As forecast by the Ministry of Finance (MOF), the insurance sector of Vietnam in 2013 will maintain its good growth and the growth target of 10-12 percent against that of 2012. The life insurance premium will be increased by two percent during the next year, after one year without much change. Particularly, at emerging markets, the insurance premium will continue to go up strongly, of which non-life insurance premium will be boosted to eight percent. Regarding this issue, Vietnam Business Forum had a discussion with Mr Nguyen Phuc Hung, Chairman of Nano VCI Company and an experienced expert in insurance sector. Do Ngoc reports.
2013 is forecast to cope with heaps of difficulties. However, insurance is still considered a bright spot in the somber picture of Vietnam’s economy. As an expert in the insurance sector, do you think the growth target of 12 percent in 2013 against that of 2012 is a feasible one?
Amongst the recession of global economy, Vietnam is subject to great influence. However, the insurance sector still witnesses a relatively good growth rate. At the end of the first nine months of 2012, the turnover generated from non-life insurance of the whole market exceeded VND17,000 billion, up 11.3 percent against that of the corresponding period in 2011. This uncovers a fact that while other business lines in the market witnessed no growth or minus growth, insurance was still a channel which helped to attract a huge amount of money for national budget.
The macro-economic situation of 2012 casted a negative impact on insurance activities. Nevertheless, the insurance market had some advantages, i.e.: the validity of new legal documents facilitated enterprises’ operation… 2012 was also the first year in which the Strategy for insurance market development in the period of 2011 – 2020 and solutions on mechanism, policies, restructuring of enterprises, enhancement in management and state administration over insurance, etc. got implemented.
In 2013, difficulties still remain. Therefore, I believe that the target growth rate of 12 percent compared to that of 2012 is completely feasible. It is known that in 2013, a lot of new insurance products will be launched by insurance enterprises in order to meet the diversified demands of organizations and individuals. Export credit insurance, agricultural insurance, liability insurance in medical treatment, medical insurance products and insurance for the poor, etc. can be named as some examples.
The insurance sector plays an important role in remobilizing investment resources for the economy of Vietnam. What do you think about the plan for mobilization of investment resources for national economy in 2013?
In the period of 2003 - 2010, insurance companies established a large and long-term capital resource which played a pivotal role in mobilizing investment resources for socio-economic development. In 2012, mobilization of resources for reinvestment into the economy was affected but not too dramatically since investment activities of insurance companies now become more and more diversified as well as exploit more in-depth services to guarantee selection of appropriate, secure and effective investment. On the other hand, due to the native characteristics of insurance business and insurance fund management techniques, insurance enterprises wishing to use their idle capital from insurance operation reserve to make investment are obliged to abide by the maximum allowed rate.
According to the Insurance Supervisory Authority Department (under the MOF), the total amount insurance enterprises save for reinvesting into the economy in 2013 is estimated to be around VND95,000 billion. The economy in 2013 will be subject to quite a few difficulties and challenges. Enterprises operating in the finance, banking and real estate sector will be the ones to suffer the most, which causes heaps of difficulties for insurance enterprises in their efforts to expand customer range.
With years of experience working in the insurance sector, what measures do you think Vietnamese insurance enterprises should adopt with a view to continuing to develop the insurance market in the coming time?
They should restructure their organizations and implement new management methods. At the same time, risk management should be enhanced and capital, invested effectively. It is important that insurance premium be correctly and appropriately defined for each specific service; unhealthy competition be minimized; and access to information in risk management, assessment and indemnity activities be improved. The legal corridor for the insurance market is now fairly complete. What is needed here is enterprises’ implementation of such legal corridor in a serious manner.
Unhealthy competition, low business efficiency and loss making at insurance companies are still prevalent in the market. Many international insurers and reinsurers either tighten conditions and regulations or refuse to accept services from Vietnamese market. However, demand for insurance at Vietnamese market is still huge. Despite piles of obstacles Vietnamese and global economies are facing, positive changes have appeared. These can be considered good factors for us to expect good development of the market in the year of 2013.
Which economic sectors can be regarded as potential ones in the coming time in Vietnam?
There are a lot of economic sectors with good growth rate in Vietnam. In my opinion, however, I believe that the insurance sector will still be a prosperous one and attract foreign investors since the participation rate in insurance service, especially life insurance service, is still very low. Statistics show that only six out of 100 Vietnamese citizens purchase life insurance package. Meanwhile, the ratio in Japanese market is 90:100. As such, in a couple of years to come, the insurance sector will witness strong development because the market share of Vietnam is very potential. The turnover from life and non-life insurance is estimated to be VND40,000 billion per annum, which constitutes a notable contribution of the sector to the economy’s development.
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