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AXA switches focus to low-end drivers
(Bangkok Post (Thailand) (KRT) Via Thomson Dialog NewsEdge) Nov. 3--AXA Insurance Plc is stepping away from heavy price competition in the first-class or comprehensive insurance business, and looking to tap the lower-end market with value-added services under third-class policies, such as emergency towing, repairs and fuel.
"Price cutting is now rampant in the comprehensive car insurance market," said Kheedhej Anansiriprapha, the CEO of the French-Thai joint venture.
"On top of that, in the second half of this year, the economy has been slowing, prompting people to pay less and save more, particularly in car insurance coverage."
According to Mr Kheedhej, price-cutting has resulted in a sharp drop of 26 percent in the company's motor insurance business in the first half of this year. It now expects to earn 750 million baht in auto premiums this year, compared with 800 million last year.
As a result, AXA would fall short of its target of 1.4 billion baht in total premiums for 2006.
Last year, the company reported total premiums of 1.3 billion baht, with motor insurance contributing about 60 percent.
Mr Kheedhej said the lower-end car insurance market, particularly affordable third-class (third-party liability only), offered better growth potential over the next year, given the country's economic slowdown, political uncertainty, high oil prices and interest rates.
According to the General Insurance Association and Thai Insurance Datanet, in 2005 compulsory insurance covered 6.5 million passenger cars, pickup trucks and mini-vans.
Voluntary coverage including first-class, second-class (third party liability- fire and theft), and third-class (third-party liability only) totalled only 2.2 million vehicles, 1.29 million of which had third-class coverage.
Mr Kheedhej said the third-class coverage market also had a relatively lower loss ratio, about 40 percent, compared with 60- 70 percent for comprehensive policies.
"We are confident that we can grow in the third-class segment as long as we come up with attractive value-added services and affordable premiums," he said.
To reflect the new focus, AXA yesterday introduced AXA 3 Free, a unique third-class plan with added services now offered only to first-class policyholders. They include free repairs for light damage worth 1,500 baht per accident, free towing for the first 50 kilometres, and up to 10 litres a year of free petrol in emergencies.
Premiums would be 2,999 baht for passenger cars with engines smaller than 2,000cc, 3,299 baht for larger-engine cars, 4,499 baht for pickup trucks and 4,599 baht for mini-vans.
Installment payments are also offered interest-free four months.
The company expects to sign up 1,300 to 1,800 drivers a month for the plan, with premiums of 50-80 million baht a year.
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Copyright (c) 2006, Bangkok Post, Thailand
Distributed by McClatchy-Tribune Business News.
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