Life insurance, the playground of foreign insurers

Despite great difficulties, 2009 was still a prosperous year for life insurance companies, most of which are foreign-invested. The next several years look even better.

Insurance companies expand their business by opening more branches

The more risky the life is, the more people need the tools to protect themselves.

This principle proved to be true for 2009, when life insurers obtained encouraging business result despite the economic downturn.

General Director of ACE Life Vietnam Lam Hai Tuan said that his company’s business increased 150 percent in the first nine months of 2009 over all of 2008.

Despite the fact that Dai-ichi Life Vietnam’s insurance premiums increased by 30 percent in 2009 over 2008, the company benefited for a second consecutive year, according to Takashi Fuji, General Director of Dai-ichi Life Vietnam.

Korea Life, which is considered a market newcomer with operations beginning in April 2009, has attracted 6,500 clients with total premiums of 35 billion dong. Its target for 2009 was much more modest. The jump start of Korea Life shows the big potential of Vietnam’s life insurance market.

To date, however, life insurance remains a playing field only for foreign insurers. There are 11 life insurers in Vietnam, but there is just one Vietnamese life insurer, Bao Viet, and one joint venture, Vietcombank-Cardiff, which just opened in 2009.

As such, Bao Viet remains the only 100 percent Vietnamese owned life insurer, which holds 32 percent of the market share, according to the Vietnam Insurance Association. The other 2/3 of the market is controlled by nine foreign life insurers.

Life insurance companies are mostly foreign-invested because the companies must have at least 600 billion dong in capital, a very high requirement. Besides, they have to have good information technology systems, good management staff, and experience. Generally, life insurance companies make profits only after 8-10 years of operation.

“Frankly speaking, besides Bao Viet, no domestic business is powerful enough to set up life insurance company,” a director of a life insurance company asserted.

Mr Takashi Fuji calculated that 10 years is a long enough period to start business and develop it, but for life insurance, 10 years is just the initial stage.

He said that capital and experience are the two elements that Vietnam’s market lacks and needs, so it needs foreign investment.

In early 2009, applications for setting up new life insurance companies were made to the Ministry of Finance, but no news about any new life insurance companies has been released to date.

“I think that foreign life insurers suffered economic difficulties in 2009, which forced them to delay overseas expansion plans,” speculated Pham Truong Khanh, Marketing Director of Korea Life.

Mr Takashi Fuji believes that life insurers will continue to enjoy a prosperous year in 2010, although the impact of the economic crisis still exists.

According to Korea Life, only five percent of Vietnamese people are protected by life insurance policies. Yet at least 30 percent of Vietnamese people are capable of taking out life insurance policies, a figure that keeps rising rapidly and spells good opportunities for life insurers in the future.

VietNamNet/DTCK

Tags: Vietnam insurance