● <B>I know you had to document yourself thoroughly on the local insurance market. Are you surprised at the changes brought by the government budget ?</B>

I am surprised that it took so long to come ! These changes are very much in line with best practices around the world. Countries which have recently undergone similar changes are Slovakia, which has incidentally the highest growth rate in Central Europe, Estonia, Malaysia. As an outsider, I can say that it will be good for the country if targets as set by the budget are met, though there will be painful withdrawal symptoms.

● <B>How did the insurance market fare in those countries you mentioned, following such changes ?</B>

There is hardly any market left where there are still tax incentives for life insurance aiming to encourage policyholders to save. But despite this, insurance companies have continued to enjoy significant growth and even gain more international recognition. The reason is that if economic targets as set by the budget are met, the efficiency of markets ensure that in 2-3 years, people have more income and thus can buy more insurance. And insurance continue to be bought as long as it corresponds to the needs of the customer and not just because of the tax incentive.

● <B> Still, local insurance companies are quite worried about the future !</B>

Market forces are forces which you have to reckon with. No matter what is your emotional reaction, the world is fast moving and you had better not miss the train. Free enterprise means less government intervention, less taxes and letting people take care themselves of their own future.

As I often say, insurance companies are “not the prettiest on the dance floor” and therefore, we have to work hard on being thoroughly professional and offering the best advice to clients.

● <B>What about the tightening of regulations ?</B>

In principle, this is very good for the public because nobody has the right to play with public money. The practice in other countries is to increase capitalisation requirements and solvency levels, in line with the risks the insurance company is assuming. This is not only good for the public but also for the industry.

In practice, you must take care that regulations remain business-friendly, logical and not too heavy-handed.

I noticed that top insurance companies in the world (ING, AIG, Allianz) massively surpassed even the strictest requirements.

● <B> What about the claim that they will be driven out of the market ?</B>

I would find it marvelous that the underperformers exit the market. How do you recognize them : high complaint ratio, undercapitalized, untrained staff, low standards… I sincerely hope the regulators will vigorously follow up on complaints and crack down any risk of default to ensure that the public has full confidence in the industry, as in Europe and the US.

It may seem unfair that in the process, the big are getting bigger. But for an insurance company to survive, it must be able to provide good service at an affordable price. If there are too many companies in the market (more than 20 for such a small market as Mauritius) it is surely not cost effective for the public and not profitable for some companies. If you take the car industry in the US, there were some 300 companies in the early 20th century and only 3 left now.

● <B>The new Insurance Act mentions that Life insurance and Non-Life (or General) insurance should be completely separated. Your comments ?</B>

This is indeed the world trend. One of the top insurance companies ING specializes in life insurance and asset accumulation and wants nothing to do with property or casualty.

This is because these two fields are really different and you need different professionals for each field and different selling skills. To sell life insurance, you need to touch the client at an emotional level by appealing to the human ideal for a better life in the future, a better education for the children. However, for non-life, you have to be more down to earth because the customer has a need to protect an immediate loss to an asset. So while as a life insurance adviser you would encourage your client to save for the future – thus sacrificing the present, as a non-life adviser you would encourage him to invest now in an asset (such as a car or a house) with the confidence of adequate protection through insurance.

● <B> Gazing at your crystal ball, what are your predictions for the future of the local insurance market ?</B>

I believe there may be a slight contraction for the immediate future. But in say two years, provided the budget measures are implemented and targets are met, I would expect GDP growth to surpass past levels. And as I have seen in other countries, the insurance industry will enjoy substantial and sound growth as people get more disposable income and as professional standards rise.

● <B>And who will be the winners ?</B>

Those companies that will provide decent service at the lowest cost !

From my experience of other markets, successful companies share some common traits :

• Capacity to act fast

• Investment in a good IT system

• Train, train and train their staff and salesforce

• Hire and develop the most professional salesforce –

(I recommend personally to have a team of young graduates with a good financial background)

• Run their business efficiently and professionally

• Highest regard for consumer information and protection

• Well capitalized

I observe that the Mauritian market is somewhat lagging behind those international trends and there is thus a lot of scope for development.

● <B>Your recipe above implies investments, thus costs. But in this difficult environment, surely some will adopt a strategy of cutting costs at all cost ?</B>

Well, if the recipe above is what I would call the virtuous circle, you’ve also got the vicious cycle : too much competition implies price cuts which in turn lead to cost cutting namely of much needed investments thus leading to insufficiently trained staff, lower professionalism, bad service, inefficiencies, low morale and finally the demise of the company.

But let me be very clear – the top insurance companies are all adamant at controlling their costs while spending / investing where necessary.

● <B> Do you think that that those world leaders such as ING, AIG, Allianz, Prudential may want to enter the local insurance market ?</B>

It is true that those companies have had a tremendous success in other countries. For example, ING entered the Romanian market only 10 years ago with 16 existing companies and within 5 years conquered an impressive 60% of the market.

In India, when the insurance market opened up, they had to set up strategic alliances with local companies.

<I>After a slight contraction, I would expect GDP growth to surpass past levels in say two years. As I have seen in other countries, the insurance industry will enjoy substantial and sound growth as people get more disposal income and as professional standards rise.</I>

● <B>What about Mauritius ?</B>

I can answer a definite NO for ING because I know that they are not interested in any market of less than 10 million lives.

As for others, I would set the probability that one of them will enter the local market in the next 5 years at maybe 50%.

I don’t think they will look at an alliance with an existing company – they tend to do things their own way. Perhaps they may envisage buying an existing company.

The usual set-up as seen in Central Europe or Asia is having an experienced middle-aged experienced manager surrounded by a team of young professionals. They will not want to hire from the competition and will want to implement their own IT, own training system and product development program.

● <B>And finally, how have the local companies responded to your training offers ?</B>

I had a very encouraging response. I will be back in Mauritius in November as I am a guest speaker at the African Life Insurance Convention and will run courses for some more companies. I thank the Insurance Institute of Mauritius for their invitation and offering me this opportunity to visit your beautiful island. They are doing a great job at promoting education in insurance.

<I>Interview conducted by </I> <B>Bruneau WOOMED </B></I>– [email protected] Life Insurance & pensions specialist</I>