Insurers getting it in the neck

Vietnam’s non-life insurance firms in Vietnam face falls in revenue due to inflation and the government’s monetary tightening policies.

Since the government tightened public investment and other expenses, insurance demand among state groups and enterprises has reduced.

Particularly, demand for construction insurance, which produces up to 30-40 per cent the insurers’ revenues, is strongly declining as the government cuts new construction projects.

As a result, local non-life insurers all expected revenue dips in property and engineering insurance in 2011 business plans.

Besides, tightening credit policies is narrowing local manufacturing enterprises’ operations resulting in a dip for insurance.

Meanwhile, non-life insurance premiums on domestic market are almost unchanged. Being in a severe competition environment, several insurance firms have had to reduce premiums, along with extending terms in order to scramble for clients. For instance, Vietnam’s premiums for vehicle insurance are at crippling low levels.

Meanwhile, the stock and real estate markets have also tumbled, hurting insurers further.

However, inflation could expose local enterprises to more risks, thus increase their insurance demand.

In fact, statistics proved that non-life insurance growth usually increased together with inflation. The non-life insurance growth in 2006 reached 16.78 per cent with inflation of 7.7 per cent in 2006. The growth boosted to 28 per cent in 2007 when inflation soared to 12.63 per cent. And in 2008, it dramatically hit 33.52 per cent along with inflation reaching the record high of 22 per cent. – VIR

Tags: Vietnam insurance, Vietnam insurance industry, Vietnam insurance market