Insurers have been working hard on introducing products and services that meet the specific needs of potential customers in Vietnam.
Mr. Phan Thanh Hung, a 38-year-old sales and marketing manager in Hanoi, has just returned home after six months in hospital undergoing multiple surgeries on a broken leg he suffered in a motorcycle accident. “Thank God I wasn’t disabled for life,” he said, adding that his family was significantly out of pocket due to his “bad luck”. The accident made him change his mind about the risks that face him and his family and encouraged him to seek out information on life insurance products.
For a country ranked among the top in terms of traffic fatalities and injuries, with 20 people losing their lives and 70 becoming permanently disabled every day, according to National Traffic Safety Committee figures released in December 2014, the insurance penetration rate in Vietnam is rather modest. According to the Annual Report on Vietnam’s Insurance Market 2014 issued by the Ministry of Finance (MoF), only 10 per cent of its 90 million people are insured. “One of the greatest obstacles to the development of the insurance industry is public awareness,” Mr. Phung Dac Loc, Secretary General of the Association of Vietnamese Insurers (AVI), told VET.
Though first appearing in Vietnam in 1996, life insurance is still viewed as a new industry in the country. Many potential Vietnamese consumers continue to see insurance as an investment rather than a device to share the financial burden when misfortune strikes. They therefore prefer bank deposits or investing in gold or real estate to earn a higher rate of return rather than taking out an insurance policy.
With low insurance penetration and a largely untapped insurance segment, Vietnam holds significant promise for insurers. Foreign life insurers are attracted to the country because of its rising population and growing middle class. According to figures from the Insurance Supervisory Authority (ISA) at MoF, life insurance premium revenue grew by 26.81 per cent in 2013 and an estimated 17.3 per cent in 2014. The market share of life insurers in terms of premium revenue, as at April, was led by Prudential (with 30.98 per cent) and Bao Viet Life (30.97 per cent), followed by Manulife (12 per cent), AIA (9.9 per cent), Dai-ichi (8.9 per cent), ACE (4.3 per cent), Hanwha Life (1.9 per cent), Generali (1.8 per cent), and Prévoir (1.4 per cent).
Recent figures from the AVI show that life insurance companies are competing strongly in urban areas, where 30 per cent of the population now resides. It hasn’t been easy, however, to convince people to take out insurance policies. Companies have had some success with fruit growers and aquaculture farmers but have faced challenges in signing on city-dwellers. Life insurers, as a result, have focused on adopting strategies and products that meet the needs of urban Vietnamese customers.
AIA Life, one of the Top 5 in life insurance, introduced a new customer service model in March in the heart of Ho Chi Minh City that targets busy city-dwellers.The insurer plans to bring similar one-stop service centers to Hanoi and other major cities in Vietnam.
ACE Life, meanwhile, has strengthened its presence in different localities around the country after opening a new office in Buon Ma Thuot city in the central highlands province of Dak Lak in May, following on from new offices in Lam Dong and Quang Ngai provinces a month ago. “The expansion to Buon Ma Thuot is an important part of ACE Life’s sustainable growth strategy, particularly in the central highlands,” said Mr. Lam Hai Tuan, Chairman and Country President of ACE Life in Vietnam.
The preference for purchasing investment-linked insurance has continued to increase since insurers received MoF approval to provide the products in 2007. “Fubon Life has seen a significant increase in market demand for investment-linked insurance in recent times,” Mr. Anton Chang, CEO of Fubon Life Vietnam, told VET. “We will launch these products in the third quarter of this year, to bring diverse and better choices to our clients.”
The life insurance market also witnessed a wave of new products last year based on Vietnam’s specific cultural characteristics, such as investments for the future of children and financial planning for retirement. “VietinAviva plans to conduct research and assess the Vietnamese market’s demand to develop pension insurance, focusing on major cities such as Hanoi and Ho Chi Minh City,” Mr. Mark Wilson, CEO of Aviva Corporation, told a meeting with leaders of ISA in April. VietinAviva life insurance, a joint venture between VietinBank and the Aviva Corporation that began in 2011, is also implementing a strategy that involves selling insurance through a multitude of channels, with a special focus on selling insurance via banks (bancassurance) by taking advantage of VietinBank’s extensive network throughout Vietnam.
The ambitious plans of insurance companies, however, may fail to bear fruit because of shortcomings in human resources. Many new graduates still consider working as an insurance agent to be a temporary job where they can earn income while looking for a “real” job. When other opportunities arise, agents often leave their company, leaving it with the burden and expense of training fresh agents. The increasing numbers of insurance companies starting out in Vietnam over recent years and inadequacies in insurance training have created a serious shortage of skilled staff. “This has led to some unfair competition among insurance companies in attracting experienced staff and agents,” Mr. Loc said.