Mr. Ngo Trung Dung, Deputy General Secretary of the Vietnam Insurance Association, discusses the present and future of Vietnam’s insurance market with VET’s Ngoc Lan.

■ While foreign insurers dominate Vietnam’s life insurance market, the Top 5 domestic insurers account for 63 per cent of the non-life insurance market. Why do you believe this is the case? 

In my opinion, life insurance attracts customers due to the quality of services, the advantages of each type of product, and the capacity of the insurer’s network of operations, mainly agents. 

Therefore, if a life insurance company invests in the development of service quality and customer care services, uses agents that focus on a particular area or a specific group of customers, it will maintain stable revenue. 

Non-life insurance companies, meanwhile, attract most customers based on financial strength, prestige, and business tradition. Revenue being concentrated in the Top 5 largest local insurers is therefore easy to understand. If small-scale, non-life insurance companies want to compete to attract revenue, this requires building a broad network of branches and offices and promoting their brand. This is difficult and requires a lot of time and effort.

■ What are the opportunities in Vietnam’s insurance market for domestic and foreign insurers? 

Most State insurance companies have now been equitized and domestic businesses can invest in the insurance market through buying and selling shares and cooperating to become strategic shareholders. 

Foreign and domestic businesses can be licensed by the Ministry of Finance (MoF) as newly-established insurance enterprises if they satisfy the conditions of Decree No.73/2016/ND-CP.

The insurance market is forecast to continue to grow steadily, with total market revenue accounting for more than 2 per cent of GDP. The government targets market turnover reaching 3 to 4 per cent of GDP by 2020. 

In addition, customers have now started to pay more attention to insurance. In developed countries, the proportion of people with insurance exceeds 90 per cent. Vietnam therefore has great potential.

■ What are the difficulties for domestic and foreign insurers? Why is the percentage of Vietnamese people taking out insurance policies lower than in other countries in the region?

There are some difficulties when investing in Vietnam’s insurance market, such as unhealthy competition and insurance companies becoming increasingly sophisticated and difficult to control.

Another challenge is in high quality human resources. At present, high quality human resources with a solid professional background in the sector are in short supply. 

For example, actuary teams in life insurance are almost entirely foreigners or overseas Vietnamese. In life insurance, senior executives such as CEOs and CFOs rotate from one company to another, and this is normal given the shortage of high quality human resources. 

Therefore, in addition to business development to increase sales, insurance companies must pay attention to investing in training and avoid taking each other’s human resources. It’s an unhealthy practice. 

The proportion of Vietnamese people taking out insurance policies is lower than elsewhere in the region, mainly due to people being afraid to contemplate risks. 

For example, putting fire extinguishers in the house is a simple and effective way to tackle a fire, but the general psychology of Vietnamese people means they don’t want to consider the possibility of there being a fire. 

They think it cannot happen to them. Meanwhile, in developed countries, risk prevention is an overriding principle for many people.

Additionally, living standards in Vietnam remain low. The average annual income in 2015 was VND45 million ($1,980), or VND3.7 million ($160) per month. 

With such a low average income, many people have to be very careful when deciding to set aside money for life insurance. 

Most worry they will not be able to maintain their life insurance policy for ten or 20 years, and if they can’t do so they may lose their policy and be disadvantaged.

■ What is your view of Vietnam’s insurance market in 2017?

Vietnam’s economy in general and the insurance market in particular are expected to continue to grow this year, with new legal documents promoting the advantages and stimulating market growth. 

Vietnam is implementing free trade agreements and is gradually cutting back on certain types of tariffs, which will undoubtedly promote the development of goods and services.

GDP is to reach 6.7 per cent this year, and government policies still focus on business development, especially small and medium-sized enterprises. 

The MoF and the Insurance Supervisory Authority will remain close to businesses, removing obstacles, shortening the time for handling administrative procedures, and creating a legal framework for the development of the insurance market.

State management agencies are studying and developing policies to develop more insurance products, such as agricultural insurance and micro insurance, and modifying compulsory fire and explosion insurance products. The Circular for Decree No.73 provides detailed guidance.

With these favorable factors, together with the efforts of insurers, it is expected that the life insurance market will maintain a high growth rate of about 35 to 37 per cent this year and non-life insurance 15 to 18 per cent.

■ Insurance products are becoming more diverse, and insurance companies and customers are starting to pay more attention to premium products in beauty care. Will this become a trend in the near future for non-life insurance companies and customers? 

This type of insurance is available in developed insurance markets. As Vietnamese society develops, the demand for these types of insurance will rise. Insurance companies will then develop insurance products to meet that need. 

In my opinion, it is difficult to say that this will be a major trend in the near future in the non-life insurance industry. 

VN Economic Times