Insurance Industry: Vast Room for Growth

1:02:46 PM | 11/1/2021

Total insurance premiums were estimated at VND184,662 billion in 2020, representing a year-on-year growth of 15%, according to the Ministry of Finance. Non-life insurance premiums were projected at VND57,102 billion, up 8% over 2019, while life insurance premiums were forecast at VND127,560 billion, up 19.6%.

Stronger financial capacity

The insurance industry continued to be a solid "shield" for the economy and society. Every year, the sector pays a huge sum of insurance indemnities and benefits for beneficiary individuals and businesses and contributes to stabilizing the state budget.

Up to now, Vietnam is home to 69 insurance firms, including 31 non-life insurers, one foreign insurance branch and 18 life insurers, two reinsurers and 17 insurance brokers. Insurance premiums grew by as high as 22% a year in the five years from 2016 to 2020, of which non-life insurance segment expanded 13% and the life insurance segment advanced 28%.

Insurance companies have handled insurance benefits well for their policyholders and are trusted for risk coverage. According to statistics, insurance benefit payment was estimated at VND48,223 billion in 2020, up 11.4% year on year, including VND23,108 billion for non-life insurance and VND25,115 billion for life insurance (up 10% year on year).

Notably, the financial capacity of insurers is growing steadily. The total assets of insurers reached VND202,558 billion and the total reserves amounted to VND119,540 billion in 2015 but the former figure climbed to VND552,403 billion in 2020, trebling the 2015 value and 20% more than the 2019 value. Of the sum, non-life insurers had VND95,949 billion and life insurers had VND456,454 billion, up 23.3% year on year. Total insurance reserves stayed as high as VND355,240 billion, up 22% year on year, of which nonlife insurers accounted for VND27,125 billion and life insurers had VND328,115 billion, up 22.6%.

Total owner equity was estimated at VND113,523 billion, up 18% year on year, including VND31,035 billion of non-life insurers and VND82,488 billion of life insurers (up 25.2%).

Especially, in recent years, the insurance industry has created a source of medium and long-term investment funds for the economy. In 2015, insurers invested VND160,466 billion into the economy and the value was VND460,457 billion in 2020, including VND51,308 billion from non-life insurance businesses and VND409,149 billion from life insurance businesses. This sector has created more than 1 million jobs (including employees and agents).

Insurance brokerage also recorded steady growth. Insurance brokers increased from 12 in 2015 to 15 by 2020. The total value of insurance premiums arranged through brokers has steadily grown over the years.

The scale is still small relative to the potential

The insurance market is a useful financial hedge tool for investors. Up to now, insurance has been hedging almost all types of assets of all economic sectors and industries with various types of insurance such as property damage insurance, aviation insurance, marine insurance, credit insurance, agricultural insurance and fisheries insurance.

According to insurance companies, about 80% of major infrastructure construction and economic works invested by the government are covered by insurance. In the event of insurance, these facilities will not use the State budget to cover damage and loss, thus helping ensure fiscal policies.

However, although the Vietnamese insurance market has highly and stably developed, its scale is still small relative to its potential. The ratio of insurance premium to GDP is currently only 3.07%, lower than the average of ASEAN (3.35%), Asia (5.37%) and the world (6.3%). In particular, some potential fields such as import and export insurance, health insurance, natural disaster insurance and public property insurance have not been fully tapped.

Therefore, according to many experts, the Vietnamese insurance market still has vast room for development. Reportedly, a number of natural disaster insurance policies are being researched and developed, which will have extremely important implications on the implementation of the national strategy for climate change.

By Quynh Chi, Vietnam Business Forum