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Morton’s Meanderings in the Insurance Future

Great literature has included the experiences of one person from one culture experiencing the life and nuances of another culture. Reading the book, the Reader’s Digest abridged edition or watching the movie cannot convey the depth of the impact another country can have on the uninitiated. Travelling between the two super powers of North America is virtually seamless — Melrose Place, As the World Turns and the latest hockey scores and trades are available in all local media. If only we could make the border patrols or better known customs and immigration officers understand that it is a seamless border.

Get on a plane or, for the claustrophobic and acrophobic traveller (one could add mysophobia to the list given the conditions I have on rare occasions experienced), a boat and journey abroad to a far away land of inherent differences. Only then can you truly experience what is the perception of us Canucks and also the scorecard on how we are doing. As the millions of readers of MO know I have been blessed with business travel to the green pastures over both oceans. I will however curtail my writing to over the Pacific for reasons of brevity and my laptop batteries are running on their last legs. Unless I forget I will stay away from digestive feats that test the squeamish and only bring back memories of an embattled sphincter muscle. I also act presumptively in assuming the reader will not mistake my prose for great literature.

Canadians have been doing business from a life insurance view in parts of Asia for over a hundred years. Regrettably some of the companies have not lasted as long as the countries. Reversing that statement one can also record that some of the countries no longer bear the name earlier voyageurs ascribed to parts of Asia Pacific. The second great war coupled with the conflict in Korea provoked some Canadian companies to leave international expansion to all the pink countries and retreat to Canada and the pinkest country, Britain. Those that stayed often were very narrow in their choice of countries and very narrow in their tactics for expansion. In fact some or perhaps most were content “to just be there.”

By the year 1990 the Asia Pacific region was the “in place” to be and the gold rush was on. Rumours, bravado, innuendo and actual performance fuelled expectations of ROI’s of 30% or better when the Western markets were struggling to get double digits. In fact ROI’s of the former magnitude were being realized by entrepreneurial (yes, my broker/agent friends, insurance staff can be entrepreneurial) life insurance companies. The winners were often those in first with the new products and new means of recruiting and retaining career field agents. First, generally meant the competition both local and foreign (we are the foreigners outside of the confines of N.A.) was too comfortable or too slow to react to change in consumer demands. First, also meant being ahead of both local insurance regulation and reserving requirements while great pressure landed on the lap of pricing for the mortality where no mortality statistics existed. Actuaries without their mortality tables are like politicians without their constituents.

Canadian companies have tended to do well in the region and for the most part have excellent reputations both taken alone or in comparison with other foreign enterprises. Our staff in the region tended to be great at making allies of local governments, staff and the general public. We are seen as a benign people who add value to the region and are not associated with terms like plunder, taking advantage, selfish and dictatorial. You know, typically Canadian, eh.

Singapore, Hong Kong and the Philippines have been home to decades of Canadian “expats” who have slowly constructed leading companies in each country. Well, not always leading but a least consistently there. Through wars, economic and military, and political uncertainty our mutual companies stuck to the region knowing the life industry could and would survive these sporadic dailiences. Our Canadian confreres neither dominate a market or play second fiddle to large local or international players. Wherever I have ventured in these three countries it is with pride that as a Canadian I can share in the reknown.

More recently in the past, recorded live by CNN or frequent flyers, the Canadian contingent has made strides (well sometimes baby steps) into Indonesia, Taiwan, Malaysia, Vietnam, India, Thailand and South Korea. Often the start up operations are tough on staff and boards as local governmental obstacles and personnel practices tax to the utmost our Canadian ingenuity. Each market is different and requires the wisdom of past experiences tempered with an in depth study of the current local business culture.

Generally speaking patience, an understanding and committed board of directors and a big wallet pave the way to success. The timing of success is never certain and at times looks elusive but it generally arrives. The amazing thing about the timing is that success often arrives well after the initial management that made the risky decision are long gone due to retirement or reenginering.

Indonesia is a super market with a potential customer base of 195 million people. An emerging consumer group that regardless of its religious nuances (some notable religous groups are against the very idea of financial gain at time of death, which has curtailed the potential of some markets except for the takaful cooperative concept of life cover) will prove to be the most spectacular country for real and sustainable profits in the next five to ten years. The strange anomaly here is the lack of Canadian expats and the predominance of Australian, New Zealand and American expats. So many of the actuaries and accountants were from the land of Aus yet it was not for their familiarity with kangaroos (have never seen a kangaroo in Indonesia). There never seems enough Canadian content, yet we have a surplus of both disciplines in Canada and I am sure most of us nonCAs or nonFSAs would help them pack.

Like a lot of countries Indonesia insists that foreign companies partner with local companies and our two large mutuals who are in Indonesia have both chosen wisely. Picking a local partner is a serious business akin to picking a marriage partner. The conscequences of a failed marriage can pale in comparison to the failed business arrangement. From all points of view it is generally conceded that our Canadian companies have done a superlative job in picking partners. The partners have helped negotiate or perhaps navigate the local intricacies. The marriage of Canadian life insurance know how with local political and cultural savvy has produced leading offspring.

Indonesia was also the home of one of Morton’s lessons of travel. The lesson learned was read the papers and avoid countries that a Canadian statesperson has recently blasphemied for some human rights indignation and/or attack on the sanity of their government. On a trip to Indonesia, where custom was for a speedy flow through customs and immigration, I dutifully handed my passport and visitor paperwork to the man in uniform only to see the eyes grow fierce and the demeanor change from welcoming to threatening. I was immediately and without forewarning (no time for one phone call) whisked away to a private room where I was left to ponder my fate. What had I done? Why me? Would anyone care? MO might since Steve needed an article!

After what seemed like an eternity, but was probably 90 seconds, in walked three uniformed officers with bars and stripes that denoted power. They glared at me as I jumped to attention (Boy Scout salute in hand). Finally they attacked me for blasphemying their government and supporting terrorists on far off islands under Indonesian control. After some pleading and crying they let me disappear but not without a very stern warning that I should caution the Canadian Government about keeping their nose out of places it does not belong. I trembled for days wondering how I a mere slave of the insurance industry could tell Ottawa how to manage when even the CLHIA doesn’t listen to me! The fact that Ottawa had made a statement condemning Indonesia for the way they handled the East Timor incident was only hours earlier a piece of newspaper trivia. Everything can and does in my case affect my travels! It was the only time my Canadian passport let me down. If chastisement prevails in the papers I no longer visit the chastised. The next time the water torture or matches under finger nails may break me.

Korea, the south part, has been slower in its acceptance of foreign intruders and as such growth and future growth are not as one would target. My brief experience in this market made me feel very alien and very much the outsider. Contrasted with Indonesia’s warmth (with the one exception) and openness, I found Korea to be colder and very barricaded to new entrants. It is like visiting those rich and famous relatives who make you feel like you should go home early. Once over this initial cultural depravation I am told that there is a point when you are accepted into the business community but never 100% — that happens between the diverse sections of Canada so we should not take offense!

The Philippines are carrying the legacy of Marcos and ensuing turmoil, uncertainty and much ballyhoed assassinations. Since my first visit there I felt comfortable, even lying on the floor of a taxi as we sped through a spot where snipers may lurk. I like floors of taxis, what can I say. In all seriousness ( my dear wife thinks the former sentence was in all seriousness) the people of the Philippines are warm to visitors. They are fully cognizant of the North American failings in the insurance industry and want to avoid them locally. They have a preponderance of insurance staff that carry all the correct credentials to run life insurance companies very proficiently. Our Canadian operations here make use of both “expat” and local talent. Local talent will shortly man (or woman) all key roles since there is a plethora of talented staff in Manila or willing to return from far off lands to ply their insurance craft in a home environment. The Philippines has been under rated for too long and in my opinion it gives all the appearance of shaking the past’s biases.

My favorite country or city, depending on your perspective, is Hong Kong , perhaps because my wife was born there and I have so many business friends there that have educated me in the ways of Asia Pacific. They made sure my errors were minor, my recovery swift and my sins humourous. Their patience with the Canuck made me comfortable with all aspects of the local industry from agent to reinsurer. Canadian companies have an excellent reputation here although we are not the leading companies. We have one of our mutuals ranked in the upper echelon for so long it is taken for granted that its prowess will be eternal. Many a local leader has been founded in the principles of life insurance through working here in a Canadian operation or getting their early education and mastering a discipline back in Canada. Our ties are strong in a very tough market.

Hong Kong has such a dependence on strong distribution systems that Canadian expertise at building same especially within our mutual companies has made us often the model for staff development. Competition has hit Hong Kong but not to the same degree as in Canada. Rates are approaching North American aggressiveness (mortality is reported to be better in Hong Kong than it is in Canada). Term insurance still lacks a following because of commission structure and the tax advantage of permanent cover like endowments. I can explain an endowment to anyone who will send me a stamped self addressed manila envelop. This market is oblivious to 1997 and only those without a Canadian passpot show any concern. Life in this dynamic city state will no doubt remain state of the art and prosperous.

What are the odds for success in a country of 2.5 million people, 13 life insurance companies, strict capital regulations and severe agent recruiting and retention rules. Pretty slim! What is purported to be the toughest market in the world has proved just that for Canada’s largest mutual (not my words, theirs). This is a country known for no gum chewing, caning and a great airport. Canadian ingenuity coupled with a strong local partner failed to take our insurer to the top of the heap. We are still in the heap and perhaps the next century will accommodate our climb to the top.

Malaysia, Thailand, India (home of my worst travel experience which has MO’s editorial staff sick to their stomach), Vietnam, and other local countries all offer the opportunity for expansion and I am sure each will have the benefit of a Canadian company when the doors open. The Malaysian insurance industry has been praised in the past articles for MO and at this juncture I remain enthralled by its potential and its depth of insurance personnel well trained in all the insurance disciplines. If only they would open up the market to foreign operations. Canada had an open invitation to help build Indonesia’s own reinsurance company; but, for reasons I still do not fathom, walked away leaving somewhat hard feelings.

China is so big it deserves an article on is own but my brief trips there could not qualify me as an expert in any way. Beg for permission to open a representative office. Stay in the line and out of trouble for three years. Keep abreast of all the key political players. Only then you may get a license to actually sell insurance. I would rather sit back and wait for the gates to open wide which may be in 3 years or 30. My preference is for some semblance of insurance regulations to be tested and understood. Currently we are witnessing the birth of legislation, regulation and interpretation that will lay the foundation for future generations. One of the legacies of our mutual company par policy holders may be that they financed the birth. Generous policyholders all.

Given the creativity that abounds within the heirarchy of insurance leaders in China and propensity to adapt quickly, I am positive this market unequivocally will be the world’s greatest insurance market someday (for those of you laying bets the “someday” is anyone’s guess).

Lately Canadian companies not known for adventuresome movements have taken the plunge. Perhaps it was the Board decreeing that “we too should be global and earn potentially 30% on our investment. More likely it was management in need of new focus and distraction from the contraction of our home market. Surely it could never have been the attraction of 14 hours on a plane enduring tiny seats, meals and toilets. It gives a whole new meaning to “oh, what a relief it is”.

Following Sun and Manulife’s early lead the likes of London, Mutual and Canada have laid the foundations of new ventures in numerous countries. Each has a different view of which country, in which order and in which manner but they are all definitely on the move. It is a momentous occasion to see such giants of Canadian insurance history move back to first principles in new markets. Their historic expertise, if still available, in building and retaining career agents will certainly set them up as potential success stories since distribution is the key. Their respect for local customs and icons plus a marriage of their Canadian strengths with local people strength is guaranteed to hasten success.

I should not forget the smaller players who have been involved in the region over the decades. Imperial and Crown are names that emerge in conversation in the region. Both have never figured as major players or ascended the ladder of publicity others have but their names have added to the mosaic of Canadian enterprises throughout the region. With our shrinkage on the home front there may be no more new Canadian adventurers in the region, just expansion of those already entrenched. Pity. No one for me to consult to or hold their hand (figuratively of course).

Surprises do occur and the magnitude of statements, so far away from insurance related, can have on the average Canadian like me is never anticipated. In one country that was and is still a favorite, it was a shock to have an initial accusation thrust at me for which I had no predilection. I had no more met the local regulator when he and his associates asked if I and the company I represented (worked so hard for in Canada that was expanding depth and breadth in the region) would desert the market when the going got tough. Taken aback and short for words (an anomaly soon corrected) I asked the naïve question “Why?”

No sooner had my humble question pierced the stoney air than out came the answer followed by nods of agreement from those sitting opposite me at the inquisator’s table. In as few words as possible the local authorities recounted how just after the WWII a Canadian company pulled out of the country for reasons interpreted as unacceptable by predeacesors of the current bureaucrats. No hint of leaving obligations behind, merely not wanting to write new business (is it possible to write old business?). It firmly etched in my skull the implications of any error I may perform since it may for decades infringe on other Canadians entering the region. I would rather just be known as “He of delicate sphincter muscle”.

Never assume the past is the past and long forgotten. Governments and their legion of staff can and do document everything in the Asia Pacific region. Unlike this side of the Pacific, where time is fleeting and hardly worth preserving, the attitude over there is that everything said is worth preserving. Since if it was said it must be important. I also thing the odd one is just sadistic enough to try and catch those who change their tune every visit.

The Asia Pacific region is rich in human resources that are the equal of the world’s finest and often surpass so called Western nations who today often lack the enthusiasm for the future that abounds in every country over there. Canadian companies are part of the phenomenal growth and are doing Canada proud by transferring expertise and capital. The rewards are both monetary (par policyholders and share holders) and personal as our staff working or visiting the region acquire new respect for the world and its diverse people.