Mr. Michael Tan, General Director of Great Eastern Life Vietnam, discusses the challenges facing Vietnam's insurance market.
Vietnam has one of the most dynamic and growing life insurance markets in Southeast Asia. The potential for rapid growth can be attributed to its growing middle class of young affluent people.
The 2014 Annual Report on the Vietnam Insurance Market 2014 from the Ministry of Finance stated that life insurance premiums grew by 26.81 per cent in 2013 and an estimated 17.3 per cent in 2014. The insurance penetration rate was very low, at 0.92 per cent in 2013 and an estimated 1.01 per cent in 2014. Only approximately 10 per cent of Vietnam’s 90 million people are insured.
There are now 17 life insurers in the market offering life insurance products and services to customers through traditional agency and, more recently, bancassurance distribution. With a young and more discerning population, many consumers seek professional advice and trusted sales advisors to map out their financial planning needs.
However, the life insurance market is still driven primarily by sales advisors without adequate educational qualifications and professional certification. This had led to product-push dominating, with Anticipated Endowment, Universal Life, and Health Insurance based on short-term needs. With interest rates falling for the foreseeable future, these products are not sustainable in the long run and will pose challenges to life insurers regarding asset-liability matching.
In my opinion, the key challenges facing most life insurers can be categorized as follows: the need for regulatory licensing of sales advisors with a strong focus on a code of professional conduct and work ethic; improving the competency of sales advisors in qualified sales-advisory processes and professional training and development; and managing distribution costs, with a focus on the more efficient distribution of life insurance and customer-focused needs and offering more diverse investment opportunities to maximize return and match the asset-liability portfolio.
In summary, life insurers need to seriously look to enhance the competency of their traditional sales advisors through regulatory licensing, higher educational qualifications, professional certification, and training and development based on needs-based advisory processes. At the same time, they need to scan market opportunities to collaborate and to tap into non-traditional distribution channels for new growth areas.