Shining the light
AIA Group sees growth opportunity in Korea’s insurance market
- Aiming to expand local presence by removing protection gap
By Kim Jae-kyoung
Over the past few years, Korea’s major life insurance companies, such as Samsung, Daehan and Kyobo, have set their eyes on overseas markets, believing that the domestic market is close to saturation.
Even some foreign insurance companies are scaling back their operations here or some of them have even left the country entirely concluding that there is little room for the local market to grow amid the heated completion among local and foreign players.
In contrast, in the eyes of Gordon Watson, executive vice president of AIA Group, Korea is a market of opportunity.
“Many people think the Korean market is saturated as penetration is high. But I think that the market is still underpenetrated compared to Western markets,” said Watson, who is regional managing director in charge of Korea, Hong Kong, Philippines and Taiwan.
“I see more chances particularly in the protection area — life and medical. The focus has been on retirement,” he added. “The main challenge now is to ensure people protect themselves and their families by filling a big protection gap.”
He believes that due to the huge protection gap on the medical side and life side, there is a big growth opportunity in the Korean market.
AIA points out that an average household has 4.4 life insurance policies and as much as 87.5 percent of all Korean households have private insurance but only 37 percent of them have protection against death.
Rebalance your life
On Aug. 4, as part of efforts to attract more customers and expand presence here, the insurer launched a protection campaign dubbed “Rebalance Your Life,” which is aimed at spreading the awareness of the importance of balanced insurance plans.
“We plan to strengthen our sales and product development resources for protection marketing. Customer awareness of their protection gap is low. We need to bring it to their attention and make sure we are able to provide them with the protection they need,”said Watson, who led the Seoul office from 2005 to 2007.
“The whole idea of this campaign is to make people face the reality and review their insurance portfolio in order to rebalance their lives.”
In Korea, the insurer has currently taken up a large part of the domestic life market by using new approaches, such as home shopping and “Martassurance” in a partnership with the supermarket Tesco to diversify its channel mix and increase its market reach.
AIA Korea’s value of new business (VONB) is up 8 percent over the first half of 2010 and the VONB margin is up 1 percentage point. Premier agency is beginning to take root. Its agency productivity is up 22 percent in the second quarter from a year ago.
AIA has wholly owned subsidiaries or branches in 14 markets in Asia Pacific. It has more than 260,000 agents and more than 21,000 employees across the region, with more than 23 million individual policies and more than 10 million participating members of group policies.
The following is an excerpt from the interview.
Q: I heard “removing the protection gap” is a group-wide campaign, and how will different markets implement this campaign locally?
A: We found out that there is a large and growing “protection gap” in Asia, and even the more mature markets such as Korea, Singapore and Hong Kong suffer from it. That is why we decided to execute the campaign across all the markets.
Through our integrated “Protection Gap” marketing program, we are shifting product mix through compensation realignment, new product launches, continued re-pricing and the withdrawal of less profitable products.
Each market is implementing different marketing strategies to maximize the effectiveness and value of the campaign. All markets share the same understanding. Ultimately, it is not just a campaign but a way of life.
Q: Last year, AIA made an impressive IPO on the Hong Kong’s stock market. How has the IPO changed AIA?
A: It enabled us to focus our attention and resources on growing the business and on optimizing long-term value for shareholders and our customers. Our employees and our agents are excited and re-energized to secure the future of our customers and our company.
Q: What is your outlook for global and Asian economies?
A: The global risk appetite has fallen as sovereign debt and banking sector stability in North America and Europe remains a key concern for the markets. Volatility has increased and there are clearly further challenges along the road.
However, it is important to note that Asia remains highly attractive, particularly on a relative basis, and we believe that the fundamentals for the future economic growth of Asian markets are very much intact. Asian economies continue to have substantially stronger fiscal management and significantly lower levels of household and corporate debt when compared to Japan, the U.S. or Europe.
We believe that this regional dynamic will help sustain the long-term trends that are characteristic of Asian economies and are very important drivers of our business through the ups and downs of the economic cycle.
Q: AIA has been successful in solidifying its position as an Asian leader. Could you give any advice to Korean companies that are looking for business opportunities overseas?
A: The first thing is to understand that each market is different. Then try to respect and understand the local culture, local people, and local needs.