Issue 27

 

 

The internet is opening up new business models that would have seemed unthinkable twenty years’ ago. Thailand Horizon speaks to a company that is re-brokering the Kingdom’s car insurance market.

E-commerce is proving to be big business in Thailand as in many parts of the world. Driven by the rise of smartphones and tablets, and the government's commitment to the digital economy, the industry was valued at 744 billion baht (US$23 billion) in December 2014, and is forecast to rise to 1 trillion baht ($31 billion) by 2016, according to the president of the Thai E-Commerce Association.

“Thailand’s e-commerce will continue to thrive for years to come,” said Pawoot Pongvitayapanu, Managing Director and founder of www.tarad.com at a Thailand Online Mega Sale event in December 2014. “We expect the industry to grow by at least 20% this year and 35-40% in 2015 with the entry of e-commerce entrepreneurs and the government’s policy of investing more aggressively in broadband expansion and digital technology.”

Business-to-business e-commerce dominates the market at 79.8%, compared with 19.3% for business-to-customer. Perhaps surprisingly the majority of e-commerce (66.8%) is carried out by small businesses of up to five people, with a further 26.6% from medium-sized firms (six to 50 people). Large enterprises have been slow to capitalise on this new market, representing only 6.6% of sales, although retail companies such as Big C, Tesco and Central have started selling their products via e-commerce channels.

One company that is tapping into the virtual market is Direct Asia. Established in Singapore in 2010, the company has replicated the model of providing an online insurance platform to customers first in Hong Kong and then Thailand.

“Thailand was a big step up in terms of the size of the market compared with Singapore and Hong Kong,” says Michael Parker, CEO of Direct Asia Thailand. The company had a soft launch in late 2013 and spent most of the following year making refinements to the products and services it offers customers. According to Parker, Direct Asia is the first Thai insurance company allowing customers to carry out all their insurance transactions online. They can even pay at 7-Eleven branches.

Parker, who is from Melbourne and has 18 years’ experience in insurance, including 15 years in Asia, says that the proposal to set up in Thailand caused “a lot of raised eyebrows”. People said that the insurance sector was a face-to-face business and as such not suitable for e-commerce.
However, Parker believes that the Kingdom’s insurance industry consists of a lot of companies that are basically offering customers a similar product. He argues that Direct Asia provides a much faster and simpler service to clients, as well as dedicated claims executives that work closely with the mechanics who will actually carry out repairs on cars. Currently Direct Line only provided motor insurance.

“We are much more service-focused and deliver the level of service that customers’ expect,” he says. An example of this is the more detailed driver profile analysis that the company carries out. By asking questions that would seem run of the mill in western countries, such as ‘how often do you drive your car?’ Direct Asia can reward “good” drivers with more competitive policies. Commenting upon the lack of market segmentation within Thailand’s car insurance market in general, Parker says that “good drivers subsidise bad drivers.”

Direct Asia’s novel approach is already reaping rewards with 5,000 policy holders as of February 2015, well on the way towards its target of 10,000 by the end of the year. Parker believes that Direct Asia’s model is one that can be replicated in a number of industries. “We are seeing a lot more commitment from the government to promote e-commerce and the digital economy,” he says.

Words by Mark Bibby Jackson