TBY talks to S.M. Alipour, Managing Director of Asia Insurance.
TBY What was the vision behind the establishment of Asia Insurance and how did its business evolve?
S.M. ALIPOUR After the Revolution, Asia Insurance was one of the 10 private insurance companies that continued to operate. In the first years of the Revolution, many of these companies joined Asia Insurance and created a new entity that operated as a state-owned enterprise (SOE) until 2009. In late 2007, the government agreed to privatize Asia Insurance. As a result, our shares were sold on the Tehran Stock Exchange. By our 50th anniversary, Asia Insurance had become the biggest private insurance company in the country.
What services does Asia Insurance provide to its customer base?
Right now, Asia Insurance has around 1,700 agencies and 2,700 employees. If you add the number of employees at our agencies, then the total rises to around 12,000. One of Asia Insurance’s fortes is its extensive branch network, which is present in every corner of Iran. The solid background of our agencies and the quality of service they provide to the public give our company a strong advantage in the insurance business. Equally, our highly trained insurance experts provide Asia Insurance with a competitive edge over other insurance companies in the market. In fact, many of the managing directors and other senior managers of the new insurance companies in the Iranian market are former Asia Insurance employees. If anything, this shows the technical experience that Asia Insurance has when compared to our local competitors.
What are your growth plans for the future?
We hope that as a privatized company we will be able to better explore other opportunities in our local market. For example, we see a great deal of potential for growth in the life insurance market. Happily, we have a solid background in this sector.
Will a sustained high inflation rate affect your plans to expand in life insurance?
We do not consider inflation as a major problem, but merely as a factor that is considered in our calculations. In life insurance we have to be accurate and careful to account for future conditions to ensure long-term returns.
Asia Insurance currently has around 6% of the life insurance market, though our goal is to reach a market share of 50%. In order to ensure improved progress in this field, we are looking to establish an independent company specializing in life insurance. As a result of our background and experience, we hope to do better than our rivals.
In Iran, the penetration rate per capita for insurance is significantly lower than it is internationally. How do you explain these statistics?
This is because the statistics you are referring to only consider commercial insurance activities and do not cover social insurance. In Iran, there are two or three large organizations that provide social insurance and governmental support for the public at large, such as the Social Security Organization and the Medical Services Insurance Organization. If we add these two public organizations to the activities of the commercial insurance sector then the penetration rate for insurance is far higher than the figures otherwise suggest.
What kinds of insurance are compulsory in Iran? Are the government and the insurance industry educating society on the need for insurance?
The only mandatory form of insurance is car third-party liability insurance. With the assistance of the government, we are currently establishing a new foundation to cover the dangers and risks related to natural disasters. It has been decided that the premiums to be paid into this foundation will be set at an affordable level for the people. The premiums will be partially collected through a levy on water and electricity bills, and the rest will be covered by the government. As a result, all Iranian households will be covered by an insurance policy up to a specified ceiling in case of damage caused by fire, earthquake, flood, and other natural disasters. While the government is supporting the foundation of this organization, it will be operated independently by the insurance industry.
Do you experience any problems in finding human capital in Iran?
We have experienced no problems in finding the human resources we need in Iran, and we have established a long-term program to address our needs as a private sector player. We intend to increase the amount we invest in our human resources to improve the company’s competitiveness as a private sector entity.
What were the effects of privatization on the company and the sector?
There were three events that happened in the course of the privatization drive for the insurance industry. First, private insurance companies were allowed to start operating in the Iranian market, and so far 16 private insurance companies have been established, although most them are relatively small in size. Secondly, three of the four state-owned insurance companies were sold off to the private sector. The only one that was not privatized was Iran Insurance. The last company to be privatized was Dana Insurance, which was sold off quite recently. The third event that occurred in the privatization drive was the advent of increased competition in the market following the removal of the tariff system. Tariff classification was abolished almost two years ago and now companies have to compete in the market on price. The competition is even more intense, in part due to the new companies that have been established in the country. We hope that this competition will enable us to improve our ability to be more responsive to the needs of the market and the public, and be able to increase our connections to the international economy.
What changed in Asia Insurance after its privatization?
From a management perspective, after the company’s privatization the shareholders became the decisive factor in voting for and selecting the board of directors and management team. This means that our shareholders are now actively involved in the management of the company, and with the increased competition in the market we hope the company will be able to engage in a broader range of activities.
Do you have any plans to be active in neighboring markets?
In terms of economic activity, the strongest relationships usually occur with our closest neighbors. Currently, we have a company in Azerbaijan owned by Asia Insurance, and we intend to open new companies in the Persian Gulf region, such as in Iraq, as well as in Turkey.
What was your annual turnover last year?
The amount of written premiums for Asia Insurance was over $600 million, though our revenues are obviously more than this as car insurance creates good levels of turnover. I would estimate that total revenues are more than double the amount I quoted for written premiums.
Do you need more foreign investment in the country?
There are some foreign companies that bought direct stocks in local insurance companies with the authorization of the Ministry of Economic and Financial Affairs and the Iranian Privatization Organization. We are also thinking of attracting some foreign shareholders, though we will likely undertake a few in-house reforms before that happens. Obviously, we have had offers in the past three years, but we decided to delay acting on them until after we had a listing on the stock exchange and undertook some reforms in the company. After these changes, we may increase our asset base with the help of investment from other large international insurance companies.
© The Business Year