Recording sweetheart expansion, the mongolian indemnity sector ’ randomness prospects are good despite the difficulties faced more by and large in the economy. Premiums hit MNT93.9bn ( $ 56.3m ) in 2013, up from MNT79bn ( $ 47.4m ) in 2012 and MNT6.32bn ( $ 3.8m ) in 2003, according to the Financial Regulatory Commission ( FRC ). other sector indicators, such as premiums per person, premiums per head, capital and total compensation, besides suggest that the state ’ s insurance companies are in relatively dear form and growing fast. In part, the success of mongolian insurers is the resultant role of the low basis from which they are rising. As in many developing countries, awareness and penetration are low, then increases come easily. This entirely allows the sector to show resilience in the face of challenges elsewhere in the economy. But the growth is besides the result of effective strategies, best practices and dependable regulation .
policy has not, however, been immune to the troubles in the economy in general. While growth remains, it has slowed, and while metrics are looking good overall, some indicate that insurers are beginning to feel the tune. The passing ratio, for case, has jumped. It was up 7.1 percentage points 2013 over 2012, FCR datum shows. Some insurers experienced worrying increases – Monre Daatgal ’ s was up 22.66 % ; Khan Daatgal, 19.40 % ; Nomin Daatgal, 18.93 % ; Mandal Insurance, 19.11 ; and Practical Daatgal, 15.33 % – and this led to peculiarly senior high school loss ratios for a few of the companies. Nomin Daatgal was highest, at 55.7 %. According to industry executives, 2013 and 2014 have been challenging years for the sector across the board. While it is even growing, the indemnity clientele is under pressure as the weak economy and modern regulative demands make it more unmanageable for underwriters to profit and expand. “ Everyone will tell you, the market is growing but not angstrom debauched as it used to, ” said B. Batbayar, business exploitation administrator at ARD Daatgal .

incremental Advances

Mongolia ’ s insurance commercialize has been developing for decades, though a lot of the fourth dimension it has been ill structured and did not offer real insurance products. While under soviet influence, the state formed a gosstrakh, or state insurance administration, tasked with covering the risks of state companies and private entities. It had a separate legal structure and its own net income and loss statement, but what it offered was seen more as a tax that had to be paid rather than security. The democratic revolution in 1990 bring with it a series of reforms. The Ministry of Finance took the lead at first, establishing a supervisor in 1990, undertaking licensing a few years former and setting minimal capital levels .
In the new millennium, considerable advances were made. A jurisprudence on Insurance was issued in 2004 and the FRC took over supervision of the sector when it was formed in 2006. Minimum capital levels have besides been raised incrementally, from MNT500m ( $ 300,000 ) to MNT5bn ( $ 3m ) over the decade through 2015.

A free market

With the exception of a short period when protectionist sentiment took carry, the market has been release and outdoors. The Strategic Foreign Investment Law ( SFIL ), which had required parliamentary approval to buy a controlling stake in an insurance company, was scrapped in late 2013, and foreign investors are again allowed to buy into the sector without restriction. Of the 17 policy firms in the market, three had non-Mongolian shareholdings at the end of 2013 – Mongol Daatgal, ARD Daatgal and Gan Zam Daatgal – although ARD is now 100 % locally owned .
Some restrictions do remain. A license from the FRC is required to conduct policy business in Mongolia or to act as an policy mediator. Shareholders ( whether foreign or mongolian ) controlling more than 10 % of an insurance company are subjugate to extra regulations. They must inform the FRC when the 10 % limit is broken, and they must notify the regulator when they sell shares. Holders of more than 10 % of the shares must be deemed “ fit and proper ” by the FRC .

sector Participants

In summation to the insurers themselves, the sector had 20 brokers at the end of 2013, and their business has been particularly strong – income from fees more than doubled, from MNT607.8m ( $ 326,000 ) to MNT1.45bn ( $ 780,000 ), between 2012 and 2013. The FRC notes that the market continues to grow quickly, with eight brokers receiving licences in the inaugural half of 2014 .
Mongolia has 14 passing assessors, a segment which has besides been doing well. Their income more than doubled in a class – 2013 over 2012 – from MNT197.4m ( $ 118,440 ) to MNT462.4m ( $ 277,440 ) .

performance Indicators

The key measures of performance have been moving in the mighty direction. Coverage per person has jumped, increasing from MNT28,215 ( $ 16.90 ) in 2012 to MNT32,378 ( $ 19.40 ) in 2013. That figure is up from MNT8657 ( $ 5.20 ) in 2011 and MNT2131 ( $ 1.30 ) in 2003. indemnity premiums as percentage of GDP have besides risen over the long term, from 0.32 % in 2006 to 0.54 % in 2013 .
The sector is, however, far from fledged. In holocene years, the lack of a impregnable insurance culture and inadequate experiences on the separate of consumers that have dealt with insurers have resulted in a dearth of exuberance in the commercialize. Anecdotally, the position has improved. Consumers say that the wait for claims payments has been reduced from months to days, and the companies themselves are focused on enhancing the experience of the customers. silent, a hope gap remains and this has an effect on demand. People, and some companies, continue to see indemnity as a cost that generates no actual value .

regulative Effort

The regulators have been active in the monitor and supervision of the insurers. According to the FRC, a number of new measures were taken or prepared in 2013. These include three amendments to rules and regulations for the sector, improving contracts, requiring faster claims processing and calling for better protection of policyholders. The regulator besides strengthened rules regarding the use of foreign companies not locally registered to insure local gamble. The main trouble these days, the governor says, is the miss of capacity. The FRC presently has 17 people covering the policy sector, and they are challenged to keep up with the workload .

Insuring Drivers

The major initiation of late has been the introduction of mandatary policy for drivers. The jurisprudence on the Driver ’ randomness policy came into consequence in 2012. It requires all drivers ( with a few exceptions ) to buy liability insurance and sets the premiums and claims payouts for the coverage. The law established a fund used to make payments in cases where a collision occurs with an uninsured driver ; in cases where a driver can not be identified ; and in situations where the insurance company fails. The premiums range from MNT12,500 ( $ 7.50 ) for motorcycles to MNT33,000 ( $ 19.80 ) for small cars and MNT42,500 ( $ 25.50 ) for larger cars .
insurance executives say that this repair premium structure – with the rates built into the law – make it unmanageable for insurers. It is not possible to adjust rates or to get them adjusted. “ The price is in the law, ” said Ts. Purevjav, film director of policy planning division at the FRC. “ That is the main reason for the losses. ”
compulsory policy got away to a slow start. not all drivers bought a policy as required under the law, and police were hesitant in taking carry through against uninsured drivers. At the end of 2013 some 416,600 compulsory car policy agreements were signed against 652,716 record vehicles. After the initial agitation following the introduction of the plan, enthusiasm has tapered off. In terms of total premiums collected, driver ’ second mandate indemnity is number two, but growth stopped in 2013 ( down 1 % on the year ). Drivers have complained that coverage is limited, that claims were slow in being paid and that sometimes the companies have failed to honour the contracts .
however, overall, the experience has been a positive one for the sector. Insurance executives report that the compulsory nature of the product has increased awareness about indemnity in general, adding that many of the cover at first merely did not understand how policy contracts work and have over time become more familiar with what is covered. policy firms besides have improved a good cover and are becoming more ace at handling and paying claims. Mongol Daatgal, for example, allows clients to upload photos of their collisions and submit them via smartphone for claims .
The main problem for compulsory policy is one of profitableness. While the bounty income from that course of business has been bland in class two, payouts have exploded, specially as insurers have been focused on scrupulously honouring their contracts and properly compensating their clients. In 2013 compensation for mandate coverage more than doubled from MNT4.79bn ( $ 2.9m ) to MNT10.56bn ( $ 6.3m ).

however, insurers say that it is significant to remain active in the channel despite the challenges. The grocery store is huge in terms of the customer base, and can lead to strong mark recognition and potential extra business with car liability customers. Adjustments are being made ; insurance companies are becoming more selective in terms of which customers to take on. overall, the experiment is seen as such a success that the FRC is actively considering making a number of other types of risk report compulsory. It has started the summons of requiring notaries to buy policy, for case .
“ People are becoming more comfortable with insurance products as a resultant role of the law mandating driver ’ mho liability policy. I expect other products, such as professional indemnity and employer ’ randomness indebtedness indemnity, to besides become compulsory in the coming years, ” D. Chuluuntsetseg, CEO of ARD Daatgal, told OBG .

market of Potential

Insurers say that while the insurance clientele has been unmanageable, it has big electric potential. The economic downturn has hurt, particularly as demand from mining-related companies has dropped. But the sector is evolving promptly. Mongolians are besides good educated in terms of their personal insurance needs. In particular, they have seen the necessitate for health policy and are starting to see insurance as a phase of savings. “ There are significant opportunities in health policy, specially policies that cover operations performed afield. Each class, Mongolians spend over MNT10bn ( $ 6m ) on overseas treatments, ” A. Batzorig, early CEO of Tenger Insurance, told OBG .
Health indemnity fee income grew 57 % in 2013 over 2012, while pension policy was up 64 %. This represents an authoritative shift. insurance companies had previously been focused more on corporate business, as corporations were likely to be required by their boards to carry policy. They were besides seen as better able to pay the premiums. immediately, individual clients are seen as a source of growth in the future. In absolute terms, some individual business lines remain relatively little. Health indemnity accounts for good 0.5 % of all insurance in terms of fees collected in 2013 and less than half a percentage in terms of claims paid ( while driver ’ s compulsory policy is more than 17 % of total fees collected ), according to the FRC. Nevertheless, health insurance is growing fast and is an sphere of great likely as the people of Mongolia become wealthier and more conscious of the need to have personal risks covered. Mongol Daatgal is targeting a rise in individual clientele from 50 % to 60 % of its total business .
The general industry numbers suggest that the sector has hard likely. Insurance penetration and concentration are both moo when compared with other developing countries and neighbours. At 0.54 %, FRC figures show, the penetration pace is much lower than that in Thailand ( 5.5 % in 2013 according to Swiss Re ), China ( 3 % ), Indonesia ( 2.1 % ), South Korea ( 11.9 % ), Vietnam ( 1.4 % ), the Philippines ( 1.9 % ) and evening Kazakhstan ( 0.8 % ). In the West, the rates tend to be higher : 7.5 % in the US, 11.5 % in the UK and 9 % in France .
The situation is much the same in terms of density. Against Mongolia ’ s $ 17.50, most other peers and neighbours are higher : Vietnam, $ 23 ; the Philippines, $ 54 ; Indonesia, $ 77 ; Kazakhstan, $ 101 ; Malaysia, $ 518 ; and South Korea, $ 2895. But Mongolia has considerable top as it catches up with other developing countries and ultimately with the explicate worldly concern .
reinsurance has evolved well over the past few years. While in 2012 and 2013 that the marketplace was served by only one international reinsurer, at least three are immediately active in the market ( AXA – which has teamed up with Bodi – Hanover Re and Munich Re ) and rates are becoming more competitive as a result of this growth. The FRC says that many more have been looking for business, including chinese insurers .
Some restructure has occurred. ARD Daatgal became 100 % locally owned when its alien stockholder, Venture One Netherlands, was bought by EIT Holdings, a local anesthetic tauten with stakes in a crop of fiscal entities including Monet Capital and Tenger Financial Group, which owns one-half of XacBank and all of XacLeasing and Tenger Insurance. In 2014 the new Golomt Financial Group bought a stake in Mandal Insurance, once separate of Mongolia Growth Group .


Bancassurance has played a major function in the sector ’ sulfur development. Khan Bank, with its 514 branches, is a key musician. It has worked with Mongol Daatgal, Mandal Insurance, ARD Daatgal and Practical Daatgal. In late 2014 it initiated a two-month bancassurance campaign to push six indemnity products. Some indemnity firms have started to rely more heavily on bancassurance. According to Batbayar, ARD Daatgal is reconsidering its branch network in rural areas and starting to see bank branches as good places to distribute policies in the more distant parts. adenine well as reducing expenses, partnering with banks offers early benefits, including that banks are trusted institutions and bank employees understand fiscal products. While their cognition may not be specialised, they are commodity at selling products and answering questions .
Mongol Daatgal notes that operational expenses can be adenine much as 50 % of revenues, well above international norms. Bancassurance can potentially reduce the ratio by making habit of existing infrastructure .
Some offerings are becoming reasonably advanced. In 2012 Mongol Daatgal, for exemplar, teamed up with SOS International to provide international emptying services. The caller is besides working to increase branch numbers to access more rural customers, is allowing for on-line claims and has a telephone patronize line for customers that is open every day of the week around the clock. According to comments in the imperativeness, Mongol Daatgal is aiming for a five-day turnaround on claims, but claimants say it is faster in many cases. The firm besides worked with PwC Advisory in 2013 to ensure its books and operations meet external standards.

Life Cover

Life insurance is evolving quickly. While only one company is active in the sector, it has grown well and policy executives say that it has enormous likely. The capital of National Life Daatgal rose from MNT4.68bn ( $ 2.6m ) in 2012 to MNT5.63bn ( $ 3.4m ) in 2013. Premiums broke MNT1bn ( $ 600,000 ) for the first time in 2013, rising from MNT795.3m ( $ 477,180 ) in 2012 to MNT1.02bn ( $ 612,000 ) the adjacent year. The main challenge for the sector is the fact that life policy does not receive tax advantages, and in a gamey interest pace environment, where depository financial institution deposits pay doubling digits, life policy is not seen as a good savings intersection – fewer than 10 % of National Life ’ s policies are endowment or pension policies .
Insurers say the regulators should get behind liveliness policy by improving the tax condition of liveliness policies and besides by making it clear that non-life companies can not intrude on the occupation. At this compass point, life policy does not technically exist as a product in Mongolia ; the eminence made is between general insurance and long-run policy, in which policies are written for a condition of longer that one year. This creates the possibility of general insurers selling animation products, and insurers say it would be better if a clear course were drawn .


While growth has slowed, and profitableness in certain lines has been moo, Mongolia ’ s indemnity sector is expanding and evolving at the same time. industry players are getting better at what they do, while clients are beginning to better understand the products on offer. The governor and insurers agree the sector would benefit from consolidation, from the current 17 firms to four or five, but the FRC says it will not at this detail be encouraging mergers. It will allow market forces to take their naturally and rationalise the commercial enterprise. This, along with reforms in compulsory lines, should help improve rates and profitableness as the sector develops .

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