Insurance brokerage industry falls short of potential

The insurance brokerage industry is underdeveloped and the number of companies operating in the field remains below potential, says the Ministry of Finance’s Insurance Supervision Administration.

Six domestic and four foreign-invested companies are operating in the field, according to administration statistics, with the foreign firms gobbling up 84.5 per cent of market share for brokerage services.

Total revenues from insurance premiums last year were estimated to have reached about VND30.6 trillion (US$1.4 billion), up 20.3 per cent over 2009, with VND17 trillion ($809 million) coming from the non-life sector and VND13.6 trillion ($651 million) from life insurance. Total brokerage fees and commissions reached nearly VND1.6 trillion ($75 million) on these premiums, an increase of 18.6 per cent over 2009.

Brokerage services were most commonly utilised in liability insurance (73 per cent), personal accident and health insurance (34 per cent), property insurance (27 per cent), and general liability insurance (10 per cent).

Aon Viet Nam Ltd Co CEO Vu My Lan said current insurance brokerage operations in Viet Nam did not reflect the growth of the insurance market. Brokers in Viet Nam needed a breakthrough to affirm their roles and fully exploit the potential of the market.

Viet Nam Insurance Association general secretary Phung Dac Loc said the insured were generally not fully aware of the role of the insurance broker, with many small- and medium-sized businesses tending to make direct contact with insurance companies and fearful of cumbersome procedures.

Most brokerages, meanwhile, did not comply with regulations in Ministry of Finance Circular No 156/2007/TT-BTC, including a failure to develop and maintain training and professional standards of staff, said Loc. More generally, brokerages frequently operated with inadequate capital investment, he added.

He urged State agencies to issue more specific regulations to establish standards and ensure fair competition in the insurance brokerage industry, as well as proper regulatory oversight.

To promote the proper operation of insurance brokerage companies, the Ministry of Finance was currently applying strict fines on companies that commit acts of unfair competition in computing brokerage commissions. — VNS

Tags: Insurance brokerage industry