With its GDP reaching US$2.6 trillion, a growth expansion of over 5% a year, and a total population of 625 million, ASEAN is a potential market for the insurance sector.
According to Milliman – a US-based multinational consultancy provider, l ife insurance penetration rates in ASEAN markets are still at very low levels relative to those in more developed economies.
Dr. Nguyen Viet Loi, Director of the Institute of Strategic and Financial Policies under the Ministry of Finance said increasing development of overland, seaway, and aviation transport in the region will be a prerequisite for the development of new insurance products.
This will also bring remarkable benefits to Vietnamese insurance companies, helping them have more opportunities to expand their investment abroad.
The removal of barriers and differences among AEC member nations will create a fair market for Vietnamese and foreign insurance companies.
Foreign investors are now allowed to own a maximum of 49% of stake at local insurance firms, Loi said, highlighting the importance of foreign investors’ participation in bettering the administration of Vietnamese insurance service suppliers, as well as in developing new products and improving service quality.
Besides opportunities, Vietnam will have to face many challenges when joining AEC, he noted.
According to the Milliman ASEAN liberation index (MALI), which is to measure the openness of life insurance regulatory regimes in ASEAN countries, having regard to their alignment with international standards, Vietnam ranked seventh among ASEAN countries with a score of 40.
This will put high pressure on Vietnam in reforming its policies in the field as other regional nations are quick to improve their liberalization policies, Loi said.
Sharing Loi’s opinion, General Director of Bao Viet Insurance Corporation Nguyen Quang Phi said the opening of the insurance market will create a fiercer competition for Vietnamese insurance firms as they are facing shortages in high-quality workforce, capital, administrative ability, and the limited ability of developing new products and seeking new growth momentum.
A strengthened effort from insurance firms is needed to increase their competitiveness, he noted.
Tran Duc Trung from the Department of Insurance Management said it is necessary for both Vietnamese State management agencies and insurance firms to take synchronous measures in order to take advantage of opportunities brought by AEC and realise targets of market development in the field.
The Ministry of Finance should continue to reform the insurance-related legal system, meanwhile insurance firms need to devise more solutions to increase the efficiency of their operations and better the quality of services, he stressed.