THE insurance industry in Papua New Guinea has grown in recent years with a number of companies emerging in the market. Insurance
complements economic growth by giving security to companies and citizens as well. Business reporter MARK HAIHUIE spoke to Pacific MMI chief executive LAURENS van der GAAG on the insurance industry, in which Pacific MMI has operated for more than two decades.
Q: Could you give a brief on Pacific MMI?
Van der Gaag: Pacific MMI Insurance Limited was established in 1998 on the remains of what once was the Niugini Insurance Corporation as a joint partnership between Allianz Australia and MVIL.
MVIL subsequently bought out Allianz Aust in 2012 and has been the 100 per cent owner of PMMI ever since.
Pacific MMI are duly licensed to underwrite both general and life insurance.
Q: What is the layout of the insurance market and how has this developed over the past years?
Van der Gaag: The insurance industry has witnessed considerable growth in the number of underwriters (companies that hold the risk and pay the claims) and brokers (who act on behalf of the clients and place the required policies with the underwriters) servicing individuals and commercial/industrial clients.
The most pleasing aspect of this growth has been that all newcomers to the industry are 100 per cent nationally owned.
Q: Considering that the Insurance Act was last amended in 1997, how well is insurance regulated today and is there a need for some changes?
Van der Gaag: The insurance industry is no different than many others that are regulated by virtue of a specific Act.
However, what once was deemed to be reasonable and acceptable, changes over time and the Act must be constantly reviewed with this in mind.
The industry has been constantly calling on the Office of the Insurance Commissioner for this to happen and I’m really pleased to advise a draft was provided for industry comment only just last week.
We look forward to working with the Insurance Commissioner to ensure that the resulting revised Act will serve not only the best interests of the industry but all Papua New Guinea individuals and commercial/industrial clients.
Q: How is reinsurance a major component of the insurance industry?
Van der Gaag: No insurer can legally and responsibly operate without the support of the international reinsurance market.
As the client goes to an underwriter for coverage, the underwriter will in turn seek to limit their liabilities by purchasing reinsurance cover.
You can well imagine the claims that may result from a large catastrophe which no one company can absorb.
So in effect we are sharing the risk with large reinsurers from around the world.
Q: What policies would be appropriate for small businesses in the Papua New Guinea context?
Van der Gaag: Each client will have a different view on what should be insured and what risks they are willing to pay for themselves.
But as a general rule, fire insurance is a must covering the building/machinery and plant/stock and general contents.
Burglary for contents and stock and public liability cover of at least K2 million.
Motor vehicle coverage for all company vehicles.
Remember, Workers Compensation insurance cover is compulsory for all employees.
Q: As an insurer, what are some general factors that are considered when giving insurance cover for clients?
Van der Gaag: We will take into account the occupation of the client, the construction and location of the building.
There is a general requirement for tenants and owners to install fire extinguishers and they must be maintained on a yearly basis.
If burglary (cover) is requested, we will take into account the security measures in place.
And that will decide if coverage is offered or not.
Naturally, previous claims history is vital.
Q: What is the level of demand for common insurance products in PNG such as life, vehicle and property?
Van der Gaag: As we as a population become more sophisticated, more and more people are turning to insurance to prevent the loss of their assets and belongings.
When taking out bank loans, the bank will invariably requires you to insure the asset you are hoping to buy, and often will also want you to insure the wage earner/principle borrower for life insurance (to ensure the loan can be paid out in the event of death).
We are all aware of the many perils we face in driving our cars and accept that accidents will happen.
But can we afford to lose or repair our cars (and if we are at fault the damages to the other car)?
So as we accumulate assets, be they a car/house or starting a business, insurance becomes the safety net necessary to protect what we have worked so hard to get.