In many Asian countries, the burgeoning of a subset of the population—the elderly--is presenting economic challenges tied to Asian pension systems. Because the systems are not providing an adequate retirement income for this subset, there are opportunities for insurers to enter the market with solutions.
So says
The report notes the many factors at play, including regulation in China, Hong Kong, and Singapore, and advises insurance companies to consider the entire three-pillar market structure when they plan their strategy to serve Asian retirees.
“As defined by the World Bank, the three pillars of protection for the aged are: a publicly managed, tax-financed social safety net; a mandatory, privately managed, fully funded contribution scheme; and voluntary personal savings and insurance,” says the report.
Insurers may have the opportunity to play an important role in both the second and third pillars of financial protection for the aging population, but they also face increasing competition from other financial institutions such as banks and trust companies, notes the report’s author, Wenli Yuan, senior analyst with Celent's Asian Financial Services Group.
“Pension companies’ premiums have grown quickly in China, but premium income in 2009 still only accounted for 11% of the entire corporate pension market,” says Yuan. “Pension companies compete with banks and trust companies in the role of trustee, with banks in the role of record-keeper, and with fund management companies and securities firms in the role of investment manager.”
Celent suggests that insurance companies that want to focus on the pension business should keep a close eye on regulatory activities, think about innovative business models, and analyze different requirements, providing suitable products for various target markets. The report, which explains various business development models, includes coverage on insurance companies that are focusing on individual annuities, as well as those that are extending their retirement businesses horizontally and/or vertically.
