Vietnamese Insurance Market: Fertile Land for Foreign Firms

Insurance is considered a profitable business area in Vietnam. Despite the global economic slow down, foreign insurance firms see Vietnam as “a fertile land” and they are flocking into the market.  

 

According to the Finance Ministry, the Vietnamese insurance sector is operating stably. It earned revenues of VND26.08 trillion last year, up 8.22 per cent on-year. In the year, it spent VND6.4 trillion for compensation and insurance payment. The market is expected to maintain 12-13 per cent annually between 2009 and 2010, including life insurance up 8-10 per cent and non-life market up 15-18 per cent. Currently, Vietnam has 11 life insurance enterprises, 26 non-life businesses, one re-insurance and 10 insurance brokerage ones.

 

Foreign insurance firms entered Vietnam several years ago and made remarkable achievements. They have dominated the local market. In 2007, Prudential took the lead with revenues of VND3.95 trillion. It was followed by Bao Viet with VND3.25 trillion and AIA with VND547 billion and Ace Life with VND200 billion. In 2008, Prudential accounted for VND4.27 trillion. Following were Bao Viet with VND3.4 trillion, Manulife VND1.07 trillion and Ace Life still obtained the highest growth of 184 per cent.

Vietnamese firms still dominated the non-life insurance market until late 2008. Among those, Bao Viet achieved revenues of VND3.3 trillion. The runners-up were PVI with VND2.01 trillion and Bao Minh VND1.98 trillion. However, the impressive figures warn the insurers’ competitiveness. In reality, Vietnamese non-life insurers’ successes remain modest compared to foreigners’. Particularly, the local insurers’ successes are thanks to sanctions of compulsory insurance forms, mainly vehicle insurance.

 

However, experts said, local insurers is gradually losing this advantage as this year foreign ones will enjoy equal chances to participate in insurance forms. Besides, early this year, while many domestic firms increased insurance fees, foreign ones did not, even Liberty reduced 20 per cent of fees to attract customers.

Foreigners have poured to the Vietnamese insurance market since late 2008 when Vietnam and the world are facing economic difficulties. As soon as the local insurance market opened early 2009, nearly ten foreign insurers came to the country.

 

In March alone, two giants namely Japan’s MSIG and South Korea’s Korea Life namely entered the country. Francis Jungseop Huyn, General Director of Korea Life Vietnam said, his company started penetrating into the Vietnamese market by introducing two main products called comprehensive family security and comprehensive education security. The company will set up two branches in HCM City and Hanoi from now to the year-end. It expects to lure 4,000 customers and hold 8 per cent of the country’s premium market share , equal to VND2 trillion by the end of this year. “This can be within Korean Life’s reach as it has firm financial capacity with a total registered capital of US$60 million and an effective market strategy.”, said Francis.

 

He added that Korea Life does not set short-term ambitious goals but focuses on long-term growth. “We have carefully studied Vietnamese market to bring the best products to customers with competitive fees”, he emphasised.

 

Meanwhile, MSIG injected great investment into non-life insurance market including asset, maritime transport and vehicle insurance. Experts said, the MSIG participation will make changes in the transport insurance industry.

 

Along with capital advantages, professional capacity and experience, foreign insurers also bring Vietnam diversified products. Presently, they are expanding business activities to re-insurance, fire insurance, financial insurance, maritime transport insurance and risk insurance. Foreigners have advantages in several services over Vietnamese ones.

Insurance forms like aviation, ships and launch of Vinasat 1 satellite were re-insuranced by local companies or carried out foreign ones.

 

On the other hands, foreign insurers have various advantages as they are allowed to provide cross-border services for foreign people and businesses in Vietnam and have a worldwide operation network. These showed that Vietnam is an appealing destination for foreign insurance firms.

 

Nevertheless, Phung Dac Loc, General Secretary of the Vietnam Insurance Association, foreigners will help diversify insurance products, benefiting customers.

 

 

“Advantages of personal auto insurance,” Thomas O Dore – General Director of LibertyVietnam

Liberty is known for many insurance products for personal autos worldwide. More than 10 million of automobiles in the world are using the service. Before being licensed for operation in Vietnam early last year, Liberty had conducted market surveys, aiming to offer clients the best products. This helped bring the company’s revenue soar in 2008. The firm’s revenues in January this year grew two folds on-month.

This year, in spite of lower auto sales, we aim to get access to auto owners and those who are customers of local insurance companies. Auto is a big asset of Vietnamese people; therefore, they are willing to buy insurance.

Several solutions should be carried out to develop the Vietnamese insurance market stably. The state needs to inspect and control insurance and related financial business activities to timely prevent chain failure of the areas of insurance, banking, securities and realty business. It is important to continue completing and concretising the Insurance Business Law via guiding document in line with the WTO commitments. The country needs to have flexible policies to develop the insurance market in the context of economic crisis.

 

Additionally, economic information and warnings and public relations should be enhanced. Information about local and foreign insurance activities should be updated.

It is necessary to build a mechanism to combine for insurance human resource training and re-training. This is a training mechanism based on social demand with the participation of institutes, universities, the Vietnam Insurance Association and insurance firms.