News Forum - Thailand’s finance ministry closes 2 insurance firms, Covid-19 claims

[Thaiger]

After an overwhelming number of Covid-19 claims caused two of Thailand’s insurance providers to owe billions of baht in compensation, Thailand’s finance minister has revoked the providers’ business licenses. The decision was made effective yesterday. One provider, Southeast Insurance, owes 13 billion baht in compensation, while the other, Thai Insurance, owes 4.6 billion baht. The Secretary-General of the Office of the Insurance Commission said the insurance reserves and capital funding ratio of the two firms are below the legal minimum. He said the firms now have more liabilities than assets, and have unreasonably delayed compensation payments to their customers. He […]

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[Shade_Wilder]

 

This is an abject failure of governance, and one that requires political penalties and/or sanctions.

I am very much a Capitalist, but inherent in Capitalism is the concept of "Creative Destruction"; simply put, for the Capitalist system to function, you need to have the possibility of somethings getting destroyed and losses taken. 

In  a modern economy, we have learned that regulations and laws are required to govern various industries, and that the binary choices of either success or failure don't need to be the only options; a well-regulated industry can still be efficient and effective without causing terrible harm when it doesn't work. In this particular case, minimum reserves of funding to pay claims and/or reasonable regulations regarding cash to policy numbers are/were needed.

In order for the system to work, there needs to be effective governance of the industry with clear, enforceable and enforced laws regulating its operations, and these were lacking here; there must be a price paid for this failure, above and beyond the bankruptcy of the particular firms themselves.

In short, this was a failure of both business AND government, and there needs to be a political price paid as well.

"The Secretary-General of the Office of the Insurance Commission said the insurance reserves and capital funding ratio of the two firms are below the legal minimum. He said the firms now have more liabilities than assets, and have unreasonably delayed compensation payments to their customers. He also said they have failed to record compensation payments as required."

If the above is true, and I am sure it is, then it is clearly a failure of governance as well as a failure of the Private Sector.

I am waiting to see the Finance Minister's resignation letter published.

And waiting, and waiting, and waiting, and waiting, and waiting....

 

 

[riclag]

How convenient for the board d members ! Immunity from further consequences! Most importantly they get to start other companies 

[dingdong]

3 hours ago, Shade_Wilder said:

This is an abject failure of governance, and one that requires political penalties and/or sanctions.

I am very much a Capitalist, but inherent in Capitalism is the concept of "Creative Destruction"; simply put, for the Capitalist system to function, you need to have the possibility of somethings getting destroyed and losses taken. 

In  a modern economy, we have learned that regulations and laws are required to govern various industries, and that the binary choices of either success or failure don't need to be the only options; a well-regulated industry can still be efficient and effective without causing terrible harm when it doesn't work. In this particular case, minimum reserves of funding to pay claims and/or reasonable regulations regarding cash to policy numbers are/were needed.

In order for the system to work, there needs to be effective governance of the industry with clear, enforceable and enforced laws regulating its operations, and these were lacking here; there must be a price paid for this failure, above and beyond the bankruptcy of the particular firms themselves.

In short, this was a failure of both business AND government, and there needs to be a political price paid as well.

"The Secretary-General of the Office of the Insurance Commission said the insurance reserves and capital funding ratio of the two firms are below the legal minimum. He said the firms now have more liabilities than assets, and have unreasonably delayed compensation payments to their customers. He also said they have failed to record compensation payments as required."

If the above is true, and I am sure it is, then it is clearly a failure of governance as well as a failure of the Private Sector.

I am waiting to see the Finance Minister's resignation letter published.

And waiting, and waiting, and waiting, and waiting, and waiting....

capitalism as it is put in practice today ( banks make their own laws etc...war and destruction of nature as a means for profit of a few...while the masses remain in permanent poverty )..is a failure by design...

no surprise here as the Thai variant of this virus is exposed..

[anarchofarmer]

The insurance industry world-wide has an inbuilt problem as it persists in using self employed sales people to sell their policies. Commission only! Regulatory boards are effectively useless as the branch managers are also largely on commission - the more their sales force sells the more they earn! And on up the change! Some greedy bugger here dreamed up the covid policy and they ran amok with it! When the s###e hit the fan with the dawning of realism and the top guys wanted to stop it they were told "no" from way on high, as up in the stratosphere face could never be lost! I wonder to what extent those insurance companies tried to clam back the commissions from the sales force?!

[Skip]

11 hours ago, anarchofarmer said:

The insurance industry world-wide has an inbuilt problem as it persists in using self employed sales people to sell their policies. Commission only! Regulatory boards are effectively useless as the branch managers are also largely on commission - the more their sales force sells the more they earn! And on up the change! Some greedy bugger here dreamed up the covid policy and they ran amok with it! When the s###e hit the fan with the dawning of realism and the top guys wanted to stop it they were told "no" from way on high, as up in the stratosphere face could never be lost! I wonder to what extent those insurance companies tried to clam back the commissions from the sales force?!

Why would the sales force be responsible to pay back their commissions... they earned them up front... they accomplished their job requirement...  it's not their responsibility to "balance the books" of the company... you sound like someone who has milked your company for an hourly wage your entire life without proof of accomplishment for your work... 

[Fanta]

16 hours ago, Shade_Wilder said:

This is an abject failure of governance, and one that requires political penalties and/or sanctions.

I am very much a Capitalist, but inherent in Capitalism is the concept of "Creative Destruction"; simply put, for the Capitalist system to function, you need to have the possibility of somethings getting destroyed and losses taken. 

In  a modern economy, we have learned that regulations and laws are required to govern various industries, and that the binary choices of either success or failure don't need to be the only options; a well-regulated industry can still be efficient and effective without causing terrible harm when it doesn't work. In this particular case, minimum reserves of funding to pay claims and/or reasonable regulations regarding cash to policy numbers are/were needed.

In order for the system to work, there needs to be effective governance of the industry with clear, enforceable and enforced laws regulating its operations, and these were lacking here; there must be a price paid for this failure, above and beyond the bankruptcy of the particular firms themselves.

In short, this was a failure of both business AND government, and there needs to be a political price paid as well.

"The Secretary-General of the Office of the Insurance Commission said the insurance reserves and capital funding ratio of the two firms are below the legal minimum. He said the firms now have more liabilities than assets, and have unreasonably delayed compensation payments to their customers. He also said they have failed to record compensation payments as required."

If the above is true, and I am sure it is, then it is clearly a failure of governance as well as a failure of the Private Sector.

I am waiting to see the Finance Minister's resignation letter published.

And waiting, and waiting, and waiting, and waiting, and waiting....

There was “effective” governance because rules were in place and the insurance company was ordered to stop trading by the government. Business failures occur for many reasons - not every plan is a winner and some are destroyers. In this case, imo the upper management have some explaining to do. The shareholders get wiped out while the people tasked with maximizing profits and minimizing losses, and also paid the big bucks/bonuses, get to walk away financially unscathed - mission failed successfully. 

[Shade_Wilder]

12 minutes ago, Fanta said:

There was “effective” governance because rules were in place and the insurance company was ordered to stop trading by the government. Business failures occur for many reasons - not every plan is a winner and some are destroyers. In this case, imo the upper management have some explaining to do. The shareholders get wiped out while the people tasked with maximizing profits and minimizing losses, and also paid the big bucks/bonuses, get to walk away financially unscathed - mission failed successfully. 

Interesting post.

Who bears responsibility for ensuring that the rules were followed; the shareholders or the government?

Theoretically, I would say the shareholders. 

However, in this modern world of large companies and massive amounts of data, it is pretty difficult (frankly impossible) to adequately ensure that the company you invested in is following the rules, managing everything adequately and within the rules, and acting in your best interest. Could any other entity other than a government effectively monitor Amazon? Microsoft? Carrefour? Salamander Bank? GM? Meta/Facebook?

Is it even possible for a shareholder, outside of the large institutional ones, to monitor the behavior(s) of a large company anymore? And, if not, then isn't that a role for government through regulation and effective oversight of an industry?

I am very much a believer in free markets, but have companies reached a level whereby the only entities who can realistically ensure they behave are governments? 

It is a serious question.

I genuinely hate the idea, but...

[Fanta]

43 minutes ago, Shade_Wilder said:

Interesting post.

Who bears responsibility for ensuring that the rules were followed; the shareholders or the government?

Theoretically, I would say the shareholders. 

However, in this modern world of large companies and massive amounts of data, it is pretty difficult (frankly impossible) to adequately ensure that the company you invested in is following the rules, managing everything adequately and within the rules, and acting in your best interest. Could any other entity other than a government effectively monitor Amazon? Microsoft? Carrefour? Salamander Bank? GM? Meta/Facebook?

Is it even possible for a shareholder, outside of the large institutional ones, to monitor the behavior(s) of a large company anymore? And, if not, then isn't that a role for government through regulation and effective oversight of an industry?

I am very much a believer in free markets, but have companies reached a level whereby the only entities who can realistically ensure they behave are governments? 

It is a serious question.

I genuinely hate the idea, but...

Neither the govt or shareholders are responsible for the running of a business. The board of any company is responsible for the company’s compliance with laws, rules, profit and loss, advising the market of issues that impact or boost future earnings etc etc. Hence my point that the upper management, whose very purpose it is to oversee and direct the company from a bird’s eye view, seem to get off almost scott free when it all goes wrong while shareholders (who are the investors) often lose everything with creditors a close second. We all too often hear of board members resigning just before a catastrophic announcement (admission) is made to the public. To generalize, they have no “skin in the game” so it is no skin off their nose when a company they have recently distanced themselves from goes belly up due to issues arising during their watch. Their financial risk is minimal but their reward is high regardless of failure. Senior execs must be paid accordingly but, for example, bonuses based on ”inflated” earnings should be clawed back and senior management should be held accountable for issues arising from the management  of the company.  I didn’t offer an opinion on your question “have companies reached a level whereby the only entities who can realistically ensure they behave are governments?” No and they never should. imo governments  enforce laws. For example - stocks market analysts, financial analysts, lending entities , the media, competitors and the board should ensure companies are doing the “right thing”. 

[drkenchao]

guess these two are not providing the health insurance needed for OA retire visa

[anarchofarmer]

12 hours ago, Skip said:

Why would the sales force be responsible to pay back their commissions... they earned them up front... they accomplished their job requirement...  it's not their responsibility to "balance the books" of the company... you sound like someone who has milked your company for an hourly wage your entire life without proof of accomplishment for your work... 

I worked for insurance companies for a few years and the commission structure is based upon a percentage of the premiums to be paid for the first year - if the premiums are not paid the commission advanced to the commission agent is clawed back! In the UK when they changed the liability of the insurance companies to their being liable for the actions of their agents (self employed - thank you Maggie!) they terminated  most agents and took legal action for the return of commissions paid "in advance" to the agents.

As to my sounding like an embittered wage slave, I actually only suffered that indignity for a few years way back at the commencement of my after school life! Save for a few years in Bangkok enslaved to the clergy (nuns) trying, in vain, to pass on thinking skills to privileged Thais! The kids were great, the nuns were not! But that's another story!

[Skip]

14 hours ago, anarchofarmer said:

I worked for insurance companies for a few years and the commission structure is based upon a percentage of the premiums to be paid for the first year - if the premiums are not paid the commission advanced to the commission agent is clawed back! In the UK when they changed the liability of the insurance companies to their being liable for the actions of their agents (self employed - thank you Maggie!) they terminated  most agents and took legal action for the return of commissions paid "in advance" to the agents.

As to my sounding like an embittered wage slave, I actually only suffered that indignity for a few years way back at the commencement of my after school life! Save for a few years in Bangkok enslaved to the clergy (nuns) trying, in vain, to pass on thinking skills to privileged Thais! The kids were great, the nuns were not! But that's another story!

This situation is different in that the premiums were paid... therefore commissions were earned.  The companies involved mismanaged funds and are running shortfalls due to their mismanagement.

[Thaidup]

I wonder how many claims may have been people directed by the government DDC to go to hospital when they could have stayed home? Wasnt the DDC doing that? Are they still doing it?

When this is allover, wait and see, we may have to tick a box if we want "pandamic cover" and have to pay an extra premium.

Edited April 4, 2022 by Thaidup
The pandamic cover.

[Thaidup]

Double edit,^ There are a lot, or most if not all Insurance companies will not cover your property in case of a riot or war, I think one of those two is a fairly large company, it may be cause for concern and other companies may simply refuse to cover "pandamics" in the future,

[Foolish_Farang]

Can't feel sorry for an insurance company going under. Just the poor people who paid and then couldn't claim.