corruption risk in insurance, mandal insurance
TRANSCRIPT
Risk, Legal, Ethics WG joint meeting
2017-01-17
Zaya Bolorbold, Chief Underwriter
Mandal Insurance
Insurance industry at a glance
• Regulator: Financial Regulatory Commission /FRC/
• % of Gross written premium (GWP) within GDP: 0.52%
• Industry premium increased 10 times compared to 10 years ago - $57 mil as of 2015
• GWP per capita: $19
• Total assets of insurance companies increased by 80% in last 5 years: $79 mil
• Insurance: less than 1% of Mongolian financial sector compared to banking’s 96%, NBFI’s 2%, Securities & Broker’s 0.6%
58.2
77.3 76.2 80.8 86.8 78.8
2011 2012 2013 2014 2015 2016Q2
Total asset Equity
Total asset and owners equity, in
million USD
34.0
56.7 56.6 57.6 57.1
30.4 25.9
40.8 39.9 38.4 34.9
20.5
0
10
20
30
40
50
60
70
2011 2012 2013 2014 2015 2016Q2
GWP Net premium
Total gross written premium and net premium, in million USD
Insurance industry at a glance
• The insurance products available are almost entirely short-term non-life products
• Life insurance development is lagging. /99% of premium from non-life/
• The main 6 insurance products compose 92% of the total GWP
• Market is largely concentrated on auto coverage following the introduction of mandatory driver’s liability coverage in 2012, which grew the insurance industry by 65%
• Mongolian insurers do underwriting and brokering at the same time.
Top 5 insurers collect 85% of the total premium
28%
26% 12%
10%
9%
8% 7%
Bodi insurance
Mongol insurance
MIG insurance
Mandal generalinsurance
Practical insurance
Tenger insurance
Structure of total gross written premium/2016Q2/
Insurance legal environment at a glance
In 2012, the FRC set the obligatory minimum capital • 5 billion MNT /2.5 million USD/ for non-life insurance
companies • 6 billion MNT /3 million USD/ for life insurance companies Currently, only 2 companies /one of them Mandal/ meets the criteria
• Insurance activities in Mongolia are regulated by the “Insurance Law of Mongolia” approved in 1997 /amended in 2004 /
• The Law prohibits an individual or a legal entity residing in Mongolia from allowing its property and interests located within the territory of Mongolia to be insured directly by a foreign reinsurance company without mediating through a local insurance company.
Insurance intermediary
• According to the “Law on Insurance Intermediary”, insurance brokers, insurance agents and insurance loss adjusters are considered intermediaries in Mongolia.
• Insurance brokerage commission in 2015: $1.7 mil (48% earned by 8 commercial banks with brokerage license and 52% by other insurance brokers)
• Banks’ insurance broking activity composes 9.5% of the banking sector revenue.
• Motor insurance brokerage commission range between 10-30%, while mandatory driver’s liability insurance commission is 20-30% of insurance premium.
• Some insurers have been known to offer similar commissions on large corporate insurance placement.
• In terms of corporate insurance, brokers acquire a set of corporate customers through relationship building and when placing their client’s risk, brokers select insurance companies based on commission level offered and close relationship with insurance companies.
• Brokers’ clients barely receive any value-added services on par with international insurance brokers.
Corporate insurance accounts for 75% of the total insurance industry GWP or $45 million
State involved insurance
• It is common practice that the insurance commission is shared with the decision makers as kickback when allocating publicly-funded insurance expenditure.
• State procurement regulations require tendering process of government expenditure, many instances of insurance procurement are made without public announcement, with no tenders, or vital information circulated only within close group of participants.
• In June 2015, FRC started requiring insurance companies to report whom it paid any commission when writing insurance of state agencies, state-owned company, publicly listed company, foreign-invested company, .
Government expenditure for 2016 was $3.5 million, 2017 insurance
budget is set at $3.8M or 0.5% of the total budget
• Aside from the budget above, on average 8% of the insurance industry’ annual gross written premium is composed by premiums from state-owned entities such as Mongolian Airlines, Civil Aviation Authority etc
• Established in 2011
• In less than 6 years, included in top 3 insurers’ rank by premium, assets, reserve funds and reputation
• Gross written premium amount increased 15 times, which accounts for 200% annual growth rate
• Reserve fund has increased on average by 92% in last 3 years, which is a leading indicator in insurance industry
7,271 8,823 9,375 9,797
13,560
2012 2013 2014 2015 2016Q2
Total Assets in million MNT
2,960
7,298 8,035
9,184
5,043
2012 2013 2014 2015 2016Q2
Gross Written Premium in million MNT
Major milestone
The first risk management forum
Bankassurance in partnership with Khan Bank
The opening of Darkhan branch
Incorporated with Golomt Bank and became 100% Mongolian owned
Mandal General Insurance was founded
Audited by PWC
The opening of Tsogt Tsetsii branch
Launched customer service department
Launched call center
Stance on ethical practice
• Audited by a globally recognized firm PwC
• No cash kickback policy
• Instead, Mandal offers: • Risk assessments • Risk seminars, educational events • Loss reduction tools • No claim bonus • Loyalty program • Credit earning system for premiums paid
• Employees: Tries to recruit non-insurance background sales force / clean slate sales practice
• The Mission Statement of Mandal makes our employees to think, to act and to execute differently from those at other insurers:
“WE, close-knit members of the Mandal family, take mutual responsibility for each other’s happiness in our journey to become a NOURISHING GROUND, by being the industry LEADER who introduces client-centered products and services while providing solutions for our insureds to secure their RHYTHM of LIFE, allowing all to contribute to the PROGRESSIVE DEVELOPMENT as a society.
Recognition for innovation
Reinvention of Insurance
• Implementing a strategy termed as “Reinvention of Insurance” in Mongolia • Majority of the players in the industry has “re-seller” mentality, not investing in R&D
and selling traditional products from reinsurers’ off-the-shelf policies.
• Mandal, on the other hand, believes that there is vast opportunity, if insurance companies truly understood clients’ needs, delivered services through a complete journey of customer’s expectation, and localized international know-how and practices, which at the end all translate to VALUE creation for clients.
• Mandal has held “value creator” approach in business, with a dedicated in-house R&D function within its Business Development Department.
• Affordable and flexible payment term pricing – the leading company offering flexible payment term allowing clients to pay premiums in monthly installments.
• International standard practices – learning from proven international practices and carefully localizing them to the needs of the local market is an important aspect of Mandal’s product development.
Reinvention of Insurance example: “Jargalan” Health Insurance
Mandal launched Jargalan Health insurance on the following notion:
• Insufficiency and poor quality of state health insurance scheme
• Absence of a global standards and affordable health insurance in the market.
Key product features are:
• Coverage that is relevant to the client
• Affordability
• Service infrastructure - Created network of hospitals for the first time in Mongolia enabling direct-billing from Hospitals to Mandal.
• Monthly premium installment available
• has its own Health Insurance Department that consists of professionals who are medical doctors.
JARGALAN HEALTH INSURANCE GOLD PACKAGE
- Up to 50’000’000 MNT per year - Full electivity - Co-Insurance - Serious health conditions (Organ
transplantation) - IP + OP + PREG + PRIV - Monthly payment ≈ 40’000MNT - Network hospitals + All public
Hospitals
- Up to 50’000’000 MNT + 250’000$ per year - Full electivity - Co-Insurance - Mongolia + China (Mainland) + Thailand - Serious health conditions (Organ transplantation) - IP + OP + PREG + PRIV + Traveler's PA - IP cash benefit + Accompanying member cash allowance - Monthly payment ≈ 76’000MNT - Mongolian+ Asian Network Hospitals + All public Hospitals
JARGALAN HEALTH INSURANCE PLATINUM PACKAGE
Innovation by localizing
Efforts to improve – Not just complain
“Insurance procurement seminar for government agencies” – Organized by Mandal with support from Ministry of Finance, Mongolian Insurers’ Association in November 2016
Vision
• To build the Mongolian brand of a Financial corporation competing on a global stage.
“Transparent & Ethical business practice workshop” – participated actively and gave comments from Insurance industry perspective in November 2016
As Mandal strives to realize its mission, it shall be a benchmark insurance company that would “nudge” its peers in the industry to be ethical and creative in order to be competitive, resulting in faster development of the insurance sector and at broader scale where clients and society benefit from various options and quality of insurance services.
Efforts to improve – Not just complain
