Insurance Market Keeps Busy

According to preliminary statistical data, the whole Vietnamese insurance market saw revenue growth rate of 12-13 per cent in the first six months of 2007, in which PetroVietnam Insurance (PVI) had a growth rate of over 40 per cent, Bao Minh around 11 per cent, Pjico around 15 per cent. Vietnam National Insurance Corporation (Bao Viet) still led the market with revenue growth of over 10 per cent against the same period last year.

 

Vietnam economy has still experienced a stable growth rate, including GDP growth of 7.87 per cent, budget receipt increase of 14.5 per cent. According to financial experts, the above element is one of the main reasons stimulating the strong and stable development of Vietnamese insurance market. Many newly founded insurers have been operating stably and beginning to expand their operation, for example, BIC has been provided strong support in big projects from the Bank for Investment and Development of Vietnam (BIDV) for its strong development. Global Insurance has taken advantage of insurance services, technology and assets from its big shareholders such as SFC (Service Flight Company) and EVN. Besides, Vietnam Airlines is also planning to set up its own insurance company.

 

Recently, decree amending the decree No. 42-43 and instructing circulars on insurance business activities have been issued in accordance with Vietnam’s commitments taking effect from January 1, 2007 when Vietnam joined WTO. The issuance has affected the service developing activities of foreign-invested insurance enterprises in Vietnam. Some legal documents related to insurance business promulgated recently have had positive influence on insurance revenue growth for the whole market, such as the decree forcing fire and explosion insurance, insurance for machine vehicles, or new decree on healthcare insurance that changes payment method (patients will pay 20 per cent), the decree giving specific regulations for tourism sector, which forces travel agents to buy insurances for their customers.

 

In the first six months of this year, the premium revenue of the Vietnam National Insurance Corporation finished 46 per cent of the annual target, a growth of 10.5 per cent on year. Of the total 65 units throughout the system, 15 units fulfilled more than 50 per cent of the set target, notably Bao Viet Nam Binh Duong and Bao Viet Haiphong are two units finishing over 50 per cent of the yearly target.

 

In general, the average operating revenue of Vietnam National Insurance grew over 10 per cent against the same period of last year in the first half of 2007. In which, aviation insurance grew nearly 51 per cent, goods and responsibility insurances over 20 per cent. Specialized activities with high revenue finishing more than 90 per cent of the full year target includes airport owner insurance, installing risk insurance - EAR, responsibility insurance of motor car owner for passengers and products responsibility insurance. Revenue from financial investment activities of Bao Viet comprised more than 47 per cent of the early target in the first six months and promises strong growth rate in the third and fourth quarters of this year. Especially, revenue from reinsurance selling specialized activities also saw a growth of over 23.6 per cent.

For motorised vehicles insurance activity, insurance enterprises have paid attention to improve services quality and add values for vehicles owners, such as simplifying administrative procedures, quickly solving compensation cases, supplementing salvage services and drivers assistance. The mass and incautious exploitation in the past years has been proved to be ineffective, while insurance services developing activities in combination with banks have been strongly developed through forms of bank credit cards. The development will affirm position of each insurance enterprise in the market.

For human insurance activity, health insurance and healthcare expenses insurance are now activities that Vietnam’s Bao Viet is holding advantages. However, Bao Viet is deploying this activity mainly via insurance brokerage channel, thus the result is still limited. In addition, the concern about healthcare insurance sector of foreign insurance enterprises has been rousing healthcare insurance market in the coming time.

 

Goods insurance market is facing a severe competition. Many insurance companies have decreased premium by 40-60 per cent, including sensitive commodities with high compensation rate. Besides, insurance brokerage firms always offer uncustomary clauses in insurance sector such as goods deficiency in leaden containers, or insurance clauses for risks exclusive in insurance rules and others, leading to lower and lower premium but higher and higher responsibility for insurers. Thus, in order to ensure the operating effectiveness, Vietnam’s Bao Viet has enhanced the appraisal of risks, controlled extensive clauses, tested ship information to provide timely instruction for localities to offer competitive fees, and bid in insurance service for big projects to vie services. At the same time, Bao Viet has piloted measures to limit risks for imported goods with high loss rate.

 

The unhealthy competition mainly by decreasing technical fees and raising exploiting cost has been popular, especially from small-sized insurance enterprises. Foreign-invested insurance companies have still specialised their operations, with strategy of "selecting risks, focusing on targeted market". As a result, although the competition level is not very high, they are effectively controlling chunks of the insurance market. Foreign insurance brokers have been operating efficiently; however, they are shifting from exploitation of assets insurance to more potential insurance services, including healthcare, human, occupation responsibility insurance products.

As of June 2007, Vietnam’s Bao Viet had nearly 4,000 professional non-life insurance agents, operating stably. This force gained a revenue growth of 23 per cent on year. Bao Viet is planning to exploit some 4,300 agents from its life insurance system to develop non-life insurance products. Revenue from these agents was equal to figure of the same period last year.