The competition between foreign and domestic life insurers in Vietnam is as multi-faceted as it is fierce.
Selecting an insurer has now become harder as Vietnamese and foreign companies try to compete and win market share with new products and business strategies. And with many other foreign insurers keeping an eye on Vietnam with a view to establishing a presence in the country the problems associated with an abundant choice aren’t going anywhere.
The latest figures from Insurance Supervisory Authority of the Ministry of Finance show that in first four months of this year Vietnam’s life insurance market continued to maintain its healthy growth, with premium revenue reaching over VND9 trillion ($418 million), up more than 43 per cent compared with the same period last year. The market leader remains Prudential, with 23.93 per cent, closely followed by Bao Viet Life with 23.55 per cent, Manulife Vietnam with 9.45 per cent, AIA Vietnam with 12.48 per cent, and Dai-ichi Life Vietnam with 10.6 per cent. The market also saw breakthroughs in market penetration made by relative newcomers such as Hanwha Life, Generali Vietnam, Fubon Life, and PVI Sun Life.
The difference between the market shares of Prudential and Bao Viet Life, at just 0.4 per cent, is evidence of how competitive the race is for domestic and foreign insurers even though foreigners have a larger presence in the country.
Accounting for more than half of the market share in life insurance, Prudential and Bao Viet Life have been locked in competition for top ranking for some time now. According to industry experts, an insurer’s strengths include its human resources, distribution channels, and products. Of these, distribution channels play an important role in expanding the market and approaching potential customers. Prudential, after 15 years in Vietnam, has more than 230 customer service centers, branch offices, and agency offices around the country. After many years of market expansion via agents, Prudential is now also promoting bancassurance, a form of cooperation between banks and insurance companies to sell insurance products, which is considered a new way to attract new customers.
Not to be outdone, Bao Viet Life has focused on building its distribution channels, with 300 offices and 60 offices of its subsidiaries. As well as bolstering its agent force it will also access customers via banks (with bancassurance) or by cold calling with telesales. Bao Viet has already built up an extensive network to understand the needs and specifics of each locality so it can offer diverse insurance products that meet different demands.
Products are the key factor in overcoming the competition so differentiation is crucial. This year Dai-ichi Life Vietnam has continued with its development strategy featuring four aims: sustainable growth, excellent customer service, flawless operations, and long-term customer relationships. In order to reach its strategic goals the insurer has adopted plans to create new insurance products, such as burial insurance, which provides immediate financial support to families when relatives are killed in an accident. The product is considered an innovative move and a highlight of Dai-ichi Life efforts at differentiation, said General Director Tran Dinh Quan.
Cathay Life has also launched a product especially designed for women with many incentives, such as extended maturity dates for long-term savings, regular cash payments every two years for medical check-ups, cancer protection, and female-specific surgery, as well as benefits being passed on to her spouse.
Bao Viet Life, meanwhile, has kept abreast of the goals of the competition and set a strategy for this year of stable and effective growth and further improvements to its customer service quality. The company has worked with its parent company, the Bao Viet Holdings, to provide product and service packages and developed a multi-channel distribution system to better meet the growing demands of a diversified customer base. According to Ms. Than Hien Anh, Chairwoman and CEO of Bao Viet Life, besides 50 different product packages the company will also sell voluntary retirement products this year, which are considered a long-term strategic product and consistent with the strategic direction provided by the government and the Ministry of Finance on developing a multi-pillar pension system in Vietnam.
Domestic insurers, according to Mr. Phung Dac Loc, General Secretary of the Association of Vietnam Insurers, hold advantages over foreign firms in understanding the market better. To offer products that match demand, foreign insurers must study the Vietnamese market very carefully, which is no easy task. Moreover, spending on healthcare and future needs among Vietnamese people very much depends on their ability to put aside money. Foreign insures, therefore, should carefully research what’s required to enter Vietnam’s insurance market before deciding to invest, he believes.
While they possess a greater understanding of the local market, domestic insurers are weaker in product design. Product design for life insurance previously involved a certain amount of assistance from foreign experts, with the cost running into millions of dollars, but the resulting package often fell short of expectations because the foreign input lacked an understanding of the local market and people. A better product emerges when it’s more of a joint collaboration that uses the expertise of both parties.