Insurance market promises strong growth

Although 2009 was not an easy year for any business sector, life insurers still posted very good results with growth of 14 percent in total premiums.

Therefore, 2010, which promises to see a strong recovery of the local economy, will also be a good year for general insurance companies to widen their operations and meet their business ambitions. In early 2009, as the global financial crisis hit the local economy, hardly any enterprises dared to set high business targets and almost all investment channels went through a dreary period. At that time, banks drastically lowered their interest rates, the real estate market froze and the stock market plunged to a bottom of 235 points, but insurers still had to ensure interest rates of about 5 percent to 8 percent per year for policyholders during the contract period.

However, general insurers still managed not only to maintain their existing operations but also to launch new products and to post good business results by the end of the year. According to the Association of Vietnamese Insurers, the life insurance industry achieved 11.86 trillion dong in premium turnover, an increase of 14 percent from the previous year with 4.26 million general insurance policies, a 10.2 percent growth rate compared to 2008. Of these policies, new contracts amounted to about 758,900, up by over one-third from a year earlier.

Despite the difficult year, the number of insurance agents also increased by one-third to over 94,600 by the end of 2009. Of those, Prudential had the largest number with over 33,300, Bao Viet was next with 18,150, and Dai-ichi Life was third with nearly 11,100.

In terms of premiums, according to the Association of Vietnamese Insurers, big names continued to hold the leading positions in 2009 as Prudential led the market with 4.73 trillion dong, Bao Viet ranked second with 3.72 trillion dong and Manulife was next with 1.26 trillion dong. Those were also the same positions in terms of premiums on new policies.

Commenting on last year’s results, Jack Howell, CEO of Prudential Vietnam Assurance, said: “We had a very good year in 2009, with a very strong increase in APE (annual premium equivalent) and total premiums, the number of policies and agents, and case size.” With strong support from Prudential Pic plus a set of strategic focuses in Vietnam, Prudential Vietnam Assurance has successfully sustained its position as the market leader in life insurance in Vietnam, he added.

Other companies also posted two-digit growth last year. Manulife Vietnam reported 25 percent growth in new premium value. Meanwhile, ACE Life Vietnam said it achieved growth of 60 percent in premiums last year.

Another foreign insurer, Dai-ichi Life Vietnam, obtained 744 billion dong from insurance premiums last year, with new policies increasing by 39 percent. This was the second straight year the Japanese-invested company posted profits from the local market in three years of operation.

Given such successes in the local market, insurers are setting even higher targets this year. In 2010, besides expanding agent networks and improving products, insurance companies said they would continue training and developing their agents to be more professional because of the important role agents play in explaining the usage of each insurance product as well as in taking care of customers during the contract period.

Howell of Prudential Vietnam presented an ambitious plan for this year as he said the company is planning to achieve a strong double-digit growth rate by increasing the number of agents and offices and improving productivity through innovative training programmes. “We will continue to be a market leader in profitable, growing product segments with a strong focus on unit-linked and protection products while protecting the margins,” he added.

The company will also deliver superior customer service by improving key service areas including premium collection, customer communication, orphan customer management and claim processing, said Howell.

The representative of ACE Life said that the company is highly aware that every good product can be imitated, but service quality and human resources cannot. ACE Life now has enough products to meet local insurance demands, so what the company has to do this year is to develop human resources and enhance service quality, the source said.

Meanwhile, for Manulife who is one of the top three life insurance companies, developing products to meet the diverse demands of people in Vietnam will be the next significant step to deepen its presence here. The firm’s market share is 10 percent, so it hopes to double the figure in the next five years, according to the company’s leader.

Carl Gustini, CEO of Manulife Vietnam, said: “In Vietnam, a key part of our strategy is geographic and product diversification. We want to be able to serve all Vietnamese people. We will continue to develop innovative products meeting the specific needs of all customer segments, especially mixed products offering both investment and insurance protection.”

Vietnam’s economy is predicted to be one of the fastest growing ones among Asean countries in the decade to come. This means there will be an emerging middle class with higher disposable incomes, so the demand for better healthcare services will increase, Gustini said. “Therefore, there will be a huge need for medical and hospital insurance. Investment and healthcare products will be our immediate focus, and pension plans and retirement product development will follow,” he revealed.

Meanwhile, Japanese-invested insurer Dai-ichi Life Vietnam wants to combine developing service quality with diversifying products to meet the target of increasing its market share in Vietnam.

Dai-ichi Mutual Life Insurance Co. acquired Bao Minh-CMG joint venture in 2007 to establish Dai-ichi Life Vietnam. It expanded its market share from 4.8 percent to around 7 percent in 2009 and plans to serve 8 percent of the market this year, then increase the figure to 10 percent in two years.

To reach these targets, Dai-ichi Life Vietnam plans to improve the human resources in its agent system and launch more products this year to meet various demands. “We hope that our agents will be pioneers in Vietnam in using netbooks with new software to provide consultancy for customers,” Dai-ichi Life Vietnam general director Takashi Fujii said.

The company is the first insurer in Vietnam to use insurance request forms with five questions instead of 31. It has also had Japanese experts design documents in the style of Japanese comic books to help customers learn about complicated financial concepts.

The pie is still big

Most insurance companies entering Vietnam say that the local insurance market has yet to develop to its potential. Therefore, besides the old names, the market in recent years has welcomed new insurers such as Korea Life Insurance (Vietnam) and Great Eastern Life (Vietnam).

The representative of Prudential Vietnam pinned high hope on economic growth as he said that Vietnam would continue to be a high growth market. “With the entrance of more players in the market, more consumers will be able to appreciate the benefits of life insurance and learn how life insurance can help them secure their future,” CEO Jack Howell said.

Meanwhile, Gustini of Manulife said that the life insurance market was just in its infancy, as industry revenues currently make up just 2 percent of the country’s gross domestic product (GDP) while the share in developed countries is usually 8-15 percent of GDP.

“Figures from the Ministry of Finance show that about only 5 percent of the population has life insurance, much lower than in other developing countries, which have over 30 percent penetration rates. So, Vietnam represents a promising market with great potential and it is expected that the life insurance sector will continue to grow at double-digit rates in 2010,” he added.

Some new market entrants have emerged and more will come because Vietnam is seen by many as a highly attractive market and this will raise standards and benefit consumers, the CEO of Manulife said.

“The challenge though is how we can maintain healthy competition. This is an area in which the industry and the regulators will have to work closely together to ensure the healthy and proper development of the Vietnamese insurance market,” he concluded.

Tags: Vietnam insurance industry, Vietnam insurance market