University of Economics

Da Nang University
--0--

TOPIC DISCUSSION
INSURANCE MARKET IN
VIETNAM

Group members:
1. Tran Nhat Bao Anh
2. Le Thi Nhat Ly
3. Nguyen Thi Hong Phuoc
4. Nguyen Thi Dieu Vi

Da Nang, 12nd November 2017

 CONTENTS

I. Classification of insurance types based on attributes ......................................................... 1

1. Object of insurance ............................................................................................................... 1
1.1. Human insurance ........................................................................................................... 1
1.2. Civil liability insurance ................................................................................................. 1
2. Management methods ........................................................................................................... 2
2.1. Voluntary insurance ...................................................................................................... 2
2.2. Compulsory insurance ................................................................................................... 2
3. Purpose of operation ............................................................................................................. 2
3.1. Social insurance............................................................................................................. 2
3.2. Commercial insurance ................................................................................................... 2
4. Insurance technique .............................................................................................................. 3
4.1. Life insurance ................................................................................................................ 3
4.1. Non- life insurance ........................................................................................................ 4
II. Market share of Insurance Company in Viet Nam: .............. Error! Bookmark not defined.
1. Number of insurance companies: ........................................ Error! Bookmark not defined.
2. Insurance agents: ................................................................. Error! Bookmark not defined.
3. Type of Insurance in Viet Nam ........................................... Error! Bookmark not defined.
3.1. Life insurance market ................................................... Error! Bookmark not defined.
3.2. Non-life insurance market ............................................ Error! Bookmark not defined.
III. BANCASSURANCE ............................................................................................................ 12
1. Introduction ........................................................................................................................ 12
1.1. Definition .................................................................................................................... 12
1.2. Models of bancassurance: ........................................................................................... 12
2. Benefits of bancassurance: ................................................................................................. 13
2.1. Advantages for the insurance company: ..................................................................... 13
2.2. Advantages for the bank:............................................................................................. 13
2.3. Advantages for the consumer: ..................................................................................... 14
3. Bancassurance market ........................................................................................................ 14
 3.1. In the world: ................................................................................................................ 14
3.2. In Vietnam ................................................................................................................... 15
4. SWOT analysis of bancassurace in Vietnam ...................................................................... 16
IV. Extra information: ............................................................................................................... 17
1. Vietnamese under-developed insurance market in reference to low contribution of
insurance (premium) to GDP and the low rate of people owning life insurance ....................... 17
1.1. Measured contribution of premium of insurance relative to GDP ............................. 17
1.2. Penetration rate involving the rate of people who own life assurance ........................ 18
1.3. Enormous potentialities to further growth in insurances ............................................ 18
2. Obstacles............................................................................................................................. 19
3. Role of insurance to your life. ............................................................................................ 20
3.1. Advantages of insurances:........................................................................................... 20
3.2. Limitation of buying insurance: .................................................................................. 20
4. Suggestions and recommendations:.................................................................................... 21
Group Assignment – Financial markets and institutions Group 6

I. Classification of insurance types based on attributes

1. Object of insurance
1.1. Property insurance
Definition: Property insurance is the image insurance for property objects, including plant,
money, paper value in money and property rights.

Characteristics when buying property insurance:

 An insurer is not liable in case the insured property is damaged due to natural wear and
tear or because of the inherent nature of the property.
 The indemnity paid by the insurer to the insured shall be determined on the basis of the
market price of the insured property at the time. The indemnity paid by the insurer to the insured
shall not exceed the insured sum, unless otherwise agreed upon in the insurance contract

Form of compensation:
 Repair of damaged property;
 Replacement of damaged property by other assets

1.1. Human insurance

Definition: is an insurance that purports to pay a pre-agreed amount to the insured or the
beneficiary in the event of events affecting the insured person

Objects: damage to human beings, but there are risks that occur when not cause damage to
human remains is also the subject of human insurance.

1.2. Civil liability insurance

Definition: An insurance that covers civil liability in connection with the payment of
compensation for injury or illness to a third party or property damage of a third party caused by
the insured person

Objects: liability for damages of insured arising from the liability of the insured in
accordance with the civil liability of the law

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Group Assignment – Financial markets and institutions Group 6

2. Management methods

2.1.Voluntary insurance
Definition: Voluntary social insurance is a form of social insurance in which the employee
voluntarily participates, is entitled to choose the level of contribution and mode of payment in
accordance with his / her income to enjoy social insurance.

2.2.Compulsory insurance
Definition: the type of insurance that an individual or business must purchase in accordance
with the law.

It is mandatory for individuals and businesses wishing to engage in certain financial risk
activities, such as motorists or hire employees.

3. Purpose of operation

3.1.Social insurance
Definition : Guarantee to replace or compensate part of the employee's income when he /
she loses or loses his / her income due to sickness, maternity, labor accident, occupational
disease, death of working age or death, on the basis of Contributions to Social Insurance Fund
(Item 1, Article 3 of the Social Insurance Law)

Purpose: profit and social security purposes

Objects: income of employees

Participants: employees and the employers

The subject of the insurance: social insurance in Viet Nam
Subject insured: employees or members of their families when fully satisfying the
conditions for social insurance according to the provisions of law

3.2.Commercial insurance
Definition: The insurer shall act as a lucrative business under which the insurance
enterprise accepts the risks of the insured, on the basis of the insurer paying the premium so that
the insurer shall pay the insurance premium. beneficiary or indemnity to the insured upon
occurrence of the insured event. (Clause 1, Article 3 of the Insurance Business Law)
Purpose: profit
Object of insurance:asset, liability, human.
Participants: individuals and organizations in society
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Group Assignment – Financial markets and institutions Group 6

The subject of the insurance: domestic and foreign insurance companies operating in
Vietnam

Subject insured: the participant or designee stated in the insurance contract.

4. Insurance technique

4.1.Life insurance
Definition: the type of insurance through which the insurer commits to pay the agreed
amount upon the occurrence of a regulatory event involving the life and health of the person
The subject of the insurance: the type of insurance through which the insurer commits to
pay the agreed amount upon the occurrence of a regulatory event involving the life and health of
the person

Period of insurance: many year

Compensation if there is no risk: If the customer does not take risks during the insurance.
Termination of the contract will be partially or fully compensated by the terms of the contract
Life insurance products have the meaning of life and the meaning of saving investment to
ensure financial

Life insurance products:

 Whole life insurance: Whole life insurance is a contract with premiums that includes
insurance and investment components. The insurance component pays a predetermined amount
when the insured individual dies. The investment component builds an accumulated cash value
the insured individual can borrow against or withdraw. This is the most basic type of cash-value
life insurance
 Term insurance: is life insurance that provides coverage at a fixed rate of payments for a
limited period of time, the relevant term. After that period expires, coverage at the previous rate
of premiums is no longer guaranteed and the client must either forgo coverage or potentially
obtain further coverage with different payments or conditions.
 If the life insured dies during the term, the death benefit will be paid to the beneficiary.
Term insurance is typically the least expensive way to purchase a substantial death benefit on a
coverage amount per premium dollar basis over a specific period of time.
 Combined insurance: is a global provider of supplemental insurance, including accident
insurance, life insurance and critical care coverage.
 Recurring paid insurance
 …

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Group Assignment – Financial markets and institutions Group 6

4.1.Non- life insurance

Definition: Other commercial insurance is not life insurance, the type of insurance through
which the company committed to pay compensation when the insurance event occurs related to
material losses. and human accident, the responsibility of the insured

The subject of the insurance: the type of insurance that targets the property, the person and
the responsibility

Period of insurance: Short for 1 year or less than 1 year

Compensation if there is no risk: If the object is not at risk, the customer does not receive
the money back.
Non-life insurance products are meant to help customers reduce difficulties when goods,
facilities and materials are at risk.

Life insurance products:

 Property insurance:
 Cargo transport insurance

 Construction and installation insurance

 Fire insurance
 …
 Civil liability insurance:
 Motorcycle liability insurance for a third person
 Owner's liability insurance
 …
 Human non-life insurance: Compared to life insurance, life insurance coverage is shorter
and usually 1 year, such as 24/24 accident insurance. The insurance premium is usually
paid once when you sign the insurance contract
 Accident insurance
 Passenger accident insurance
 Insurance for hospital surgery
 …

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Group Assignment – Financial markets and institutions Group 6

II. Market share of Insurance Company in Viet Nam:

The insurance market has more and more participant insurance companies. The number of
insurance companies is increasing, with diversified types of ownership. The number of insurance
products has grown rapidly in both life and non-life insurance in all three areas of human health,
property insurance and civil liability insurance.

1. Number ofinsurance companies:

Before the year 1993, there was only Bao Viet Insurance operating monopoly. But
according to Association of Vietnam Insurers (AVI), by the end of the year 2016, there are 62
insurers and 1 foreign non-life insurance branch in Vietnam, therein:
 29 non-life insurance companies
 18 life insurance companies
 2 reinsurance companies (both are state-owned)
 and 13 insurance brokers (included 5 international companies and 8 local companies)

2. Insurance agents:

TOTAL INSURANCE AGENTS IN VIETNAMESE MARKET 6/2016

500000

400000 437738
404607
300000
294593
200000

100000

0
2014 2015 2016

Source: Vietnamese insurance market report, Thai TradeCenter, 2016

Until the end of June 2016, total insurance agents increased by 29.5% compared with same
period last year to 437,738 agents. Prudential took the lead with 181,808 agents, followed by Bao
Viet life with 94,129 agents and Dai-ichi Life with 53,811 agents.

3. Type of Insurance in Viet Nam

Until the end of 2015, Vietnamese insurance market had total 1,189 insurance products,
which more and more meet the diverse needs of organizations and individuals, contribute to
stabilize the economy and ensure the social security. Therein, motor vehicle insurance accounted

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Group Assignment – Financial markets and institutions Group 6

for the largest share of revenue with 30.08%, followed by health insurance accounted for 23.85%,
property insurance and damage insurance was 18.46%.

Share revenue of insurance products at the end the year

2015
Motor vehicle insurance
27.61% 30.08%
Health insurance

18.46%
Property insurance and
23.85% damage insurance
Others

Source: Ministry of Finance – Department of Insurance Supervisory and Authority (2015),

Report on Vietnam Insurance Market

Insurance companies in Vietnam are operated in life insurance or non-life insurance. In the
period from 2011 to 2015, the average growth rate of Vietnamese insurance market was 16%,
of which non-life insurance raised 11.7% and life insurance increased by 24.6%. Up to the
year 2016, total asset of non-life insurers and life insurersare estimated at 67.585 bilion VND and
171.828 bilion VND respectively.

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Group Assignment – Financial markets and institutions Group 6

3.1.Life insurance market

18 Life insurers

Joint stock Joint-venture Foreign-owned

 Bao Viet Life  Vietcombank – Cadif  Chubb Life

 Phu Hung Life  Vietinbank Aviva  Dai-chi Life
 MB Ageas  BIDV Metlife  Prudential
 Manulife
 AIA
 Prevoir
 FWD
 Hanwha Life
 Cathay Life
 Fubon Life
 Generali
 Sunlife

(Source: Ministry of Finance)

Life Insurance is assessed to be one of the highest growth sectors in Vietnamese
economy. Only the 5 biggest insurance companies hold 85.65% of the Premium revenue market
share. For the year 2016, Prudential is the biggest company in terms of insurance premiums
revenue with the market of 27.11%. The second biggest company is Bao Viet Life (26.02%),
followed by Manulife (11.91%), AIA (10.34%) and Dai-ichi (10.27%), Chubb Life Vietnam
3,99% and PVI Sun Life 2.3%. The other companies are sharing only 8% of market share.

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Group Assignment – Financial markets and institutions Group 6

VIETNAMESE LIFE INSURANCE MARKET SHARE IN

2016

14.35% Prudential
27.11%
10.27% Bao Viet Life
10.34% Manulife
AIA
11.91% 26.02%
Dai-ichi
Others

Source: Ministry of Finance – Department of Insurance Supervisory and Authority

List ofthe top 5 reputed insurance companies, that are trusted by people in Vietnam in
2017according to Viet Nam Report:
1. Prudential Viet Nam Assurance Private Limited

2. Bao Viet Life

3. Manulife Vietnam

4. Dai-Ichi Vietnam
5. Ala (Vietnam) Life Insurance Company Limited

Only Bao Viet Life is domestic insurer and 4 of 5 above list of insurers are foreign-owned.

3.2.Non-life insurance market

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Group Assignment – Financial markets and institutions Group 6

30 non-life insurers

Joint stock Joint-venture Foreign-owned

 Bao Viet  UIC  AIG

 Bao Minh  Bao viet Tokyo  QBE
 Bao Long  Marine  Groupama
 PVI  ACE
 PJICO  Liberty
 MSIG
 PTI
 Fubon
 VASS  PAC
 GIC  Cathay
 ABIC  Samsung
 MIC  IAI
 VNI  Hanoi
 HVI
 BSH
 Vietinsco
 XuanThanh
 BIC

(Source: Ministry of Finance)

Conversely, domestic companies hold almost non-life insurance market share. According
to Ministry of Finance-Department of Insurance Supervisory and Authority, until the end o f
t h e y e a r 2016, the 5 biggest non-life insurance companies hold more than 59.48% of market
share, other 24 companies only account for 40.52% market share. PVI Insurance took the lead
with 18,65% of the market share, followed by BaoViet Insurance with 17,41%, Bao
Minh8,34%, PTII nsurancewith 8,30% and PJICO Insurance 6,78%.

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Group Assignment – Financial markets and institutions Group 6

VIETNAMESE NON-LIFE INSURANCE MARKET

SHARE IN 2016

18.65% PVI Insurance

40.52%
17.41%
Bao Viet
8.34%
Insurance
6.78% 8.30% Bao Minh

Source: Ministry of Finance – Department of Insurance Supervisory and Authority

List of Top 5 insurance company reputed nonlife 2017 trusted by people in Vietnam,
according to Viet Nam Report:
1. Bao Viet Insurance

2. Bao Minh Insurance Corporation

3. PVI Insurance Corporation

4. Military Insurance Corporation

5. PetrolimexInsurance Corporation

All of above insurers are state-owned insurancecompany.

It is clear that the companies in above list are also the highest revenue companies in the
insurancemarket share. Companies, those existed and developed over many years with the
preferential policies, good sales service, good customer care, and understands the market as well
as the needs and desires of the Vietnamese.

(a) Highlight company: BaoViet Holdings

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Group Assignment – Financial markets and institutions Group 6

BaoVietwas established on 15 January 1965. Operating more than 50 years, Bao Viet is one
of the leading Finance - Insurance groups in both life insurance and non-life insurance market in
Vietnam. On 14 September 2017, according to Forbes Vietnam, BaoViet Holdings is one of the
companies in list of 50 best listed companies in Vietnam in 2017. That means BaoViet is still
leading the insurance industry for five consecutive years in the Forbes 50.

In 2016, BaoViet exceeded the business plan and become the first Finance-Insurance Group
in Vietnam exceeding USD1 billion in revenue. BaoViet became the Finance - Insurance Group
with largest network in Vietnam, by opening 6 more member companies in non-life business and
5 more companies in life business, bringing the total number of companies to more than 180
across 63 cities and provinces nationwide. Most of life insurance companies in Vietnam are now
the largest foreign-owned company, only Bao Viet Life Insurance is Vietnamese insurance, still
maintain the leading position throughout the history of its operations.

Business goals and strategies:

 Giving to customers dedicated service, dedicated professional and perfect.

 Bao Viet’s successful application of centralized management model and new IT
solutions in management lead to the reduce costs and improve the effectiveness of
operation.
 Receive and apply effectively and appropriately the experience and capacity
transferred from strategic partner HSBC Insurance
 Focus on developing Bancassurance distribution channel to catch the trend Future
distribution channels.
 Bao Viet also pioneered the financial supermarket system with the model of One Stop
Shop - The model is being deployed in leading countries with the world's leading
financial-insurance industry such as Japan, the United Kingdom and Canada. BaoViet
One Stop Shop operated as a convenient financial supermarket with full range of
products that can meet the needs of insurance, investment, finance and banking in the
same location.

Besides pursuing its business goals, BaoViet also demonstrates great care for the
community through its Corporate Social Responsibility activities. Bao Viet commited economic
growth with environmental protection and social responsibility. As of 2016, the Social Security
Fund of BaoViet has invested more than VND 200 billion for community activities with four
main focuses: poverty alleviation; investment for education and youth; gratitude to senior

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Group Assignment – Financial markets and institutions Group 6

officials and to overcome the consequences of natural disasters. Bao Viet organized Public
Relations Divisions which represent BaoViet to support a broad range of projects across the
community in Vietnam such as education, community welfare, and environmental protection.
With the effective and flexible business strategies and the long time established, BaoViet
holding is worthy of being a leading insurance company in Viet Nam.

III. BANCASSURANCE

1. Introduction

1.1. Definition
Bancassurance is a compound word of French, Banque (bank) and Assurance (insurance).
Bancassurance means selling insurance product through the bank windows. In the other words,
banks and insurance company come up in a partnership wherein the bank sells the insurance
company’s insurance products to its clients.

1.2. Models of bancassurance:

Participant Model Contents

Bank: Commission revenue by

selling insurance products;
Sales
Insurance Bank Insurance company: Product
alliance
development, underwriting,
retention, sales training, etc.

The bank establishes a life

Affiliated Bank Insurance insurance affiliated company
company (Affiliated company) and runs the insurance
business.

The bank and the insurance

company establish an
Establish
Joint insurance affiliated company in
insurance
venture Insurance joint, or own sales affiliated
company Bank
company together after
establishment.

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Group Assignment – Financial markets and institutions Group 6

The financial hold company is

Bank holding company established, and the bank and
Financial the insurance company are
holding included in the same financial
company group, which can resolve
interest conflict between the
Insurance Bank Securities Credit card
bank and insurance company.

2. Benefits of bancassurance:
Bancassurance is a win for all.

2.1. Advantages for the insurance company:

- Through this new distribution network, the insurance company significantly extends its
customer base and enjoys access to customers who were previously difficult to reach. This is
obviously a fundamental advantage, it is itself enough to convince an insurance to ally itself with
a bank;
- The insurance company has the opportunity to vary its distribution methods, in order to
avoid excessive dependence on a single network. Diversification reduces risk;
- The insurance company often benefits from the trustworthy image and reliability that
people are more likely to attribute to banks;
- The insurance company also benefits from the reduction in distribution costs relative to
the costs inherent in traditional sales representatives, since the sales network is generally the
same for banking products and insurance products. This means that products can be sold more
cheaply.

2.2.Advantages for the bank:

- First of all, the bank sees bancassurance as a way of creating a new revenue and
diversifying its business activities. It allows banks to add new products to their customers but is
not required to raise capital on a risk basis as for other traditional products. Due to in the early
1990s, increased competition between financial institutions and a reduction in the bank’s profit
margins and, therefore, the need to look for new business;
- The sale of insurance products simultaneously with credit services also helps the bank
reduce the risk of not recovering the debt when the risk comes to the borrower at the bank.
- The bank becomes a sort of “supermarket”, a “one-stop shop” for financial services,
where a “customers’ needs- whether financial or insurance related- can be met. The broadening
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Group Assignment – Financial markets and institutions Group 6

of its product range markets the bank more attractive and can reinforce satisfaction and therefor
customer loyalty;
- The distribution costs can be seen as marginal since, in most cases, it is the bank’s
existing employees who sell the insurance products. Amongst other things, the one-stop shop
model optimizes the use of the network and increases profitability of the existing branch network.

2.3. Advantages for the consumer:

- As mentioned among the advantages for the bank, the consumer enjoys greater access to
all financial services from a bank that offers both banking and insurance products;
- Since the distribution costs are lower than in a traditional distribution network, the
consumer can usually get cheaper insurance products than through traditional channels. In
addition, premium payment methods are simplified, since premiums are collected directly from
bank accounts;
- The special relationship between the customer and the bank means that there is a better
match between what the customer needs and the solutions provided by the bank. In summary, we
would say that customers benefit from the opportunity to get simple, often inexpensive insurance
products with a premium payment system adapted to their needs (usually monthly installments)
and with easy access, since the branch network is usually denser than the network of insurance
outlets.

3. Bancassurance market

3.1. In the world:

In developed countries, bancassurance is the main insurance distribution channel,
accounting for 70% of the sector's revenue; In Indonesia and Thailand, the contribution rate of
bancassurance is over 40%;…

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Group Assignment – Financial markets and institutions Group 6

Distribution Share of Bancassurance Channel

Non-Life Insurance Life Insurance

UK 12.50%
12.50%
Spain 14%
69.50%
Maly 5.50%
62.50%
Germany 11%
20.50%
France 12.50%
62.50%
Vietnam 6.50%
4.50%
Thailand 13.50%
36.00%
South Korea 15.50%
60.50%
Mexico 13.50%
30.00%
Japan 3.50%
7.50%
Indonesia 12.50%
41.50%
India 40%
12.50%
Hong Kong 12.50%
50.50%
China 4.50%
37.50%
Chile 30.50%
6.50%
Brazil 15.50%
80.50%

Source: Finaccord Global Bancassurance, 2010/2011/2012

3.2. In Vietnam
- Majority of customers access insurance products through agents. Therefore, by the end of
2016, only 10%;
- Last 2 years, the increasing bancassurance deals have demonstrated that the competition
in the sector is heating up. With the advantage of various branches all over the world, modern
facilities and experienced staff. Commercial banks are now hunted by insurers. Competition in
bancassurance is getting fiercer, as most local insurers have joined or tried to join this sector.
Nevertheless, the number of commercial banks is limited, and some have signed exclusive
contracts with other insurers. Thus, if they do not act in time, some insurers will not find
appropriate banking partners and may lose in the bancassurance race.

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Group Assignment – Financial markets and institutions Group 6

- According to data of the Ministry of Finance in 2017, total new premiums were estimated
at 7,698 billion VND, up 33.8% over the same period last year and life insurance premiums
Accumulated (both old and new) in the first five months of 2017 is estimated at 22,266 billion, up
31.1% over the same period in 2016.
- Market share of premium income through bancassurance channel:
 Bao Viet: 21.8%;
 Prudential: 19.3%;
 Manulife: 14.2%;
 Dai-ichi: 14.1%;
 AIA: 11,5%;
 Generali: 6,4%;
 Chubb: 4,1%;
 Hanwha: 2,9%;
 Sunlife: 1,1%

4. SWOT analysis of bancassurace in Vietnam

Strength Weakness
- Potential and large market; - Conflict in Employee Use;
- Few substitutional product; - Overlapping insurance products and
banking products;
-A large number of traditional customers.
- Conflicts between traditional and
bancassurance channels.

Opportunity Threat
- Social development, the demand for - No clear legal framework;
insurance increased; - Fierce competition, demanding affiliate
- International integration, access to modern products must be diversified, quality;
technology. - Insurance practices are quite new,
building trust in the insurance products
with customers;

- Requires modern technology.

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Group Assignment – Financial markets and institutions Group 6

IV. Extra information:

1. Vietnamese under-developed insurance market in reference to low contribution of

insurance (premium) to GDP and the low rate of people owning life insurance
The Vietnamese economy has continued its robust growth since the early 21st century with
a population reaching 90 million, of which 60% are aged under 30. Per-capita GDP exceeded
2,000 US dollars in 2014, and the economy is set to grow further.

1.1. Measured contribution of premium of insurance relative to GDP

Figure 9: Total premiums in 2014 relative to GDP

Not surprisingly, the market with the highest rate is Singapore, although it still remains
relatively modest when compared to more developed insurance markets such as in the UK or
Japan. Other countries, including ASEAN’s three most populous countries - Indonesia, the
Philippines and Vietnam - are notably under-developed, which means that ASEAN’s growth
potential for insurance remains very large.

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Group Assignment – Financial markets and institutions Group 6

A recent statistics announced illustrate that in the year of 2016, insurance coverage in
Vietnam now represents some 2% of gross domestic product (GDP), lower the average of 3.55%
in ASEAN, 5.37% in Asia and 6.3% in the world.

1.2. Penetration rate involving the rate of people who own life assurance
For the past 10 years (2006 – 2016), the life insurance market in Vietnam has continued to
grow at an average annual rate of more than 20%. Yet, life insurance covers only five million
people, or about 6% of the population, according to Dai-ichi Life Vietnam’s report on Special
feature - Overseas life insurance business.
“The penetration rate of life insurance, usually measured as the number of individuals who
actually own life insurance, is still low in Vietnam relative to other Southeast Asian countries,”
Mr. Steve Clark, Country Head of Prudential Vietnam. Average insurance premiums stand at
only $30 in Vietnam, much lower than the global average of $595 and $74 in Southeast
Asia. Only 7 per cent of Vietnam’s 90+ million people have life insurance and the sector
contributes a modest 2 per cent to GDP, compared with more than 2.6 per cent in Indonesia and
11-14 per cent in South Korea and Singapore.

To sum up, the proportion of Vietnamese people who actually possess life assurance is
notably low, about 6 to 7 percent, especially in comparision with the other developed countries in
Southeast Asia.

1.3. Enormous potentialities to further growth in insurances

 The young middle class and rising wages turns (a) to life insurance products, with health,
savings now being one of the leading concerns among Vietnamese people, according to a
February report released by global market researchers Nielsen.
 Vietnamese’s awareness of necessity for insurance is increasing. Besides, prejudice as
well as misconception of insurance as above, some of Vietnamese people sincerely care more
about insurance regarding risk management solution. Besides compulsory insurance for fire risk
and motor vehicles and so on, people have to confront with many floods and droughts in the past
of few years and also a rise of cancer risk due to unsafe food, which makes them truly pay
attention to insurances, regardless of property insurance, life insurance and health insurance as
well.

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Group Assignment – Financial markets and institutions Group 6

2. Obstacles

A. From the policyholders’ perspectives:

 Awareness among Vietnamese people about life insurance may have increased but most
still do not think it is worth it. Furthermore, almost all Vietnamese people are wary or believe it
unnecessary to buy insurance because they do not have a thorough understanding of its
importance.
For the most part, many potential Vietnamese consumers still see insurance as an
investment rather than a device to share financial losses caused by poor fortune. So, they prefer
bank savings or investing in gold or real estate, where they earn a higher rate of return, than
buying insurance
Secondly, Most people believe that insurance especially life and health insurance are
mainly for high-income earners. Lower premiums to mid and low-income earners are yet to be
introduced, even though they are the majority of the population and are vulnerable to financial
incidents.
 Life insurance products usually involve a long contract term, so many customers are
concerned about their ongoing financial capacity
 At the same time, doubts about foreign life insurers’ commitment to permanent operations
in Vietnam add to the low penetration rate.

From the issuers’ perspectives:

 Life insurers have only focused their operations in big cities while overlooking the 70
percent of the population that still lives in rural areas.
 Life insurers have only focused on building their brand and image and not on activities to
promote basic insurance knowledge
People may say as below as asked about buying life insurance:
"There's no one telling me to get one," or
"No one knows what life insurance covers, what it gives the policy holder, or what the
benefits are."
 While life insurers focus on implementing their own strategies to gain more market share
and sign up more customers, their ambitious plans may fail due to problems relating to human
resources with reference to a lack of quality insurance training skilled and integrity employees
and insurance agents.

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Group Assignment – Financial markets and institutions Group 6

3. Role of insurance to your life.

Before considering going without any kind of insurance, remember that some kinds of
coverage are mandatory. If you drive, you must have auto insurance in most states. If you buy a
home with a mortgage, the lending bank will require you to carry homeowners insurance to
protect its collateral. The Viet Nam Social Security will require all people to carry health
insurance -- or have health insurance provided by an employer. All the risks of being unprotected
far outweigh the benefits of saving money in the short term. Those kinds of above insurances are
must-have insurance.
Besides, because the two types including saving accounts and life insurances both have
meaning of saving and investment somehow, rather than the non-life insurance which mainly
focuses on risks of properties and protection against those risks. Thus, we make a comparision of
saving account and life insurance.

3.1. Advantages of insurances:

- Protections/guarantees of financial against risk in the future. This is also a major function
of all kinds of insurance, regardless of life or non-life insurance.
- Increase the awareness of people about risks of death, illness, fire and so on and propose
life insurance as a protection of financial threats.
- As for the non-life insurance and the temporary or short-term insurance (eg: ), the cash
value would be lost if not any risk happens to the policyholder. But as for the life insurance, for
example whole life insurance or universal insurance, the returned premiums plus interests on
returned premium would be refunds the policyholder. These days, when the interest rate in the
bank is no longer always higher than that of insurance company, life insurance help the
policyholder have to build the habitat of saving money.
- Products have varied to satisfy the needs of risk protections, savings, and sometimes
investments.

3.2. Limitation of buying insurance:

- Losing of trust. Most of insurance companies haves followed the laws that promulgated
by the Ministry of Finance including, the regulation of contracts to ensure the rational interests of
policyholder, but the insurance agents that quite frequently conceal and vague or unclear
explanation to set contracts. Thus, most of the lawsuits of insurance proceed from the disguise of
agents. Besides, most of the life insurance companies are foreign companies, people may think as
it bankrupt, the point is such company may keep their premium back to its countries without
refunding their money

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- Some of the clauses of the contract further complicated especially relating to interests and
which amount of premium to calculate interests, which require significant consideration from
purchaser. However, Vietnamese sometimes skip reading and checking due to the belief to the
agents and their relatives who occasionally their advisors.

4. Suggestions and recommendations:

There are 3 main things, that people should take into consideration when they are going to
buy any kind of insurance.
 The financial capacity and credibility of that insurance company. These days, besides
depending on the suggestions from relatives, this may evaluated through some of the
investigations. (For example: The list of 2016 Top 10 Vietnam Most Reputable Insurers was
selected and ranked by Vietnam Report and online newspaper Vietnamnet on the basis of three
criteria being financial capacity, media credibility, and customer satisfaction towards insurance
products and services offered by insurance companies)
 Do that company has product that suits your need and your financial condition. Is it short-
term (1 year as for non-life insurance or 15-30 years applied to temporary life insurance) or long
tern (for example: until you get 100 years old)? Have you considered cash value life insurance?
 How is its agents, is it considerate and well-informed? Though this may be frequently
ignored by the purchaser, soon after, they will realized its consequence as this agent will be the
intermediate to connect between policyholder and issuer and play the crucial roles helping the
policyholder.

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Group Assignment – Financial markets and institutions Group 6

References:
[1] Ministry of Finance – Department of Insurance Supervisory and Authority (2016),
Overview of Vietnam insurance market
[2] Insurance Supervisory Authority Ministry Of Finance Vietnam’s report (2016)
[3] (2012). Finaccord Global Bancassurance.
[4] (2016). http://english.vov.vn/economy/bancassurance-to-become-new-trend-for-insurers-
and-commercial-banks-355994.vov.
[5] (n.d.). https://spib.wooribank.com/pib/Dream.
[6] ASEAN Insurance Markets Integration, regulation and trade | October 2015
[7] Http://english.vietnamnet.vn/fms/business/171128/vietnam-s-insurance-market-posts-
robust-growth-in-2016.html
[8] Life Insurance Market growing at more than 20% on average (http://www.dai-ichi-life
hd.com/en/investor/library/annual_report/2017/business/vietnam.html)
[9] http://english.vietnamnet.vn/fms/business/177658/vietnam-s-life-insurance-market-faces-
challenges.html

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