Life Insurance: Playground of Foreign Insurers

Insurance companies are rated and ranked with three main criteria: financial capacity - shown in the latest audited financial statements (total assets, capital efficiency, etc.) with 35 per cent of weighting points; media credibility gauged by Media Coding method - coding of articles on insurance companies in the media (30 per cent of weighting points); and online survey on consumer satisfaction with insurance products/services (35 per cent of weighting points). Besides, a business survey, conducted in June 2016, on capital size, revenue growth, profitability, new product/service development plans and business prospects in 2016 is seen as an additional factor for positioning insurers in the industry.

 

Four out of five most well-reputed companies are foreigners. Bao Viet Life Insurance also has a strategic foreign shareholder, Sumitomo Life (Japan). It is quite clear that the life insurance field is mostly played by foreign insurers with extensive experience, senior professionals and the competence of designing very costly product packages. In addition, life insurance products often have a long contract term and serve different customer groups with different contracts. Thus, it is hard for Vietnamese insurers to compete with foreign rivals.

 

Meanwhile, all Top 10 non-life insurance companies are domestic insurers, including six State-owned insurers and four private insurers. They are Bao Viet Holdings, PVI Holdings, Post & Telecommunication Insurance Joint Stock Corporation, Petrolimex Insurance Corporation, BIDV Insurance Corporation, Bao Minh Insurance Corporation, Military Insurance Corporation, Agribank Insurance Joint Stock Company, Bao Long Insurance Joint Stock Corporation, and Vietinbank Insurance Co., Ltd.

 

Despite having no presence of foreign insurers, non-life insurance competition is always very intense, particularly in property insurance, fire insurance, compulsory project insurance and ship hull insurance. They are mostly competing in premium and extended sub-prime insurance terms. In the coming time when Vietnam integrates more deeply into the global economy, there will be more types of goods and businesses present in Vietnam. Thus, non-life insurance companies must further improve the competitiveness for growth and development.

 

Vietnam Report reportedly conducted a consumer survey on insurance product/service coverages in Vietnam in May and June 2016. According to the survey, the majority of respondents often choose insurance companies based on prerequisite factors: Strong financial capacity, good business performance, high revenue growth, strong capital base and large market share as they see these as a guarantee for coverage repayment of their insurance policies.

 

In addition, customers pay attention to company information via friends, media and internet. When considering an insurance product, customers tend to be “sensitive” to bad information from external sources. Thus, according to Vietnam Report, in addition to customer understanding, insurers need to build and manage its good media images together with recruit and train good personnel.

 

In fact, insurers must pay a lot for marketing, branding and commissions for agents. And, especially they may take very little margins or even suffer losses if products are immature (compared with companies operating in banking, finance and real estate sectors). However, unfair competition among agents makes the gain or loss a decisive factor of customers in choosing insurance and affects operations of insurers. According to Vietnam Report, in the coming time, the cooperation among insurers should be further enhanced instead of “backbiting” each other. Fair competition based on quality, diversity and customer benefits of insurance products and services will shape a healthy market, in turn change people's awareness in insurance and enhance the reputation of insurance companies.

 

According to data from the Insurance Supervision Management Department under the Ministry of Finance, total insurance premiums valued VND68,688 billion (US$3.1 billion) in 2015, up 23.45 per cent over 2014. Non-life insurance premiums accounted for VND32,038 billion, up 17.18 per cent year on year, and life insurance premiums amounted VND36,650 billion, up 29.5 per cent. By the end of 2015, total insurance revenue equalled about 2 per cent of the country’s GDP. This is a good signal for the insurance industry and a stepping stone for its rapid development in the coming years.