Page 297 - India Insurance Report 2023- BIMTECH

India Insurance Report - Series II 285

There is also a tendency for more customers to purchase insurance policies via online channels. As a
result, many insurance companies are interested in offering their insurance products for sale online and plan
to develop mobile applications from which the insured can easily and conveniently view data and operations.

4.3.Ageing Society and Health Expenditure

The Office of the National Economic and Social Development Council (NESDB, a Thai National
Planning Commission) indicates that Thailand has become an ageing society with the number of elderly
persons growing continuously.

In contrast, the number of working age population and children tends to decrease. According to the
Official Statistics Registration Systems of the Department of Provincial Administration, it was found in
2018 that the elderly people accounted for 17 percent of the total population of Thailand. It is estimated
that in 2023 the number of elderly persons will increase to the point that Thailand comes the aged
society. The elderly persons are expected to represent 30 percent of the total population in 2037.

A decrease in the number of working age population and an increase of elderly persons will result in
a narrower tax base while the government’s expenditures on healthcare, public health and welfare increase
continuously.

4.4.Price Competition and Increased Costs

Insurance companies’ operating costs increase as a result of underwriting expenses, claims, and
insurance fraud. Currently, price competition in the insurance market is intense, either in terms of
insurance premiums or the protection that meets customer needs. A decline in premiums of certain
types of insurance impacts insurance companies’ performance and long-term growth.

The recent research shows that five life insurance companies from a total of 22 companies (excluding
reinsurance ones) have negative ROE whereas three other companies have the ROE under 2 percent.
However, five insurance companies with negative ROE are small companies.

An analysis reveals that the net loss is mainly caused by an increase in the expenditure and a decline
in insurance earned premiums. The policy interest rate is reduced from 0.75 percent to 0.5 percent per
annum. The average cost of a new insurance policy is about half of the premium income, which is quite
a high rate. Moreover, information on the ratio of cost to premium classified by company size indicates
that all of the small, medium and large companies have the combined ratio exceeding the standard value,
which should not be over 100 percent.

The high acquisition cost of a policy affects business operations, especially profit, which may result
in unsustainable business operations in the future.

According to the statistical data on premium income and premium income ratio in 2018, it was
found that motor insurance accounted for 59 percent of the non-life insurance products, followed by an
accident insurance at 13 percent. It can be seen that the insurance products sold involved motor insurance