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Insurance sector set to experience huge growth

Interview - March 13, 2014
As GDP per capita in Mongolia rises from $2300 in 2011 to a forecast $8000 by 2016 there will be an increasing demand in insurance coverage in the areas of education, health and pensions. As the banking industry also develops, MONGOL DAATGAL are one of the companies expecting to benefit from the anticipated long term growth in this budding sector. In an interview with United World, Chief Executive Officer of MONGOL DAATGAL Batzul Tumur-Ochir explains how the company is evolving as the demand for insurance grows deeper
How do you see the future of the insurance sector in the upcoming years? What are the major challenges that is currently facing?

For example, on average, a person buying insurance in Mongolia pays 10 dollars whilst the world average is 200 dollars, which implies a lot of increase.

Mongolia became the fastest growing economy in the world. And insurance companies benefited from this growth as well. In 2011 and 2012, insurance companies had 30 to 40 percent increase in premium income. It is as a result of the mining sector growth and lots of investors are coming in and they all buy insurance. Insurance is getting well known in Mongolia we expect a long-term growth in the coming years.

Around 5 to 10 years ago, people saw insurance as an expense without understanding the benefit. And at the same time, the government also made some insurance products mandatory in 2012, which increased the market by 15 billion MNT.

The banking sector is one of the most developed sectors in the financial sector of Mongolia. Commercial banks, such as Khaan Bank, have 500 branches and Xac Bank has 200 branches, so these banks have an extensive network. In 2010, the banking law was changed which enabled buying insurance services through banks and by using the banking network to reach out to people who have savings, the insurance sector will be able to experience a big growth. We are cooperating with them which all got a license from the FRC last year.

The cooperation is currently in its project phase but it is going well. These are some of the main factors influencing the growth of the insurance sector. 
The number of companies that want to invest in Mongolia is increasing, but in order to meet with the increasing demand, additional capital is required and maybe international insurance brands will start coming to Mongolia. From where does the company plan to finance this growth? 

Mongolian companies are still small and we have the highest capacity. Even though there is a huge interest, not many insurance companies are coming into Mongolia.

There are still brokers waiting to provide their services to clients. So we have to be prepared for those moments because have to be ready for big growth. Without growing, it is really tough to benefit from this growth and the government support is essential in order to encourage local companies. The line in the law to protect local companies from international companies is quite blurred, so the law of insurance needs to be modified. The last modification was in 2004 and it has already been 10 years since.

The capital requirement is 5 billion MNT and it has been this much since 2006. So, from my understanding, the capital requirements shall be changed regularly, every year or few years. Now there are 17 companies in the market, which is too many. The guarantee policy is not allowing us to invest our reserve funds. 
One of the main things is that the company shall understand how important the insurance sector is. Citizens also have to know how important it would be to insure their house and cars. So, insurance companies like Mongol Daatgal are aware of the importance of teaching the consumers about the benefits of having an insurance policy. Do you consider that the government is aware of it too?

The government can work with insurance companies very closely. We actually have proposed our law amendments to the parliament. We are working to have authorities be educated about the insurance but it seems the authorities are ignoring us. The drivers’ insurance policy is no longer a profitable business to the insurance company and something has to be done by the authorities in order to make it profitable.

Otherwise the driver’s license will stop. It I really a long-term process and we give training programs to school children and their parents and doing advertisement on what insurance is. 
What is the relation of Mongol Daatgal with its customers and how do you create a long-term relationship with your clients? 

Our strategy is to maintain the current service and the sector competition is harsh.

There are 17 insurance companies operating in the sector. We opened an office here and our target is to cover the damage in 5 days. It is shorter than the world average but we have to work like this.

The faster we serve, the more likely a client will stay with our company. Our main strategy is to open branches in rural areas. We now have 28 offices and this year, we changed our software so our clients can claim their damage through online. We have also introduced a mobile application, which enables our clients to track where the process currently is going and can access news and a bonus system through this technology. 
Car insurance is mandatory in Mongolia. And a driver can claim their damage through an application through their mobile phone. Are you planning to provide all the services you have in cell phone aps? 

We operate our 24/7 branches and a phone line 1990. So our customers can have immediate access. 
As a young democracy, it is important to know more about successful stories of transition from state owned to private ones. Can you please describe the transition process of Mongol Daatgal to our readers in order for them to understand more about Mongolia? 

I wasn’t working here when the transition took place. The privatization of insurance companies was in 2003 and I joined the company in 2010. In my sense, the insurance sector has been growing in the last 5 years and Mongol Daatgal was the only insurance company in 2003. At that time, when somebody needed insurance, Mongol Daatgal was the only option. Once the privatization took place, insurance companies such as MIG and ARD came to the market and it is really important to have a competitor in order to grow.

The story is the same for the banking sector, such as TDB and Khaan Bank had the widest network throughout the country and later Savings Bank and Khaan Bank came into play. 
From all the insurance policies you provide to your clients, in which one do you have more expertise?

Our Company sells 60 types of policies but only 15 to 20 policies are being sold, which is the market demand. We have expertise in all the policies I would say. If we lack experience in certain cases, we cooperate with foreign insurance companies and every time we are short of knowledge, we send our employees to those insurance companies. We, as a company, always try to catch up with the international standard. 

Is mining insurance profitable? 

Mining insurance brings in a lot of revenue, but at the same time, the claims are really high. One excavator is 1 to 2 million USD, which is why Mongol Daatgal is planning to expand our portfolio for retail sites.

You might have realized that the business in Mongolia depends on few business groups. Almost every group in Mongolia has insurance companies. However have the total support and we cooperate with important companies such as MCS, ER, MMC, Oyu-Tolgoi, China, TDB, Savings Bank, Tavan Bogd and other groups. That’s give us lot of value.
Why do you think those companies choose Mongol Daatgal? 

Because we are well known in the market and we have experience. We don’t belong to any group and work independently so our risk insurance service is really high quality. 
How has been the relationship with Wagner Asia and other companies from the US? 

We have contact with Warner Asia in America to its head office so normally they control the insurance policy so we really have close relations with them.
So what is the main reason of companies coming here? 

To cooperate with our company, the only point I think. When companies from the USA, Europe or Japan come to Mongolia, it is really about networking. So it is our strategy to create a good brand to provide a good service so that the investor community companies are ready to cooperate with Mongolian companies.
You mentioned how important it is to train your people or cooperate with other insurance companies worldwide to learn best practices. How do you train your staff in order to acquire more knowledge about the insurance sector?

Education of insurance people is big challenge to be honest. There are only one or two classes especially on insurance sector in the bachelor degree from the Mongolian National University.

The outcome is not as good as we expected and last year we started focusing on training our people so we work with the Japanese insurance association institute and we work with the Indian insurance institute as well. Sometimes we send our people there sometimes we invite more teachers over.

That’s our policy of training also we send our employees to reinsurance partners on job training so it is a continuing process to focus on and it is our main objective to improve our knowledge.

How many employees do you have now? 

250 employees and 700 agents
You also mentioned that you have a human resources program. I would like to know more features about programs for children like Mongolian Pop or your cultural or ecological activities. 

Our target is children, youths and nature so for the youths and children we organize an event called “Future league” which is not for professionals but for normal players.

We have been doing this for the last three years and it is really popular within the youth community. Our reason for doing this is to develop football in Mongolia which is really underdeveloped also it is my interest. We like to find some young talent probably if it is successful we like to send them to maybe Spain or to London to the football academy which is the main reason for doing this. 
The second reason is that, lots of children are injured in road accidents. There are a lot of schools and in winter especially when it gets dark quickly, we started doing some jobs in that area for example so we already distributed reflector coats for 10.000 children. We also planted trees nearby schools to protect the children from road accidents, which is our social responsibility. 
How important it is to cooperate with US reinsurance companies for Mongol Daatgal?

We don’t have a specific strategy in our company for each reinsurance market.

Less communication partners compare to Europe or USA so I think we are open to anyone. If there is a new partner coming interested in life insurance we are totally open for them. Mongol Daatgal has some responsibility to develop this market using our brand, network and client base so we have a project for that to establish a life insurance company. So I will be happy if there is an American company who is interested in that project. I will be open to any type of cooperation and we are seeking some investors who can bring not only money but also expertise to the insurance sector.
One of the reasons is the brand of course. We have been in the market for more than 75 years so everybody knows our name. We have an extensive network, our human resource and 24 hours services throughout the country to be able to reach our clients at any time. As for other companies, they also have branches but are not recognized and as well established as ours. And of course comparing to other companies the risk taking capacity is bigger. And of course we are independent, meaning we don’t belong to any political party or business group.

We don’t have any bank attached to us, which means we can protect our clients independently regardless of the influence from other people or investors. That is the main point and that is the difference. I think everybody would say we are professionals but when you deal with Mongol Daatgal or deal with another company the client will see that they always come back. Sometimes they leave and say that there are 17 more companies where they can go and after 2 years they come back because they didn’t pay. 
Mongolia has such competitive insurance market so marketing strategies are key in terms of transmitting the right values to your potential clients What are the 2 or 3 concepts you would like to remind the people of when Mongol Daatgal is mentioned? 

The most reliable, the fastest and the highest quality service.