Significant Developments In Motor Insurance In Thailand

ABSTRACT: The 1990s saw rapid economic growth in Thailand. Motor insurance grew enormously, becoming the biggest income earner for total general business (both for the whole industry and for many individual companies). Cash flow underwriting seemed to be the recipe for success in a competitive market. The agency distribution system for motor insurance in Thailand is almost wholly controlled by finance companies and banks, which expect a high rate of commission. Their delay in paying over the premiums to the insurers created bad‐debt problems after the 1997 economic crash, when the government closed many of these financing companies. This also meant an end to the motor insurance boom, with a decrease in premium income and a reduction in investment returns and assets, thus threatening solvency margins. Earlier in the decade, in 1993, there was the introduction of compulsory third‐party insurance, followed by the establishment by the government of provincial bureaus to help these third‐party claimants. And in 2000, just in time for the next wave of economic growth, a new rating system has been introduced to bring sophistication to the basic process of evaluating and pricing different risks, though still within a government tariff system. Liberalization is coming, in stages, and the industry is making changes so as to be in a fit state to cope with the increased competition and opportunities that this liberalization will bring. Like all setbacks, the crash of 1997 was an opportunity for Thai motor insurers to examine the fundamentals of their business and plan to increase their professionalism. Some are already well on the way to high‐quality service, meeting ISO 9002 standards, and have begun Internet trading.