This paper investigates market structure of life insurance and non-life insurance industry in Thailand. This paper uses the Concentration Ratio and the Herfindahl-Hirschman Index to measure the degree of market concentration. The paper also analyzes various data from all type of insurance premium, balance sheet and income statement to measure the concentration and competition trend.
An analysis of life insurance premium, group market is unconcentrated where as ordinary and industry markets are concentrated. As for the life insurance balance sheet and income statement are concentrated market. An analysis of non-life insurance premium, fire, marine and transportation and automobile markets are unconcentrated. As for the non-life insurance balance sheet and income statement are unconcentrated market. In terms of the same sub-categorized product, personal accident and health insurance have difference concentrate degree. Personal accident in life insurance is near monopoly and highly concentrated market while personal accident in non-life insurance is loose oligopoly and moderate concentrated market. Health insurance in life and non-life insurance are tight oligopoly and concentrated market.
The results conclude that the life insurance industry is more concentrated than the non-life insurance industry. In both segments of the insurance market, as well as in the overall insurance sector, there is a downward trend in market concentration, which indicates the success of the competition promoting process which allows a greater and better choice for customers.
Keywords: insurance industry, market structure, concentration measurement
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The insurance industry serves individuals and businesses with security products such as life insurance, health insurance, automobile and other liability coverage of non-life insurance. Moreover, insurance industry plays a major role in financial intermediation, thus enhancing a nation's financial and economic development.
Life insurance brings confidence and security for all income groups of society who may be affected by life's uncertainties. At the same time, health insurance has become increasingly important due to the rapidly growing elderly population and the advanced medical technology that enables people to have a longer life span. Developed countries such as the US, Europe, Japan and South Korea as well as developing countries such as Thailand are stepping into the aging society because the elderly population are growing at a faster rate that the child-bearing population. It is estimated that the elderly population in Thailand will increase to 8.0 million (11.9% of total population) in 2010, to 17.7 million (25.1% of total population) in 2030 (Office of the National Economic and Social Development Board, 2010). Thus, governments in most countries are making effort in encouraging the population to seek ways to increasing their savings through government bonds, real estate schemes and retirement plans and to boost confidence and security in the form of life and health insurance. With a reliable saving plan, our stable income can be fortified through a life insurance system that provides protection and secures our savings. If the individual learns to take advantage of a savings plan, the saving plan will help increase the country's savings and further lead to the nation's economic development and expansion.
Likewise, non-life insurance is beneficial to business and investment sectors of society who are inevitably faced with daily risks from unforeseen circumstances or natural disasters such as floods, hurricanes, tsunamis, fire, explosions, accidents arising from travel and carelessness. All these risks and financial damage can be alleviated by reliable non-life insurance system.
As alluded to above, there were empirical studies that reveal the insurance industry in the term of insurance market structure. …