In late July Chubb Life Insurance Vietnam (Chubb Life Vietnam) announced an increase to its charter capital of more than VND150 billion ($6.5 million), its second in the last two years and bringing the total to more than VND1.55 trillion ($69.5 million). 

Chubb Life is not the only foreign insurer to have increased its charter capital in Vietnam in 2016. Cathay Life Vietnam, a subsidiary of Taiwan’s Cathay Life Insurance, increased its capital to $170 million in April. Arriving in Vietnam in 2008, it first increased its capital to $110 million in 2013 from the initial $60 million.

“We hope sustainable financial resources will make Vietnamese customers have faith in our products, similar to the way Cathay Vietnam has trust in Vietnam’s market,” Mr. Stanlee Lee, CEO of Cathay Life Vietnam, told .

Though it’s been available in Vietnam since 1996, life insurance is still seen as a new product in the country.

With just 8 per cent of Vietnam’s 90 million people having life insurance policies, Vietnam has potential for life insurers, with many foreign players being attracted to the country because of its expanding population and growing middle class. 

Diversifying products, expanding markets 

The increase in Chubb’s charter capital is to maintain its distribution expansion, improve service quality, and create a diversified product portfolio that meets the financial protection needs of families and individuals in Vietnam. 

2016 has been significant for Chubb Life Vietnam, with ACE Life renaming its Vietnam subsidiary following ACE Limited’s $29.5 billion acquisition of The Chubb Corporation and the adoption of the Chubb name globally.

In March this year Chubb Life pioneered the introduction of Universal Life plans in Vietnam and since then has developed a full suite of Universal Life products. 

These products enable individuals and groups up to the age of 80 to select plans to suit their financial needs. Chubb Life now boasts distribution of its products through a 17,000-strong agency force as well as through selected banks.

Cathay Life Vietnam decided to invest VND1.3 trillion ($58.3 million) to buy 30-year government bonds after increasing its charter capital. According to Mr. Lee this not only expresses its long-term commitment to Vietnam but also helps increase trust among customers in its products.

With strong financial resources following the increase, Cathay Life Vietnam continues to expand to serve a broad customer network nationwide through six branches in major cities including Hanoi and Ho Chi Minh City. 

Among many, it provides three key product lines to customers: savings life insurance, insurance packages for investing in their children’s future, and products tailored towards women.

“We believe that our customers will be satisfied with our product categories and their outstanding features at present and in the future,” Mr. Lee said. 

Cathay is also focusing on selling insurance through banks (bancassurance) to access potential customers and plans to provide pension insurance when the time is right. 

Asia is the most attractive and dynamic region in the world for life insurance, according to Mr. Mark Tucker, AIA Group Chief Executive and President. 

AIA therefore continues to find innovative ways to broaden its range of products and provide customers with the critically important protection and savings support they need.

In 2016 it again saw strong growth and the successful implementation of the group’s strategies and initiatives, with a strategic focus on agency network development and bank partnerships. 

The insurer closed fiscal year 2015 with total premium revenue increasing 43 per cent for the period, according to its financial report released in June.

Vietnam’s life insurance market overall recorded positive growth in the early months of this year. 

According to the latest figures from the Insurance Supervisory Authority (ISA) under the Ministry of Finance, life insurance premium revenue reached VND21 trillion ($949.2 million) in the first six months, up 36.78 per cent year-on-year. 

In terms of premium revenue Bao Viet Life held 28.1 per cent as at May, Prudential 26.2 per cent, Manulife 12 per cent, AIA 9.8 per cent, Dai-ichi 9.7 per cent, Chubb 4 per cent, PVI Sunlife 3.1 per cent, Generali 2.3 per cent, Hanwha Life 1.9 per cent, and Prévoir 1.1 per cent.

Impediments remain

While life insurers are implementing their own strategies to gain more market share and sign up more customers, their ambitious plans may fail due to problems relating to human resources. 

The rising number of insurance companies over recent years along with a lack of quality insurance training has created a serious shortage of skilled human resources for the sector. 

This has led to unfair competition in attracting experienced employees and insurance agents, one insider said.

In addition, many potential Vietnamese consumers still see insurance as an investment rather than a device to share financial losses caused by unfortunate circumstances. 

They prefer bank savings or investing in gold or real estate to earn a higher rate of return rather than buying insurance. 

The 8 per cent of the Vietnamese people holding insurance policies is modest compared with other countries in Southeast Asia, such as Singapore (80 per cent) and Malaysia (75 per cent). 

Some life insurers have therefore found the going too tough in Vietnam. Great Eastern Holding announced on June 7 the sale of its Vietnam business to FWD Life Insurance Company from Bermuda for S$48.2 million ($35.7 million) after nine years in the country. 

“The decision was made after a comprehensive strategic review,” Mr. Khor Hock Seng, CEO of Great Eastern Holding, said. “We will be increasing our focus to grow our core markets of Singapore and Malaysia, where we are among the market leaders, as well as our business in Indonesia and Brunei.” 

Last year Great Eastern Vietnam recorded total revenue of VND83.6 billion ($3.74 million) and employed about 120 staff and had 300 insurance agents nationwide.

Many, though, have faith in the potential Vietnam holds. In the first six months of this year life insurers successfully purchased VND431 billion ($19.3 million) worth of 20-year government bonds at auction and VND6.46 trillion ($289.9 million) worth of 30-year bonds as the Ministry of Finance (MoF) mobilizes long-term funds for the State budget, according to Ms. Pham Thu Phuong, Deputy Director of ISA. 

Economic strengthening and new innovations from continued FDI should impact positively on household confidence and future demand for insurance products. 

Free trade agreements (FTAs) signed recently by Vietnam, such as the EU-Vietnam Free Trade Agreement (EUVFTA) and the Vietnam-Korea Free Trade Agreement (VKFTA), together with joining the ASEAN Economic Community (AEC) and the TPP, also create opportunities for the development of Vietnam’s insurance industry as more and more foreign investors and expats come to work and live in the country, according to Mr. Phung Dac Loc, Secretary General of the Association of Vietnamese Insurers (AVI). 

To promote the development of insurance in general and life insurance in particular, the government must adopt clear legal provisions to facilitate the industry’s growth and also create a favorable investment environment for enterprises in the sector, according to insiders.

That MoF has issued uniform rules on recruitment, training, and management for insurance agents, to build a new generation of professional and high quality insurance agents for the sector, is a positive move. 

VN Economic Times