Thailand's life insurance premiums totalled 441 billion baht in the first three quarters of 2017, up 6.4% from last year, says the Thai Life Assurance Association.
Demand for life insurance products, shifting demographics and government efforts to boost personal and retirement coverage providing opportunities for insurers should all fuel growth.
The performance puts the country well on its way to exceeding the target of 600 billion baht in life insurance premiums set by the Office of Insurance Commission. It is also based on a GDP growth projection higher than the Finance Ministry's 3.8% outlook.
Rising demand for life insurance products is welcome news for the government, which has worked to improve life insurance penetration and provident fund coverage in light of the rapidly ageing population.
The World Bank estimates 25% of the Thai population will be 65 or older by 2040, compared with just 10% in 2015, making Thailand one of the fastest ageing countries in the region.
The number of Thais active in the workforce will fall 10% by 2040, resulting in a lower tax base. This will further reduce the state's capacity to support those in retirement, at a time when demand for health and social services will be rising.
According to projections from government agencies, the state's contribution to existing retirement funds, including for state employees, will need to increase by more than 140% between 2016 and 2024 to reach 698 billion baht.
Shifting demographics are a big opportunity for insurers, said Michael Plaxton, chief executive of insurance firm FWD Thailand.
"Health insurance for the elderly is a big untapped market; the over-60 group represents 5% of the client base," he said. "But insurance companies are bad at investing in new products tailored for the ageing population."
Although Thailand's ageing population will place pressure on state resources, it also provides new economic opportunities as insurers look to invest premiums, particularly following the introduction of a new compulsory retirement fund next year.
Under the proposal approved by the cabinet in February, both employers and employees will be obliged to pay into a mandatory provident fund (MPF). Contributions will start at 3% of the worker's salary, before rising to 10% within 10 years.
The upper cap for contributions will be based on a salary of 60,000 baht per month, while employers of people earning less than 10,000 per month will be required to contribute for their employees.
Initially, the scheme will only apply to companies with at least 100 employees, although it is expected to be rolled out to smaller firms within seven years.
Companies already operating retirement fund systems will not be required to implement the MPF initially, but may have to increase contributions in line with the MPF levels.
Meanwhile, Thais employed in the informal sector, along with self-employed workers and those in family businesses are not expected to be covered by the MPF.
In addition, the proposed reforms are likely to have an impact on employers, as the MFP will increase wage and levy commitments in the course of a few years.
"Companies should review their contribution structures as this could result in higher costs for firms that pay contribution rates lower than 3%," said Prapassorn Chaikit, director of professional services firm Willis Towers Watson Thailand.
