(Interview) – State-owned Myanmar Insurance Enterprise (MIE) has been the sole insurance company in Burma for more than 40 years, but soon it will face competition from perhaps 10 domestic, private insurance companies, which will be granted licenses soon. Mizzima reporter Thit Nyein interviewed MIE general manager and secretary of the Insurance Business Supervision Committee, Dr. Maung Maung Thein, on emerging domestic, privately owned insurance companies, which will be in competition with foreign insurance companies with the opening of the Asean trade area in 2015.
|MIE General Manager and secretary of the Insurance Business Supervision Committee Dr. Maung Maung Thein Photo: Mizzima|
A: Currently, state-owned Myanmar is the sole service provider in this business but the scope of business is expanding and increasing as the country transitions to democracy. A single insurance business provider is not adequate when many people insure their businesses and properties, and we decided to shift to a multiple-insurance market with private players. In 2015, the insurance companies from Asean countries will enter our market too, so we decided to grant business licenses to private companies now.
Q: How many companies have applied?
A: The companies must apply for a business license with a prescribed form. We have sold 214 copies of application forms and copies of the Insurance Law so far. We have received 20 applications.
We found three groups when we checked the applications. The first group is from big private banks. The second group is from prominent business tycoons, but they are not in banking business. The third group is from non-prominent businessmen.
We will make a shortlist from these 20 companies. For the Burmese market, 20 companies are too many.
Q: Twenty companies are too many, why?
A: For instance, there are about 75 insurance companies in Thailand. It’s too many for them. They have foreign insurance companies also and no one can reap a profit from this business. We don’t want a similar business atmosphere and situation here. We want only the number of companies that are compatible to our market. 20 companies are too much for our market.
Q: When will you make a final selection of these companies?
A: We will make an announcement sometime in August. In my estimation, about 10 companies will be the optimum number for our insurance market, maybe 8 or 9, or may be 11. It will be the optimum number for us.
Q: How many types of insurance business will be available for private players?
A: There will be three types of licenses in our market. They are life insurance, general insurance and a mixed type. The insurance companies are liable to give claims to their clients under the insurance policy. And at the same time, they can make a profit too. The person who wants to own an insurance business must have enough capital. The wealth of an insurance company can be measured by the paid-up capital of the company.
Q: Which type of insurance business is the most popular?
A: Most of them apply for a mixed type, some of them applied only for life insurance and some applied only for general insurance.
Q: How much registered capital is needed for these licenses?
A: The minimum capital for life insurance only is 6 billion kyat and 40 billion for general insurance. The minimum capital for mixed insurance is 46 billion kyat.
Q: What are the objectives of granting insurance license to private players?
A: The main reason is to provide wide insurance cover to our people. More players can give more coverage than a single player. And then they can fulfill the needs of both the state and the people. The second reason is for creating job opportunities. The third reason is to train and raise our domestic companies before big foreign companies enter our market through the Asean Economic Community (AEC).
Q: Exactly how will the people benefit?
A: More fish can be caught if three or four people are doing the fishing. Three or four people can give more insurance cover than one player.
Q: What measures will be taken to protect clients and to supervise the private players?
A: The Insurance Business Law was enacted in 1996-97. This law grants business to private insurance companies and supervises them. Under the law, the Insurance Business Supervision Committee was formed.
This committee grants a business license. The managing director of Myanmar Insurance Enterprise is the chairman of the committee and the general manager is secretary of the committee. Other ex-officio members are included from other departments and organizations.
Q: What are the functions of this supervisory committee?
A: Our responsibility is to train and help the private insurance companies to develop in a short period of time otherwise they will not be able to compete with foreign companies when they enter our market in the next 3-4 years. We must raise them as if they were our own children and protect them from dangers. The supervision committee has a lot of responsibility.
The supervision committee will not stop after granting a business license. The functions will be heavier and bigger after that. We must nurture them. We must train them in this business. We must give them guidelines to avert unnecessary dangers.
We have to train these naïve newcomers in this business in a very short period. Insurance is a discipline. We must educate them. We must help them to avoid unhealthy competition, and to compete effectively.
Q: Will you grant business licenses to foreign players too?
A: We won’t give business license to foreign players at this time. We will give priority to Burmese nationals. The foreign companies will enter our market one day. We want our national players to be immune to the competition with these foreign companies.
Q: How do you plan to keep abreast with the international insurance companies?
A: We must provide training. This is the most basic work. And we must build the institution and infrastructure of the insurance business as per international standards. We must nurture them to be grown-ups in this very short period and to establish a sound foundation for them in this business.
In other businesses, Burmese nationals have been engaged but the insurance business is new to them. If we are strong enough in this business during these next 3-4 years, the foreign companies can enter our market and we can enter their market too. There will be no problem for us.
We hope they can reach up to this level. A private insurance company conducting business in Burma is not only for the domestic market. They must be able to do business in foreign markets too. They must be ready for this level in 3-5 years even if they are not ready right now.