Sept. 8, 2015 3:30 p.m. ET
YANGON, Myanmar—Over cups of sweet tea at Yangon University, Nyi Nyi Min Htet pitches the benefits of car insurance from his mobile phone to drivers who navigate the chaotic streets of the country’s largest city.
But it often proves to be a tough sell. Few Burmese understand insurance or can afford it.
“I started in this business because I thought it would be profitable, but for now I am struggling,” said Nyi Nyi Min Htet, 33, who squeezes in selling insurance for a private company with his law school classes.
Insurance is uncommon in Myanmar, but demand is expected to grow in this poor country of 51.5 million people. As part of economic liberalization, the government has been taking steps to open up what until 2013 had been an industry ruled for a half-century solely by state-run Myanma Insurance.
Over the last two years, the government has slowly begun allowing domestic companies into the insurance market. And in May, the government permitted the first foreign insurance company, Sompo Japan Nipponkoa, to operate within the Thilawa special economic zone, followed by two others.But the transition has been rocky.
Myanma Insurance still has advantages: It offers more than 40 products while private companies are restricted to about six, including a health insurance product launched in July.
Meanwhile, breaking out from the pack is difficult because the Insurance Business Regulatory Board fixes prices for the products of Myanma Insurance and its private rivals. And the roughly dozen foreign companies that have opened up resident offices remain in a holding pattern until they are told they can tap into the market.
“In essence, private insurance is really yet to get started in Burma, and the whole notion of insurance itself isn’t something most people are familiar with,” said Sean Turnell, an economist and expert on the Myanmar economy at Macquarie University in Sydney. “Even if they were, few would have sufficient spare income from which to pay insurance premiums.”
But Dr. Maung Maung Thein, the deputy director of the Ministry of Finance who has been tasked with overhauling the industry, defends the role of Myanma Insurance and the pace of opening up.
“Myanma Insurance is the biggest but it is not dominating,” said Dr. Maung Maung Thein, who was a general manager at Myanma Insurance. “The private companies are like brothers and sisters. They are very young.”
The government is weighing a plan to allow foreign insurers to partner with local ones and open local branch offices, he said, though no timeline has been set. The government will “wait and see,” he said, before making final decisions on when and how foreign players can enter the wider market.
According to U.K. research firm Timetric, only one out of 86 people in Myanmar holds an insurance policy. Insurance penetration as a share of GDP is currently only 0.05%, but insurance premium revenues could reach US$2.8 billion every year once the industry grows to reach its full potential over the next decade, the research company said.
That expectation partly reflects the growth in per-capita GDP in Myanmar, which was $1,197 last year, up from $1,101 in 2013, according to the World Bank.
The government’s push started two years ago when it gave out 12 licenses to private companies, which had to be able to set aside steep reserves for future claims payments. The amounts—6 billion kyat ($5.8 million) for life insurance and 46 billion kyat ($44 million) for life and nonlife insurance—proved prohibitive for many companies.
For now, companies must be content with jockeying for a future rush of expected customers.
“Slowly, slowly we are trying to educate people,” said Nyo Myint, a senior managing director at the Kanbawza Group of Cos., a Myanmar company that owns IKBZ insurance.
Tony Renny, the chief representative in Myanmar for Hong Kong-based AIA Insurance, said foreign companies believe the wait will be worth it.
“Everybody is here for the long term,” Mr. Renny said.
But no one knows how long it will take for demand to catch up with availability in the fast-growing economy.
People like construction worker Khin Maung Tun, 40, are still a way off from embracing insurance. His employer doesn’t provide him with medical coverage and he says he couldn’t afford medical costs if he were injured.
But asked whether he would consider purchasing injury or health insurance, he replied: “We cannot afford it. And we don’t know whether we should buy it or not.”