Warp Speed for Health Insurer in Thailand

BANGKOK - Feb. 16, 2015 - PRLog -- What the OIC brought into the public arena was their view there were too many licensed insurers for the market (more than 90 as at today); quite a number would not manage the required capital under RBC; much of the industry was sub-scale and inefficient and did not have the necessary resources to manage the investment required to reverse this fact. As a result, the OIC argued, consumers were not being offered the best products and pricing, and Thailand’s insurance sector risked falling behind global benchmarks. Two related initiatives were proposed to redress this – industry consolidation, and the encouragement of multinational insurers into the market who could bring both capital as well as transferable best practice.

Few in the industry disagreed, but despite this there was little activity on this front – prompting concern in some sectors that once trade and investment restrictions within ASEAN are lifted (this year) Thai insurers could face strong competitive challenges from companies headquartered elsewhere within the region.

This changed during 2014 with the emergence of http://www.PacificCrossHealth.com Pacific Cross Health Insurance in October 2014, positioned as Thailand’s newest and yet most experienced insurance company – an apparent contradiction but one the Pacific Cross Group CEO, John Casey, is quick to substantiate.

The Pacific Cross Group is the newly adopted name for the privately held Asian health and travel insurance administration specialists formerly known collectively as The Everest Group, more commonly known for their Blue Cross branded businesses – Thailand and Hong Kong which were divested more than a decade ago, and the Philippines which has gone on to a market dominant position in health and travel insurance in that market.

John Casey, who balances heading the Blue Cross operations in the Philippines along with heading up the Pacific Cross Group, explains the background and history of the Group’s involvement in Thailand. “We can go back to the early 1980’s with the establishment of Blue Cross Thailand,” he says “which was sold to BUPA in the late 1990’s – a parallel to the divestment of Blue Cross Hong Kong to what was then Aetna.

“Since the sale of Blue Cross Hong Kong over 15 years ago the Group has not had any equity in the insurance business in that market, however in Thailand, after the expiry of our non-compete agreement with BUPA, we re-entered the market as a Third Party Administrator (TPA) in the early 2000’s. This eventually led to the development of a partnership with LMG Insurance to build and manage a health and travel insurance portfolio under the brand LMG Pacific Healthcare, which celebrates its 10^th anniversary this year.”

Growth during this decade of operation as LMG Pacific Healthcare was consistent year on year with the entity becoming established as one of the leading health insurers in the market, with Kiwi and former AXA executive Tom Thomson, who is now CEO of the newly minted Pacific Cross Health Insurance business, heading this partnership since 2006.

John Casey picks up the story of accelerating pace over the past two years - “we could see a range of attractive growth opportunities in and adjacent to Thailand – expanding our market-facing individual and group health insurance business; providing TPA services to manage the health and travel portfolio for insurance companies and providing a solution to large organisations who managed their own employee benefits programs; as well as the opportunity to leverage our strengths as a TPA into the adjacent markets of Cambodia, Myanmar and Laos.

“But it became clear that to achieve those ambitions we needed the flexibility of our own license, and the independence to be able to pursue a strategy that played to our core strengths” he states.

This opportunity presented itself in late 2013 as a small insurer Borirak Insurance PCL, holding one of three licenses for health insurance in Thailand (the other two being Thai Health and BUPA), became available for sale. “The position and circumstances were exactly what the OIC had laid out some years before … the operation was undercapitalized, sub scale, and lacked the skills and resources needed to become competitive and as such had been in a vicious circle that really didn’t have any solution other than do what the OIC had recommended,” he says “and that presented a great opportunity to agree on terms that represented a positive outcome for ourselves; a positive outcome for the shareholders in Borirak whose options were quite limited; and a positive outcome for the regulator and the market as a whole.”

With the support of the insurance regulator and the Thai Ministry of Commerce at each stage in the process, over 90% of the equity in this unlisted public company changed hands and the business was recapitalized, with a new product suite being designed and submitted for regulatory approval during the first half of 2014. New premises were located and fitted out with the former Borirak staff being first to move, and the team who had managed the LMG Pacific Healthcare portfolio to that point moved into the new location with the new business officially launched in October.

During this same period the Group also established a TPA business in Cambodia and is well advanced in plans for a similar TPA in Myanmar this year, both managed by Thailand’s Tom Thomson and being supported by Med-Sure Thailand, the TPA business that continues to operate alongside - but with strict protocols and ‘Chinese Walls’ to separate it from – the customer facing business of Pacific Cross Health Insurance.

“Right now we are perfectly located at the conjunction of growth opportunities that are occurring across several dimensions, and this has been recognized by Pacific Cross Group’s Board who have not hesitated to allocate the capital necessary to fund this growth,” John Casey states. “We see steady growth in the individual and group health and travel market in Thailand via our Pacific Cross business, and following on from other parts of our Group who now manage the health and travel portfolios for a number of large life and P&C insurers in their markets, because of our specialization we can demonstrate the ability to bring products to market quicker and manage them at a lower unit cost than most companies can achieve internally.

“There is also now a growing recognition of the fact that we can provide a much more cost effective and reliable solution for large organisations that until now have managed their own employee benefit programs” he says in conclusion.

Only time will tell to what level the Pacific Cross Group’s confidence in this part of the world proves to be successful, but John Casey remains confident the Board’s decision to support a range of related initiatives in this fast-growing region will pay dividends over the next decade or more.