Vietnamese Insurers: Diversifying Services, Improving Product Quality

Vietnam, a country with a young population and high population density, has long become a target of many domestic and international insurance companies. Nearly 20 years ago, the Vietnamese insurance market attracted big insurers. According to General Director of Greateastem Insurance Company, not only Vietnam has a young population but living standards of its people are also being improved day after day. This is a huge potential market. Demand for insurance policies is increasing rapidly in all walks of life, classes and ages.

 

At present, many foreign insurers are offering a variety of insurance to meet growing demand of people in Vietnam. Besides, there are many supporting factors for the strong development of the Vietnamese insurance market in recent years, i.e. political stability and economic opening-up. People also understand more about the importance of insurance.

 

Besides, incomes of people are increasing, thus boosting demand for insurance. The legal environment for insurance activities is also completed in accordance with international standards. Specially, the continuous development of Vietnamese financial market with the increasing participation of domestic and foreign financial and credit institutions has boosted the insurance market.

 

According to the Ministry of Finance, Vietnam currently has 21 insurance companies of all economic sectors (wholly state-owned, joint stock, joint venture and wholly foreign owned). They are providing nearly 500 life insurance and non-life insurance products. Total premiums rise 20 percent per year an average and accounts for 2 percent of the country’s GDP. However, the scale of the Vietnamese insurance market is smaller than regional ones like Thailand (insurance premiums account for 3 percent of its GDP), Malaysia (5.8 percent) and Singapore (6 percent).

 

Currently, domestic insurers lack human resources for managing, administering and controlling the market. Personnel shortage makes operations of insurers less professional and lax management lowers service quality.

 

Besides, the presence of foreign insurers caused an unequal competition to Vietnamese companies and losers are usually Vietnamese because they do not have enough information about their competitors while they have to pay VAT, corporate income tax, land-use tax, etc. Meanwhile, foreign rivals do not have to pay the above taxes. Vietnamese insurers are prone to more difficulties and challenges than foreign rivals because they do not any information about their competitors while foreigners are on the opposite positions.

 

Even, the insurance product distribution channel in our country also has many weaknesses. Fortunately, with slower growth in recent years, insurers are aware of their problems and take measures to improve the quality of insurance agents. Insurers rely on agents to develop nonlife insurance and they compete in premiums for policyholders, commissions and supports for agents. They have not built up a network of professional agents. Brokers are operating unprofessionally, discretionarily adding insurance conditions and terms and lower premiums, causing detrimental impacts to insurers and the insurance market.

 

To stand on their own feet and compete directly with foreign rivals, Vietnamese insurers need to differentiate services and improve product quality. According to Mr Tran Trong Phuc, General Director of Bao Viet Holdings, the largest insurer in the country, Vietnamese insurers also need to renovate corporate governance and upgrade technology, especially information technology. They should consider these top priorities at the current context. Domestic insurers need to strengthen cooperation and coordination to further promote their strengths in brand popularity, sales network and customer understanding.

 

Mr Phung Dac Loc, General Secretary of the Vietnam Insurance Association, added that the legal framework needs to be further completed, particularly the Law on Insurance Business, to suit WTO commitments and create new legal bases to support insurance companies to launch new products. At the same time, insurers themselves must have flexible policies to cope with crisis and its impact on the insurance market.