Overall growth in the life insurance market will slow dramatically in 2009 as a result of financial market turmoil and erosion of the value and image of unit-linked products, according to the international accounting firm, Ernst & Young (E&Y), in its report "2009 insurance outlook - Far East".
In the current climate, insurers need time to reposition their product portfolios and retrain distribution forces. E&Y notes that some life insurers are investing in this area and realising retention levels that western operations aspire to achieve. A few companies have shifted quickly to protection and are now outperforming the market. Some multinationals may withdraw from markets, or restrain sales, as they increase reserves and write-off deferred acquisition costs related to "in the money" guarantees.
E&Y also says that while many multinationals continue to expand in Asia, a shortage of capital could constrain their growth.
On the demand side, as consumers shift from unit-linked to more traditional products, the demand is for long-term investment offerings with guarantees. Countries such as China, where investment-linked products have yet to grow in popularity, may see less disruption.
However, the ongoing emphasis on private pensions throughout Asia, and favourable tax incentives, will help prop up the market. Life insurers with mutual fund and asset management businesses are best positioned to provide alternatives for consumer savings. The insurers most likely to come out on top are those with adequate capital, strong multinational or domestic brands, and a product portfolio able to meet the needs of a more risk-averse consumer.
In the current climate, insurers need time to reposition their product portfolios and retrain distribution forces. E&Y notes that some life insurers are investing in this area and realising retention levels that western operations aspire to achieve. A few companies have shifted quickly to protection and are now outperforming the market. Some multinationals may withdraw from markets, or restrain sales, as they increase reserves and write-off deferred acquisition costs related to "in the money" guarantees.
E&Y also says that while many multinationals continue to expand in Asia, a shortage of capital could constrain their growth.
On the demand side, as consumers shift from unit-linked to more traditional products, the demand is for long-term investment offerings with guarantees. Countries such as China, where investment-linked products have yet to grow in popularity, may see less disruption.
However, the ongoing emphasis on private pensions throughout Asia, and favourable tax incentives, will help prop up the market. Life insurers with mutual fund and asset management businesses are best positioned to provide alternatives for consumer savings. The insurers most likely to come out on top are those with adequate capital, strong multinational or domestic brands, and a product portfolio able to meet the needs of a more risk-averse consumer.
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