Matthew Kearns, General Manager, QBE Insurance: Interview

Interview: Matthew Kearns

How would you assess the sophistication of the insurance market in Papua New Guinea and the scope for more complex products?

MATTHEW KEARNS: We can divide the complexity of the insurance sector into two halves. The market covered by overseas or multinational insurers is generally quite sophisticated because of their expertise and global presence. However, when it comes to the local companies, we see that knowledge of the market and insurance products is in general much less sophisticated. It is also the case that the understanding of insurance among the population in PNG is low to very low. While there have been some sophisticated and modern products brought into the country, there still has not been a full adoption of the core structure of the global industry.

There is scope for expanding the product offering in PNG, but potential growth is predicated on the maturity and capacity of the companies currently in the market. Cyber-insurance, for example, is probably the most topical insurance product on the market at present. Whether or not it would be feasible to write and offer this type of insurance in PNG is debatable, but it really comes down to a company’s willingness to take that risk on their books in a way that makes sense for the market in PNG. It is possible that there may be some consolidations on the horizon due to the fact that the market is small and overserviced.

What criteria must be met to successfully build the micro-insurance segment?

KEARNS: On the balance of probability, companies should be able to make money on insurance. Keeping in mind that companies exist to create profit for their shareholders, I think that with the regulator and the government we need to take a good hard look at the micro-insurance segment to improve the affordability and distribution of micro-insurance. There may need to be some kind of government incentive at first, such as a tax deduction. Micro-insurance is on the minds of institutions such as the World Bank, but the affordability and viability of offering these products all depends on reaching the informal sector, which can only be achieved through technological means.

Technology does play an important role, and insurers in the market need to start to adopt and implement technical solutions in PNG. This exercise will be capital intensive, but it is something that can ultimately foster growth in the insurance sector.

Understanding what is required from the segment is also important. In most cases, purchasers of micro-insurance are looking for a life product or a small medical product. As we have two regulators – one for life and one for general insurance – there must be some review of where micro-insurance products fall and how they will be regulated. PNG, which has a relatively small population compared to India or Indonesia, does not have a critical mass of people requesting or requiring micro-insurance. Since insurance penetration is still low in the country and people do not understand that it is a critical part of the financial system, the first thing that needs to be improved is education.

To what extent is growth in the insurance market dependent on national projects?

KEARNS: I think it is extremely dependent. Industry players have a huge responsibility to increase education and help build a more sustainable insurance sector. It is a project-based economy, therefore, we need to be mindful of the volatility there. The country did not foresee the impact of the global dip in commodity prices and every sector from mining to agriculture has been impacted by this global phenomenon. PNG is located in a very risk-prone area of the world, which would make you assume that insurance would be valued higher than in safer areas.