SET-listed CIMB Thai Bank (CIMBT), the local unit of Kuala Lumpur-based CIMB Group, expects insurance savings products sold through its bancassurance channels will dip along with lower interest rates.
Senior executive vice-president Adisorn Sermchaiwong said the bank's internal interest rate return (IRR) on such insurance products was now higher than 2% on average. The reduction depends on the decision of its insurance partner, Thai Life Insurance.
Life insurance savings products represent the bank's largest portion, at 80-90% of total premiums, through bancassurance rather than protection policies.
"In the past six or seven years when interest rates were this low, the IRR on insurance savings was slightly more than 1%. We could see it repeating again," he said.
However, demand for insurance products has been rising compared with bank deposits following commercial banks' rate cut at the request of the Bank of Thailand.
CIMBT cut its loan rates by 10 to 12.5 basis points, leading to a minimum lending rate of 7.15%, minimum overdraft rate of 7.5% and minimum retail rate of 7.9%.
Mr Adisorn said demand for retirement insurance savings and legacy products had increased as individuals paid more attention to long-term savings, particularly high-income earners.
Such insurance products will represent a higher proportion of the bank's total premiums in the long run.
For this year the bank expects bancassurance premiums of 1.5 billion baht, booking 400 million in the first quarter.
"Even though the government's draft inheritance tax does not directly affect legacy insurance demand, it urges Thais to pay more attention to long-term investment," Mr Adisorn said.
"A low interest rate also makes consumers look for better returns on investment."
Though the bank kept deposit rates unchanged, it plans to cut loan rates.
Its deposit rate is 0.5%, while fixed deposit rates range from 1.05% to 1.55%.
CIMBT shares closed yesterday on the SET at 1.72 baht, down one satang, in trade worth 1.32 million baht.