Life insurers cope with inflation

The inflation has been curbed well during first months this year. According to the statistic from general Statistic Office (GSO), the country’s consumer price index (CPI) in April increased only 0.14 percent from the previous month, bringing the CPI in Jan-April to a rise of 8.69 percent against the same period last year. However, the returnable ability of high inflation makes many life insurance buyers worry about the devaluation of the money and their insurance interest may be affected.

In fact, not only life insurance buyers worry about inflation, but also life insurers have the same feeling. Life insurers have not forgotten the rough period in 2008 yet when the saving rate suddenly jumped to 18 percent per year. Therefore, most enterprises had to face big hardships because their customers stopped contracts before due and withdraw capital to send banks. Additionally, the number of potential customers also decreased so life insurers signed a few new contracts.

According to Vietnam Insurance Association (VIA), the total new life insurance contracts in 2008 decreased 13.71 percent year-on-year, total ineffective life insurance contracts increased 26.17 percent year-on-year, of which, the number of contracts being stopped before due increased 26.78 percent y-o-y.

Notably, the total number of contracts being stopped right in the first year reached 99,998 contracts, increasing 8.83 percent from the previous year. Earlier in 2006, life insurers also experienced a “crisis” when the number of customers stopping contracts increased rapidly. In some life insurance firms, the total number of new signed contracts in first half could not compensate for the number of contracts being cancelled. By that time, apart from weak service quality, two factors affecting to customer attraction were inflation and bank interest rate. These are profound lesson for life insurers.

Along with the recovery of the economy, endeavour of life insurers in developing more professional products and services to attract customers has made the life insurance market recover gradually. The total number of new contract in 2009 increased 22.42 percent from a year earlier whereas the total number of cancelled contracts decreased considerably. The life insurance market has started to recover and grow when in Q1, most of life insurers posted satisfactory business results.

Together with launching more flexible new products and services to customers, life insurers have also studied and calculated to seek solution for devaluation compensation for life insurance buyers.

In 2009, Manulife introduced in Vietnam a new product of “Quyen lua chon bao dam thoi gia”. Till the middle of 2009, ACE Life launched a supplementary insurance product whereby the insurance interest of customers will be adjusted in accordance with the inflation.

Most recently, Dai-ichi Life Vietnam also officially introduced “Quyen loi ho tro truot gia” product with two options including protection and saving for customers joining “An Thinh Chu Toan” product.

According to specialists, increasing interest for customers to compensate for high inflation will be new tendency of life insurers.

Currently, most of life insurers have launched flexible insurance products and services for life insurance buyers.

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Tags: Vietnam inflation, Vietnam insurance industry, Vietnam insurance market, Vietnam life insurers