Vietnam’s insurance market up 21% in H1

Of the total sum, the revenue from life insurance premiums is VND27.83 trillion and non-life insurance premiums is estimated at VND19.34 trillion, said Pham Thu Huong, Deputy Director of the Ministry of Finance’s Insurance Supervisory Authority (ISA).

Besides maintaining a high and sustained growth rate, the financial status of insurance firms improved in the first half of the year, Huong said. Their total assets grew by 19.11% year on year to VND264.64 trillion, of which life insurers accounted for 73.4%.

During this period, insurance companies invested VND217.59 trillion into the economy, which is a rise of 17.88%, compared to the corresponding period last year.

The insurers also purchased 15-year and 30-year term Government bonds worth VND15 trillion in H1.

The fast-growing insurance market, poised to thrive thanks to rising living standards, has prompted a number of foreign companies, including the UK’s Aviva Plc and Canada’s Sun Life Financial Inc, to step up their presence in Vietnam through mergers and acquisition or joint ventures in the past months.

In April, Aviva Plc acquired 50% stake in Hanoi-based VietinBank’s life insurance joint venture, VietinBank Aviva Life Insurance Ltd (Aviva Vietnam).

In late 2016, Sun Life took full control of the joint venture PVI Sun Life Insurance Company Ltd, by acquiring the remaining 25% stake from PVI Holdings.

The insurance industry is expected to benefit from the country’s projected gross domestic product (GDP) growth of more than 6% annually over the next three years.

It also has great potential as the country has one of the world’s lowest life insurance penetration levels, at less than 1% of the GDP.

Steve Clark, chief executive officer of Prudential Vietnam Assurance, told Vietnam Economic Times that the penetration rate of life insurance, usually measured as the number of individuals who own life insurance, is still low in Vietnam relative to other Southeast Asian countries.

The average insurance premiums in Vietnam stand at US$30, much lower than the global average of US$595 and Southeast Asia’s US$74.

Only 7% of Vietnam’s 93 million people have life insurance, and the sector contributes a modest 2% to the GDP, compared to 2.6% in Indonesia and 11% to 14% in the Republic of Korea and Singapore.

However, there remain many challenges in the way of further growth of this sector.

ISA director Phung Ngoc Khanh said that awareness among Vietnamese people about life insurance may have increased, but most still don’t believe that it’s worth the expense. In fact, almost all Vietnamese people are wary of it and think it unnecessary to buy insurance because they don’t have a thorough understanding of its importance, he explained.

Life insurance products usually involve a long-term contract, so many customers are also concerned about their financial capacity to fulfil it in the future, Khanh said. Doubts about the commitment of foreign life insurers to permanently operate in Vietnam also contribute to its low penetration rate.

Many potential customers continue to see insurance as an investment, rather than as a device to share financial losses caused by ill-fortune. They prefer bank savings or investing in gold or real estate, which have a higher rate of return.

The low penetration rate also comes from the fact that life insurers have only focused their operations in big cities, overlooking 70% of the country’s population that lives in rural areas, Khanh said.

To increase sales and promote products, besides traditional sales methods, life insurers have also started partnering with commercial banks. 

Though the bancassurance market in Vietnam has remained sluggish, contributing only 2% to the total turnover of the insurance market, analysts believe that this channel holds great potential, and now some 35 commercial banks and financial institutions are collaborating with insurers.