receiving it. Nippon Life Insurance Company Japan

In Indonesia, for example, agents reported to us that explaining the features of insurance products is a big part of their selling process. At the same time, a large sales force will be required to capture market share, given that many of these customers will have relatively small policy amounts.
 

Building these large sales forces is no easy task - with an 80-90 percent turnover rate in many instances, scaling up quickly is a massive endeavor and probably one of the most critical issues facing many insurers today. This is further complicated by the fact that much of this growth will come from second- and third-tier cities. Simply building sales forces in a few major cities won't be sufficient to capture the growth of the middle class.
 
Second, our market research shows the increasing complexity within the middle class is creating several distinct segments of customers. For example, the growing number of professionals and white-collar workers, the small-business owners, and the aging savers, are all categories that will fit into the middle-class definition but have very different needs. Increasingly, life insurers will need to understand the various segments of the middle class in order to serve them better. 

While this is at an early stage, there are already a few insurers that are creating products and channels catering to the increasingly divergent segments. For example, some insurers have found success with remote, direct channels such as outbound call centers for customers who are comfortable with such methods. Others have focused on investment products with sophisticated investment structures for those who seek more adventurous returns. 

In any case, insurers will need to improve their game and find their competitive edge in order to compete for the subsegments within the middle class. To find out more, you can check out Nippon Life Insurance Company Japan.

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Average Whole Life Insurance Rates By Age - Emerging Insurance Themes In Asia

Average Whole Life Insurance Rates By Age

Joining an insurance company in the 1960s in Hong Kong was not an obvious choice. In fact, the industry was poorly understood, and only a few multinationals were active in the market at the time. Insurance agents had a difficult time explaining to customers what the product was about, and many viewed such agents with suspicion. 

It was in such an environment that Dominic Leung joined AIA (a subsidiary of MG) as an IT analyst. He remembered that "AIA was essentially run by locals - besides a few expats from the US, most of the management team consisted of Hong Kong executives." Over the years, the industry blossomed as life insurance became one of the first financial products that most middle-class people purchased. As AIG expanded its presence across Asia, Dominic moved to Taiwan in 1989 to become the country head. There, MG was known by its Chinese name, Nanshan (a company AIA acquired some years before).
 
Over the years, many multinational insurers followed the lead of MG in entering Asia, including AXA, Manulife, Prudential (UK), and ING. By the mid-1990s, as more multinational companies aggressively entered the Asian markets, Dominic was headhunted away to be the CEO of Prudential (UK)'s greater China operations, overseeing the three markets of China, Hong Kong, and Taiwan.
 
In January 2004, Dominic made his latest career move (and he claims it will be his last) - he moved to Ping An, the fast-growing, second-largest life insurer in China, and became the chairman of its life insurance subsidiary (which contributes the vast majority of the value of the group). In 2006, Dominic took over responsibility for all of Ping An's insurance activities, including life, property and casualty, pensions, and health insurance.

During his tenure, Ping An grew to US$10.8 billion in life insurance premiums by 2007. It went public in 2004, and boasted a market capitalization of US$53.4 billion by June 2008. As he reflected on his career move in Ping An's internal newsletter in 2004, "I wanted to use my 30-plus years in the insurance industry to contribute to the development of the mainland China market. This is a once-in-a-lifetime, unique opportunity."
 
From the international finance center of Hong Kong to the fast-growing Taiwan market and then to the huge domestic economy of China - in many ways Dominic's career reflects the development of the Asian life insurance market. From a global life insurance perspective, opportunities in the industry developed quickly in the more accessible markets like Hong Kong, before growing rapidly in the next wave of developing markets such as Taiwan and South Korea, and finally reaching the massive markets of China and India. Average Whole Life Insurance Rates By Age
 
As can be seen from the various phases of development, the Asian life insurance market is no more a single market than any other financial market in Asia, spanning a region far too diverse to allow such a simplistic view of its complexity. Nobody, for example, is going to seriously suggest an intense commonality between say Japan and India, where in the former, per capita gross domestic product (GDP) stood at around US$36,000 in 2007, while India's was a little over US$1,000.
 
And there are many other differences, such as levels of market penetration and regulation of foreign players, not forgetting the rather more obvious differences in culture and outlook in a region that sweeps eastward from the borders of Europe and Africa to the shores of the Indian and Pacific Oceans.
 
Although generalization is always problematic, we have identified five pan-Asian themes, which are evident in most, if not all, of these markets.
 
These are important themes that provide a key to understanding the life insurance market in Asia, including continued rapid growth of the market, an emerging-middle-class of 110 million new households, the rise of multinational players, the changing face of distribution and the rapid growth of bancassurance, and a changing product mix due to the new needs of Asian consumers. Because the Australian market differs significantly in its characteristics to the rest of Asia, it is not included in the discussion currently.

Continued Rapid Growth
 
The big story of the last decade was about the growth of the life insurance market in the Asian region exceeding all other regions in the world, ex-Japan, accounted for 12 percent of global life premiums in 2007, but, perhaps more significantly, it accounted for almost 25 percent of the growth in the global market from 2002 to 2007, and is expected to deliver around 40 percent of life insurance premium growth over the next five years. Moreover, the profitability of Asian markets is higher than that of mature markets. Thus, from a value creation perspective, Asia looks even more attractive.

The majority of Asian markets outperformed the world average on surplus return in the period between 2001 and 2006 and they enjoyed higher profit margins than their US and European peers in 2006. 

Double-digit growth is likely to be a hallmark of many Asian markets for the next decade. This is thanks to a growing but aging population, steadily increasing wealth levels, changing attitudes about personal finances, high savings rates, and an extension of geographic scope, mainly seen in the penetration into new markets outside the biggest urban areas.
 
The United Nations' Population Database shows that projected demographics are staggeringly in favor of Asia. The combined population of the countries under review is expected to grow from 3.2 billion in 2005 to 3.7 billion in 2020, adding another 500 million potential customers. In the same time frame, the United States population will grow by a mere 40 million and that of Europe will decline by almost 10 million. That means that Asia will have more than 15 times the total population growth of the US and Europe combined, or in absolute terms, Asia will grow by almost double the United States' current population.

This growth will be unevenly distributed; Indian, Malaysian, and Filipino populations will increase by 7-8 percent; the north Asian countries such as China, Taiwan, and South Korea growing by 2-4 percent; and Japan will experience a slight decrease in population.
 
At the same time, some of these countries, such as South Korea and Japan - like many in the Western world will see the emergence of a large aging population due to the baby-boom bulge. The proportion of the population over the age of 65 is expected to increase significantly until 2020.
 
As a result, the number of working adults supporting each retiree will decrease from 10 in 2005 to eight in 2020 and four by 2050, dramatically altering the shape of the age pyramid. This phenomenon is expected to drive growth in the retirement market, as aging Asians look to retirement planning. This, in turn, gives rise to a growing demand for life insurance products such as health insurance, annuities, and endowment policies. Average Whole Life Insurance Rates By Age
 
It is a well-known fact that economic growth in Asia is currently much higher than elsewhere in the world but it is worth reminding ourselves just how significant this trend is. The projected real gross domestic product (GDP) growth rate for these countries falls in the range of 5-9 percent per annum between 2007 and 2012. In contrast, the US economy is only expected to grow by less than 3 percent during the same period. In total, the 12 Asian countries accounted for 19 percent of world GDP growth between 2002 and 2007 and 40 percent of projected growth between 2007 and 2012. 
 
With fast-growing GDP levels, the personal financial assets of the population will grow over proportionally. For example, personal financial assets in China and India grew at annual rates of 16 percent and 23 percent respectively during 2001-06, whereas the volume grew 5 percent in the US and 8 percent in the UK over the same period.

While the increase in personal financial assets will naturally drive growth for life insurance products, it can be argued that a changing attitude on investments and personal finances is accelerating this opportunity even beyond these absolute growth numbers.
 
Traditionally, Asians are more prone to leaving personal financial assets in deposits or cash. In 2002, Chinese consumers put 84 percent of their personal financial assets in cash or bank deposits, India 74 percent, and Thailand 72 percent. There has already been a considerable shift away from savings through bank deposits into investments.
 
Between 2002 and 2006, without exception, consumers from these Asian nations shifted their cash into investment products. By 2006, the Chinese put only 79 percent of their financial assets in cash, India 65 percent, and Thailand 58 percent. There is much more room for development - in mature markets such as the UK and the US, the cash holdings as a percentage of personal financial assets are at 22 percent and 13 percent respectively.
 
As Asians move from "savers" to "investors", a great deal more money will become available for investment in mutual funds, equities, and life insurance. Will the Asian consumer choose to invest this cash in life insurance rather than other investment products? In markets where life insurance ownership is very low, the answer is a resounding yes. 

In markets such as China, India, Vietnam, and Indonesia, market penetration of life insurance is very low, currently at less than 5 percent of GDP. For many customers in these markets, life insurance is the first financial product that they purchase, with the life insurance agent often being the only source of financial know-how.
 
In the more highly penetrated markets, such as Taiwan and Hong Kong, life insurance faces more competition from other forms of financial products. Even so, it is still likely that growth will continue. We believe that it is likely that one day life insurance penetration in Asia will exceed levels seen in the West. The reasons for this assertion are threefold. Average Whole Life Insurance Rates By Age
 
First, premium density per capita, on an absolute scale, is still lower than that of some Western markets.  

Second, despite a high premium level, a large proportion of this was savings products, and the level of protection as indicated by mortality sum assured is lower, relatively, than in more developed countries. For example, Singapore and Hong Kong's 2007 per capita mortality sum assured was about US$45,000 and US$49,000 respectively, whereas it was US$63,000 in the US in 2006. Therefore, despite the high level of ownership, there is still a lot of room to grow in traditional protection products.
 
Thirdly, Asian consumers have significantly higher savings rates than those in Western markets. Asians are notorious for their penchant for savings - the 2007 personal savings rates in China and India were 14 percent and 27 percent respectively, compared to - 1.0 percent for the UK and 4.4 percent for the US. These significantly higher savings rates translate into a higher level of personal financial assets at any given level of economic development. Given this level of personal savings, it is not inconceivable that Asia will one day surpass the Western markets in many of the penetration benchmarks we observe today.

Hence, growth is undeniably one of the greatest hallmarks of the Asian markets. Of course. growth will not be uniform across these countries. Major growth markets will include China, India, Indonesia, and Vietnam with forecast growth rates in the region of 15-25 percent. The four Asian Tigers will likely grow at a slower but still healthy pace, probably in the high single digits. 

The exception is Japan, where there has been no growth between 2002 and 2007 and this is unlikely to change in the future. While Asian players take this growth for granted, these growth rates represent one of the most exciting opportunities for global insurers, as they contrast this growth scenario with their often lackluster home markets. In many boardrooms of global insurers today, Asia, rightfully so, is becoming a crucial part of the overall strategic plan.

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