Bancassurance sector on the rise

Although there were noticeable effects from last year’s global and national economic slowdown, the Vietnamese insurance market still saw remarkable growth, particularly in non-life insurance transactions. Viet Nam News reporter Le Thi Mai Huong conducted an interview with Pham Quang Tung, director of the Bank for Investment and Development (BIDV) Insurance Co (BIC), listed in the country’s top 10 non-life insurance firms, about the development of the market and its prospects this year.

What do you think about the 2009 national insurance market? How did your company perform last year?

Viet Nam’s insurance industry survived the effects of the global economic downturn and enjoyed spectacular development last year. Total revenue in the non-life insurance sector grew by 22 per cent over the previous year, while overall all areas of the insurance sector accounted for 2.3 per cent of the gross domestic product (GDP).

Plus, securities enterprises came out strong by making efforts to diversify their products and distribution channels, and further improving customer service and product promotion.

Last year was a successful year at BIC. Total revenue reached nearly VND549 billion (US$28.7 million), a year-on-year increase of 50 per cent. Our pre-tax profit gained more than VND81 billion ($4.2 million) last year, the highest in our history. BIC currently ranks sixth in terms of market share for non-life insurance.

Bancassurance is a relatively new insurance product in Viet Nam. Could you give a brief introduction to this service?

Bancassurance is a French term used to identify a range of insurance products that are sold through banking networks. In Viet Nam, bancassurance is rather new, but its development potential is promising because there are many benefits to this service.

Banks, for example, can provide this service to ensure a stable source of non-interest income through sales commissions while also increasing their customer satisfaction with product diversification.

Insurance companies have started using bancassurance to expand their market shares, increase revenue and save on sales costs. And customers benefit because they have access to more financial service products from banks, permitting all of their financial demands to be managed conveniently by one organisation.

How does the company take advantage of its position as an arm of one of Viet Nam’s leading banks to promote this service? And what do you think about the competition in this sector?

BIC defines bancassurance as a long-term strategic retail channel and is focused on its development. At this time we’re the leaders in this market segment in terms of the number of bank partners and the products we provide. Last year, bancassurance generated 8 per cent of the company’s total revenue, which promises to increase in the coming years.

Banks have recently begun paying more attention to bancassurance, particularly the area that targets individual customers. I think that beginning this year and beyond we will see higher growth rate in bancassurance than we will in the traditional channels of using agents, brokers and direct sales.

The competition will therefore be harsher and securities companies are likely to set exclusive sales partnerships with banks in order to secure an advantage.

Local insurance companies are dominating over their foreign counterparts in the non-life insurance sector. However, foreign insurers have begun investing more in expanding their market shares. How does your company cope with this increasing competition?

From 2008, pursuant to WTO commitments, the Vietnamese insurance market has been fully open to foreign businesses. However, foreign insurers did not storm into the local market as many expected. This is understandable because they had to consider the of the market and efficiency of investment, especially in the context of the global financial crisis.

However, with the rising number of insurance companies in the market, the competition will surely become more heated. I think it is time for insurance firms to develop their operations in a smarter and more professional manner to ensure their long-term development strategies.

BIC has been well-prepared for harsher competition. Along with promoting new products, we are concentrating on improving service quality and developing new distribution channels such as online sales and ATM transactions. I think insurance firms will choose to compete fairly for mutual growth and market stabilisation.

How do you forecast the market will develop this year?

Viet Nam’s non-life insurance market has developed considerably in recent years (by more than 20 per cent per year). The fact that the market grew strongly last year in spite of the difficult economic situation shows its large development potential.

Along with a brighter economic forecast this year, I think traditional insurance products like construction and installation insurance, property insurance, cargo insurance and vehicle insurance, will continue to see strong growth.

I also predict that products such as liability insurance, credit insurance and guarantee insurance are likely to grow quickly this year.

Tags: Vietnam Bancassurance sector, Vietnam insurance, Vietnam insurance market, Vietnam insurance sector