|The World Bank predicts that by 2026, 26 percent of Vietnamese will be middle class, double the number today. (Illustrative image. Source: tieudung.vn)
Better income has led to more attention on health among many Vietnamese. The World Bank (WB) predicts that by 2026, 26 percent of Vietnamese will be middle class, double the number today. The average growth rate of the insurance market in Vietnam in 2012-2017 was 21.4 percent, much higher than the Philippines (14.4 percent) and China (14.4 percent).
Along with expansion strategies, life insurance firms have entered a fierce race to increase charter capital to improve their financial strength to attract customers. Among 18 life insurers in Vietnam, Bao Viet Life is the only domestic firm.
This year, Manulife has increased its charter capital to nearly 9.7 trillion VND (418.6 million USD), Hanwha Life Vietnam increased its charter capital to 5 trillion VND (215.7 million USD) from 1.89 trillion VND (81.5 million USD), Generali Vietnam injected additional capital, bringing the current charter capital to 4.85 trillion VND (209.3 million USD).
Compared to most of the mentioned foreign insurers, Bao Viet Life has lower charter capital of 4.15 trillion VND (179 million USD).
In the field of newly exploited contracts, considered one of the most important categories for life insurers, Manulife leads with revenue from new customers of 2.72 trillion VND (17.3 million USD). Bao Viet Life was second with revenue of 2.64 trillion VND (113.9 million USD).
Notably, the number of newly exploited contracts via bancassurance in 2019 increased by 180 percent year-on-year while the new premium revenue of this channel accounted for 17.8 percent of the total newly exploited revenue of the entire market.
Lots of potentials
Despite spectacular growth in the past few years, according to experts, Vietnam's life insurance market remains relatively untapped.
Experts are upbeat about the Vietnamese insurance industry’s health in the coming years, forecasting it would maintain an annual double digit growth rate. The insurance industry expects a growth rate of 20 percent this year.
The growth potential is great as the country has one of the world’s lowest life insurance penetration levels at less than 1 percent of GDP. The average insurance premium in Vietnam stands at 30 USD, much lower than the global average of 595 USD and Southeast Asia’s average of 74 USD.
Data of the Vietnam Insurance Association showed 8 percent of Vietnam’s population currently has life insurance. Though there is no updated data, the number of insurance contracts signed via bancassurance in the first half of last year grew by 89 percent year-on-year, reaching nearly 857,000 contracts.
"The potential for further development is enormous, especially as the middle class continues to expand rapidly and awareness of risks such as increased cancer," said the CEO of a foreign insurance firm in the market.
Bloomberg reported on September 23, billionaire Richard Li's FWD Group Ltd. was nearing an agreement to pay about 400 million USD for the purchase of Vietcombank's Cardif Life Insurance.
There are also domestic insurers which have launched life insurance products like Bao Minh or PVI however, a report of Rong Viet Securities Company said: “The products of domestic companies are relatively similar. Foreign companies, thanks to their ability to provide differentiated products with better profitability, are targeting the Vietnamese market. There, the direction to buy shares of domestic firms is the fastest way to penetrate the young and highly competitive Vietnamese market."