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Distribution Channel
Introduction
The distribution market comprises
three main elements, namely banks, agents
and brokers.
All the major banks have equity links with
one or more insurers and direct all of their
loan-related Property and Construction business
to their associated companies. Private Motor
and small Commercial risks such as traditional
shop-houses tend to be the preserve of agents
who normally represent only one insurer.
Brokers are mainly involved in hi-tec, infrastructure
and multi-national accounts, and their business
is expanding with privatisation and the
increasing size and sophistication of Thai
industry and commerce.
Direct marketing is still at the trial stage,
but has shown some success with Private
Motor and credit card affinity schemes.
However, the average consumer is relatively
unsophisticated and shows a marked preference
for face-to-face dealing.
Direct Sales
A number of insurers have experimented with
direct marketing of Personal Lines through
television and press advertisements. The
results are reported to be patchy, with
the greatest success in the field of Private
Motor. Personal Accident is heavily promoted
but suffers a high lapse ratio. The most
successful initiatives have involved the
cross selling of banking and insurance products,
such as credit cards with Personal Accident
and/or Travel insurance benefits. In general
terms, however, the consumer has a predisposition
to personal dealing, and direct sales are
not expected to make an impact on the market
for some considerable time.
Agencies
At the end of December 1999 there were over
100,000 Life and Non-Life agents. Agents
have to pass a qualifying examination and
be licensed by the Insurance Commissioner.
Agents are allowed to represent more than
one insurer provided that all principals
consent to the arrangement. In practice,
however, most agents have exclusive relationships.
Agents are mainly active in the fields of
Private Motor, Personal Accident and small
Commercial Lines, and are not in competition
with brokers. Agents' accounts tend to be
founded upon family or personal relationships
and therefore show considerable loyalty.
Insurance Brokers
At the end of 1999 there were 284
Non-Life corporate brokers.
Individual brokers have to pass a qualifying
examination and be licensed by the Insurance
Commissioner. Broking firms, which also
have to be licensed, must be either Life
or Non-Life, composite brokers not being
allowed. General business brokers are required
to maintain a surplus of assets over liabilities
of THB 1 million (US$ 39,000) reinsurance
brokers a surplus of THB 1 million, and
combined general business and reinsurance
brokers a surplus of THB 1.5 million (US$
58,500). Corporate brokers registered after
5 August 1994 are required to have a minimum
75% Thai ownership and three out of four
Thai directors. Brokers established before
that date are subject to the minimum Thai
participation rules prevailing at the time
of their registration. Directors of broking
houses are not allowed to be directors,
managers or accountants of insurance companies.
A general business broker must employ a
minimum of five individual brokers: a reinsurance
broker a minimum of three. Brokers are not
required to have Professional Indemnity
insurance.
It is estimated that brokers control 50%
of the commercial and industrial market,
which equates to 10% to 15% of the national
account (the rest being Private Motor, small
Commercial lines and bank-controlled Property
business). Brokers sometimes provide services
to insurers on accounts which they do not
directly control - for example, risk management
and Facultative reinsurance. The size of
the broker-controlled account is expected
to grow over the next few years as more
public utilities are transferred to the
private sector, as Thai conglomerates mature
into multi-nationals, and as the manufacturing
base becomes increasingly hi-tec in orientation.
Major international brokers resident in
Thailand include Aon, Jardines, Marsh and
Alexander Forbes.
The Insurance Brokers Association is only
open to non captive brokers. In 1999 there
were 43 members.
Reinsurance Brokers
There are three major resident reinsurance
specialists, Thailand Reinsurance Brokers,
Aon Re and SC Consultants Ltd. The major
offshore brokers are Jardines and Howdens
in Singapore.
Intermediaries' Commissions
Maximum commission rates are determined
by the Insurance Commissioner. Current levels
are as follows:
• Fire 23%
• Voluntary Motor 18%
• Compulsory Motor 12%
• Marine, Aviation and Transport 13%
• Accident 18%
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