Life insurance market has room to grow
With six million out of 90 million people with insurance contracts, the domestic life insurance market still has great potential to grow.
Phung Dac Loc, general secretary of the Viet Nam Insurance Association, spoke to the Vietnam News Agency about those issues.
How has the domestic life insurance market developed in recent years?
There were 17 life insurance companies by 2014 with around 1,000 representative offices and general insurance agents. There are 290,000 insurance dealers nationwide.
The total insurance premium revenue in 2014 reached VND28.54 trillion (US$1.268 billion), a year-on-year increase of 21.7 per cent.
According to the association and Insurance Management and Supervision Administration, the total insurance premium revenue in the first half of this year gained a year-on-year growth of 30 per cent to VND16 trillion ($711 million).
Why do the people not pay much attention to the life insurance services though the industry has a long term of development?
Most of the income of the Vietnamese is below middle level. According to statistics of the International Retail Association, in Viet Nam, the middle-income group, who can save a certain amount of money to buy insurance products, accounts for only 15 per cent of the total population.
Meanwhile, the high-income group in Viet Nam has not changed its thinking to ensure a stable and better quality of life in the future. That means they do not think of buying insurance products or investing in a fund to secure their future.
Moreover, the quality of activities on training and consulting from insurance agents has also not been up to the mark. The agents have asked more people to buy insurance services only because they receive commissions from insurance contracts.
The life insurance market in Viet Nam is now considered a playground mainly for foreign investors. What are reasons of the situation?
Foreign companies have dominated the life insurance market in Viet Nam because it is a new market having developed only in the last 15 years.
In addition, local organisations or individuals have often learnt from the experiences of other insurance operators in the market when they want to set up their businesses.
Moreover, development of one insurance firm needs a long term plan, including development of a distribution system via agents and the labour force.
Life insurance products are valid between 10 years and 20 years or the entire lifetime so insurance firms must calculate the value of cash in the future.
What are the opportunities for insurance companies in the future?
According to commitments with the World Trade Organisation as well as with foreign partners at free trade agreements and bilateral trade agreements, Viet Nam will open its insurance market, which includes life insurance. The local insurance market has great potential with large market shares that has not seen investors.
In addition, foreign insurance companies have strong points with regard to experience, information technology, management and development of products, and especially experience in distributing insurance products.
Meanwhile, there is high demand of life insurance products in the local market. The people need funds to complete certain tasks in the future, including children's education, their nurturing, looking for work and buying a house or a vehicle. If the people have greater earning, they will pay more attention to their health. At present, if they are sick, they wish to be treated at hospital with high quality and advanced technology. This will promote competition among insurance firms.
Finally, employers want to retain their employees by buying insurance products for their workers.
What do you think about the prospects of the local life insurance market next time?
According to the forecast of the Insurance Management and Supervision Department as well as the development plan of local insurance market this year, the insurance sector will reach VND34 trillion ($1.51 billion) in insurance premium revenue for this year, an increase of 20 per cent against last year.
The revenue is expected to achieve a growth of 15 per cent next year against 2015, depending on competition with cash flowing to the bank, securities or real property.
The association is a bridge between the enterprises and the State. What has it done for the past years?
The association is a representative of insurance companies to contribute opinions to legal documents related with insurance business activities, including a guide of law on insurance business and regulations on finance, accounting and tax.
The association has also reflected the difficulties in insurance business activities, policies, administrative procedures, tax and activities of agents as well as proposed solutions for those difficulties.