The insurance business and the business of insurance

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The insurance business and the business of
insurance

• Noel MacCarthy, Senior Vice President, Casualty
• Speech to AILA
• 17 September 2008

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Three key drivers of success common to every
industry
2. Growth
1. Capital
3. Distribution
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Three key themes we will discuss today
2. Growth
1. Capital
3. Distribution
Where to find more money
Money
How to make more money
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Three key themes we will discuss today
2. Growth
1. Capital
3. Distribution
Where to find more money
Money
How to make more money
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The Asian insurance market El Dorado or
Shangri-LaLa land?
National GDP, 2007US millions
13,843
1
3,250
4
1,098
12
957
13
908
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Global growth America in the lead
Source Goldman Sachs
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According to Goldman Sachs, in the next 40 years
or so

• China will grow from having an economy one
  quarter the size of the US to an economy twice as
  big
• Indias GDP will be 34 times bigger than it is
  today
• Indonesia and Vietnam will be among the worlds
  15 largest economies (but Australia will not)

Source Goldman Sachs
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China and India are not so self-insured as the US
and Australia
Non life insurance spend per person, 2007US
2,164
1,326
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US spends 86x more than China and 360x more than
India on general insurance
25
54
Asia
Source Swiss Re Sigma World Insurance Reports
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Insurance penetration is about a third less than
that of Australia
Non life insurance penetration, 2007As a of GDP
4.7
3.0
0.6
1.1
1.6
Asia
Source Swiss Re 2008
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People in the US and Australia have more to
insure than people in China and India
Income per person, 2007US
World ranking
45,845
11
43,312
15
978
131
2,461
105
Source ?
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Who wont buy why the Asian insurance
opportunity is over hyped

• Few assets
• Not used to the concept of insurance
• High cost of agency distribution model
• Dont like paying something for nothing
• Little litigation, so third-party cover not
  valued
• Even when its purchased, limits are low

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Three key themes we will discuss today
2. Growth
1. Capital
3. Distribution
Where to find more money
Money
How to make more money
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More than half of Gen X Y use the internet to
compare insurance products
Overall internet purchasing, 1998-2007 of
Australian population aged 14 years and over
Source Roy Morgan research
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The future of personal lines insurance
Source Tesco Compare website
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Our challenge
?

• How do we learn to innovate in capital
  management, in distribution and in marketing?
• How do we do this, yet stick to proven and
  conservative principles when it comes to risk?

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