According to a report from the Bao Viet Securities Company (BVSC) on Vietnam’s insurance industry, the number of life insurance products in Vietnam rose from 100 in 2009 to 350 by the end of 2016. The number for non-life insurance products also surged from 200 in 1999 to more than 1,000 today.
Local insurance market now has some 1,350 products
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Besides, modern distribution models of the local insurance industry have been also gradually developing thanks to the participation of foreign investors.
A survey from Swiss Re showed that Vietnam’s non-life insurance is trending to enlarge direct distribution channels such as online or telesales while the local life insurance market’s distribution is still mainly through intermediate agents.
Bancassurance was launched for the first time in Vietnam in 2001 with the cooperation between AIA and HSBC while online distribution channel was implemented by most of large-sized insurers in 2016.
According to BVSC’s report, the capital hike, with the participation of foreign investors, has helped domestic insurers enhance their insurance capacity through training, legal framework construction and operation of products.
Pham Thu Phuong, deputy director of the Ministry of Finance’s Insurance Supervisory Authority (ISA), said that the insurance sector this year targets to gain total revenue of VND129.24 trillion, up 22.38% against 2017. The sector also plans to re-invest VND305.49 trillion into the economy.
Insurance firms also targets to increase their total asset for VND370.81 trillion this year.
To meet the targets, the insurance industry will focus on building and streamlining legal policies, restructuring insurance companies besides developing new products and improving the quality of services.
The insurance industry expected to benefit from the country’s projected gross domestic product (GDP) growth of more than 6% annually over the next three years.
It also has great potential as the country has one of the world’s lowest life insurance penetration levels, at less than 1% of the GDP. The average insurance premiums in Vietnam stand at $30, much lower than the global average of $595 and Southeast Asia’s $74.
The domestic fast-growing insurance market has prompted a number of foreign companies, including the UK’s Aviva Plc and Canada’s Sun Life Financial Inc, to step up their presence in Vietnam through mergers and acquisition or joint ventures in 2017.
The insurance market maintained a high growth rate of 21.2% in 2017, gaining a total revenue of VND105.61 trillion (US$4.65 billion). Besides maintaining a high growth rate, the financial status of insurance companies has been also improved in 2017 with their total assets rising by 23.44% to VND302.94 trillion.
However, there remain many challenges in the way of further growth of this sector.
ISA director Phung Ngoc Khanh said that awareness among Vietnamese people about life insurance may have increased, but most still don’t believe that it’s worth the expense. In fact, almost all Vietnamese people are wary of it and think it unnecessary to buy insurance because they don’t have a thorough understanding of its importance, he explained.
Life insurance products usually involve a long-term contract, so many customers are also concerned about their financial capacity to fulfill it in the future, Khanh said.
To increase sales and promote products, besides traditional sales methods, life insurers have also partnered with commercial banks. Though the bancassurance market in Vietnam has remained sluggish, contributing only 2% to the total turnover of the insurance market, analysts believe that this channel holds great potential, and now some 35 commercial banks and financial institutions are collaborating with insurers.
