AIA Life Korea CEO Daniel Costello

AIA CEO emphasizes importance of protection element in policies

By Kim Tae-jong

The nation’s life insurance industry has been steadily evolving for the past six decades since its establishment here. The market size has drastically increased, thanks to domestic and global players, which are competing to meet various needs of customers.

What began with only four companies in the late 1940s has grown to 23 firms with total assets reaching 373 trillion won.

One of the notable aspects in such evolution is the role of global insurance firms, which is believed to contribute to diversifying the market with their advanced insurance products and services.

They are also the ones that first introduced the concept of whole life insurance here and changed marketing practices.

In early times, local insurance firms used to hire unskillful “ajumma,” or middle-aged housewives, as their salespeople. But global ones started to change the scene by hiring and training male salespeople with college diplomas so that they can work in a more professional way.

The local life insurance industry has been shifting its focus to protection-type products from the savings type, and at the change of the trend is AIA Life Korea with its ongoing campaign, themed “Rebalance Your Life.”

Rebalance your life

AIA Life Korea CEO Daniel Costello said the insurer aims to spread the awareness of the importance of balanced insurance plans through the campaign.

“There is a protection gap between what they have and what they need, and we want to fill that gap,” Costello said during a recent interview with Business Focus at his office in Seoul.

He emphasized that Koreans focus too much on the savings part in their life insurance, neglecting the importance of death benefits.

“People have an average of 4.5 policies per person, but the fact is that when we look at their life insurance policies, mainly they are savings policies and call them life insurance policy, but they didn’t have significant death benefits,” he said.

He noted that not only are there a few people who are insured with true death benefits but also the ones who are insured don’t have nowhere near enough in terms of benefits.



“The average policy size was 56 million won, and that’s nowhere near enough coverage for an average individual. Of the customers with life insurance, only 37 percent had a policy with death benefits,” he said.

In this regard, he strongly believes that the Korean life insurance market has a huge potential for growth.

But the veteran in the insurance industry with over 25-year experience simply thought that the Korean market was saturated when he first came to Korea in April last year.

In fact, some foreign insurance firms seemed to scale back their operations here or some of them even left the country entirely, concluding that there is little room for the local market to grow amid the heated competition among local and global players.

Major local life insurance companies such as Samsung, Daehan and Kyobo have started to set their sights on overseas markets, believing that the domestic market is close to saturation.

“Originally, when I came and thought the market was very saturated, but after doing some digging, I felt like there is a huge opportunity in growth in the protection area,” Costello said. “And that’s why we focus on protection products and that’s what a life insurer can do best and that’s what we uniquely do. Banks don’t give protection.”

Payoff

AIA Life Korea’s aggressive marketing along with its protection campaign, which was launched in August 2010, started to pay off, as it has successfully attracted more customers and expanded its presence here.

For example, last year, the insurer achieved a 16 percent increase in the value of new business (VONB), a measure to gauge the success in business.

Costello attributed the success to their focus on the quality of their business rather than quantity by strengthening its manpower, particularly sales agencies and telemarketers.

“We tried to upgrade the quality of our agencies and salespeople,” he said.

He said salespeople should be well equipped with knowledge of products and the overall financial industry and able to understand what customers needs.

“If someone comes to us and asks us for some professional advice, they will get somebody who understands products and the financial market,” he said.

As he emphasized the importance of salespeople and agencies, he has been touring major cities around the country for a road show to strengthen the channel of agencies since February 2012.

He has travelled four cities, inviting about 75 people for each session as part of a larger goal to strengthen their agency force and develop career path development programs for agencies.

“It’s hard to meet a customer in person as there are over 3 million policyholders, but I do spend almost all my time meeting with our Korean sales force such as premier agencies and telemarketers. They are part of our AIA family,” he said.

He added that salespeople at AIA are hardworking, very determined and well educated.

“Another quality that impresses me is that everybody seeks a way to maximize their personal growth and their own talent,” he said.

More room for growth

AIA Life Korea has made impressive achievements since its launch here in 1987.

But without just being satisfied with the recent success, Costello pledged to continue efforts to grow the business here.

“In Korea, we still have a lot of things to do. Yes, the value of new business went up 16 percent last year, but we have a lot of work to grow our business again. There is no question about it,” he said. “We want to build a very solid foundation. We’ve been here for 25 years, and we’ve been in Asia for 90 years. So this is where we are committed to.”

In fact, AIA Life Korea’s achievements may be seen as unsatisfactory given the overall performance of AIA Group, which has units in 15 countries in the Asia-Pacific regions including Hong Kong, Thailand, Singapore, Malaysia, China, the Philippines, Australia and Indonesia.

During the last fiscal year, AIA Group showed the best performance, posting 40 percent increase in VONB to $932 million, with 4.6 percentage point improvement in VONB margin to 37.2 percent. It is the fifth largest insurance company in the world by market cap.

With the importance of the Korean market growing within the AIA Group, Costello said the local unit will keep pursuing growth.

“Korea is the fifth biggest market within the AIA Group. So in that respect, it’s critically important. We have to grow at the level similar to the rest of AIA, and if we don’t, it’s a drag on the overall AIA. Korea is absolutely critical in the overall result of AIA,” he said.

With its importance of the Korean market, the group will actively support its Korean unit, he said.

“Our structure receives very active supports from our group office. If we plan to invest in Korea, capital is not a problem. We have capital here, but if we need more capital, our group office is also ready to assist. In terms of the best practice, the advantage of our group office is that they can share with us the best practices from around the entire region. While we solve certain problem or develop certain products or find some customers needs, they are very useful,” he said.

Future plans

AIA Korea has the most diversified distribution channels including agency, bancassurance, direct marketing (in Lotte Card and Citibank partnership), home shopping and martsurance (in partnership with Tesco).

It plans to continue to grow its tied agency distribution strength and improve productivity, expanding revenue from other channels.

“There is a whole group of people who are underinsured for health insurance and our direct marketing business is mainly focused on health,” he said. “As health costs rise, people need the type of supplementary benefits that we provide, and so that’s the second strategy to grow the quality and the number of our telemarketers here in Korea.”

In addition to such specific measures for growth, Costello also emphasizes that insurance firms should work from a longer-term perspective.

“You have to do things in fundamentally sound ways. We have to invest or to build our business to grow, and in all those cases, we try to determine what is the most fundamentally sound way to do so,” he said. “Because with insurance, it can take five to 10 years for the result of the decision that you take today to really emerge. So you’ve got to think in a very long term perspective in the insurance industry.”

As an expert in life insurance, he said other players in the market have been successfully meeting various needs of customers.

“I think the competitors here are doing a very good job. I think everybody is focusing more on addressing customers’ need. Regardless of their income levels, they need insurance and other players have a channel to address such needs properly,” he said.

He also carefully predicted that the acquisition of ING Life Insurance by a local insurance firm, one of the most talked-about issues in the industry, will have a positive impact on the local market.

“It depends on who buys it whether it’s positive or negative for the Korean insurance market. It’s hard to say, but probably it will be positive because it will allow some consolidation in the industry,” he said.