Insurance Industry Struggling with Continued Difficulties

The insurance industry is currently grappling with huge challenges, driven by both external and internal factors, resulting in negative growth.

According to the report by the Ministry of Finance, total insurance premium revenue (including life and non-life) was VND165.5 trillion (over US$7 billion) in the first nine months of 2024, down 0.41% year on year.

Of the sum, non-life insurance was estimated at VND58.54 trillion, up nearly 12.8%, while life insurance revenue was down 6.4% to about VND106.98 trillion. The life insurance market has not yet overcome its difficulties when the new premium revenue of this sector sank 18.7% year on year to VND13.96 trillion in the first seven months of the year. This rate is over half lower than the same period in 2022, the time before market turmoil caused a decline in customer confidence.

However, in the third quarter of 2024, insurance premium revenue returned to growth after five consecutive quarters of decline. Specifically, total insurance premium revenue was estimated at VND56.4 trillion in the quarter, up 6.9% over the corresponding period in 2023.

Historically, from 2016 to the end of 2022, this indicator kept growing at a double-digit pace, around 17-22%. Insurance premium revenue experienced a decline for the first time in the second quarter of 2023, continuing its downward trend into the third quarter of 2024 before showing signs of recovery. In the first quarter of 2024, revenue fell by 4.3%, followed by a 6.6% decrease in the second quarter. As a result, total premium revenue for the first three quarters of 2024 was lower compared to the same period the previous year.

Also, according to the Ministry of Finance, insurance benefit payments were estimated at VND64.07 trillion in the first nine months of 2024, up 16.07% year on year. Of the sum, nonlife insurers paid VND17,621 billion and life insurers paid VND46,449 billion. Total assets of the insurance market were forecast at VND978,906 billion, up 9.8% year on year, of which nonlife insurers accounted for VND141,357 billion and life insurers made up for VND837,549 billion.

Despite signals of growth, the economy is still confronting a lot of difficulties, posing enormous challenges in helping the insurance industry regain growth momentum, especially life insurance growth in 2024. According to an expert and insurer survey conducted by Vietnam Report in mid-2024, the biggest challenges faced by insurers included confidence crisis in the life insurance market, insufficient understanding of consumers of insurance policy, a lot of violations uncovered in bancassurance channels, growing competition, slowing global economic growth, and insurance fraud.

Given the identified prospects and challenges, insurers surveyed in the Vietnam Report highlighted three key opportunities for sector growth in 2024: the strong development and application of technology across the insurance value chain; the currently low insurance penetration rate relative to GDP; and the official issuance of the circular detailing the Law on Insurance Business 2023.

The current insurance penetration rate to GDP in Vietnam is 2.3-2.8%, lower than the average of 3.35% in ASEAN, 5.37% in Asia and 6.3% in the world. This shows that the insurance market in Vietnam still has a lot of potential for development and expansion. This low penetration rate is largely attributed to the low awareness of insurance among the people, given their relatively low average income compared to that in developed countries.

However, the Vietnamese insurance market is still considered to have potential for strong growth. The Ministry of Finance forecasts that Vietnam's insurance penetration rate will reach 3.5% by 2025 and 15% by 2030. With stable economic growth and rising incomes, the affordability of insurance products is increasing. In 2022, the average Vietnamese spent about VND2.5 million on insurance, double the amount from 2017. Given the favorable demographic structure, the per capita insurance premium is expected to continue rising as a larger segment of the population ages, leading to higher premiums in the future.

Additionally, the Government and insurers are working to raise public awareness of insurance roles and benefits through communication and education programs. Meanwhile, advancements in information technology and digital platforms are enhancing insurance penetration and making products more accessible and convenient for the public.

By Quynh Chi, Vietnam Business Forum