Vietnam Insurance Market: An Important Capital Channel

 

So far, Vietnam has more than 700 life and non-life insurance products in three fields of insurance: human, asset and responsibility insurances. Mr Truong Hung Long of the Finance and Banking Department under the Ministry of Finance said the insurance product has shifted from short term to long term. “With this change, insurers have set up a major and long term capital market for social and economic development investment.” In 2006 alone, insurers mobilised VND34,400 billion (US$2.15 billion) for the national economy, much larger than the amount of VND5,784 billion (US$361 million) in 2001. This figure proves the insurance sector's increasingly important role in the Vietnamese economy.

 

Long said insurers have initially provided packages of non-life insurance products instead of separated items, while they provide full traditional life insurance in combination with protection and saving factors.

 

According to the latest figure released by the Vietnam Insurance Association, six of the eight life insurers in Vietnam are foreign. Prudential is the market leader with 41.6 per cent of market share (based on premiums), followed by Bao Viet with 36.5 per cent, Manulife with 10.58 per cent and the five remaining with 10 per cent.

 

As for the non-life insurance market, as of late 2003 three state-run non-life insurance firms kept over 70 per cent of the market share, while seven foreign-led insurers held only 7 per cent. As of late 2005 Bao Minh, after going public, kept 21.76 per cent of market share and two other state-run insurers retained over 50 per cent, with Bao Viet holding 38.65 per cent. According to experts, the concentration of the Vietnamese insurance market is quite high compared with regional countries.

 

In fact, non-life insurance products are mainly for big and important projects, and projects using State funds. Insurers have not paid much attention to non-life insurance products like family insurance packages, SME guarantee, export insurance, credit and financial risk insurance, natural disaster insurance, agriculture insurance, lawyer insurance, consulting and designing insurance.

 

Experts said the Vietnamese insurance market has not met its potential. In spite of the 35.15 per cent average growth in 2001-2005, premiums accounted for only 2 per cent of GDP, much lower than the world average of 7.7 per cent. Life insurance premiums have so far equalled just over 1 per cent of GDP and 3.24 per cent of total savings. With a population of over 82 million people, only some five million have access to insurance, with average premiums of US$10.

 

Global insurance market experience shows that insurance always has an advantage over other financial services, and is the most important capital channel on the financial market. Therefore, the potential of the Vietnamese insurance market remains huge in the coming time.

 

Vietnam now has 37 insurance companies operating in four fields of non-life insurance, life insurance, reinsurance and intermediary insurance. The insurance market includes four state-owned insurance companies, 15 joint stock companies, five joint ventures and 13 wholly foreign-owned firms. In addition, there are 35 foreign insurance offices in Vietnam. Total 2006 premiums were VND18,000 billion (US$1.125 billion), an increase of 14 per cent against 2005, including VND15,300 billion from fresh premiums and VND2,700 billion from investment activities.