The Life Insurance Industry Booming in Vietnam

Posted on Aug 11, 2010 by Sergio Ulloa (G+)

The life insurance industry in Vietnam continues to expand. Despite the global economic downturn of 2007 - 2009, the insurance market in Vietnam has been resilient; prompting many leading multinational insurance companies to increase their presence in this growth market. As of July 2010, there were 50 insurance companies trading in Vietnam, this included 11 life insurance companies registered in the country. Established life insurance companies have been able to benefit from their early presence in the emerging Vietnamese life insurance market, and their presence has, in turn, triggered demands for life insurance from the country's 89 million person population. In total, 10 out of the 11 life insurance companies registered in Vietnam are multinational concerns; Prudential, Bao Viet and Manulife are three of the largest life insurance providers in Vietnam, accounting for 80 per cent of the total life insurance market. Scope exists for further growth in the range of life and non-life insurance products which can be offered to clients. In the short-term, the growth in the life insurance market is expected to continue, and generate significant profits for life insurers currently active in the Vietnamese market. The medium/long-term prospects are less clear, as a result of Vietnam's GDP deficit and possible implementation of austerity measures. However, insurance companies still remain focused on increasing business levels, taking advantage of the emerging growth in the economy. Generali obtained a license to set up an office in Vietnam in August 2009 to augment trading levels suffering from a general decline in business worldwide, following the global financial tsunami. Sergio Balbinot, Chief Executive of Generali Group said "Vietnam is strategic in order to strengthen Generali in a region with high growth potential" Three major life insurance providers within the country, Dai-ichi Life Vi?tnam, ACE Life, and Korea Life Vietnam, have all reported high growth rates for the first quarter of 2010. Dai-ichi Life Vietnam, a Japanese owned life insurance company, had a 48% year-on-year increase in new premiums for the first half of 2010, generating VND 120 billion (US$ 6.28 million) in written business. The growth in this market sector has justified the company's decision to invest in the developing Vietnamese economy. The company is investing heavily in the Vietnamese insurance market and is expanding its operation across the country and focusing on customer satisfaction. Dai-Chi will have opened 54 offices nationwide employing 14,500 staff, at an estimated cost of US$ 72 million, by the end of 2010. ACE Life reported approximately 40 per cent growth in the first half of 2010. The company's growth has been driven by the launch of a full range of life products in 2009 that allow individuals and groups between the ages of 0 and 80 to apply; these products can be tailored to suit different financial capabilities and socio-economic concerns. Korea Life Vietnam, a new arrival in the Vietnamese insurance industry, reported approximately 80 per cent growth during the same period. Korea Life is one of the many insurers in Vietnam which is experimenting with the provision of value-added insurance products in addition to simple life insurance. Korea Life, for example, is offering structured retirement plans to policyholders in an effort to entice more consumers to life insurance products. Despite the innovation occurring with individual insurer's offerings, there is significant competition between insurance companies for increased market penetration in Vietnam, and friction between the competitors as they seek consolidation of their presence in the fledgling insurance industry. 11 out of the 10 Life insurance companies in Vietnam are foreign-owned, and influenced by the need to have funds of at least 600 billion dong (US $31 million) in capital - a requirement beyond the reach of most Vietnamese owned companies. Expertise in the life insurance market is essential, combined with a strong management structure and state-of-the-art information technology systems. Bao Viet Insurance Corporation is the only Vietnamese owned life insurance company in Vietnam, and is the largest non-life insurer in the country. Earlier this year Bao Viet announced plans to raise its registered capital to VND 1.5 trillion (US$ 72.2 million), a move to advance its competitiveness against foreign owned corporations operating within the Vietnamese insurance market. Bao Viet Insurance expects to generate a VND 300 billion (US$15.6 million) gross profit by the end of 2010; a 37% increase from the previous years. In comparison to other Southeast Asian countries, Vietnam was impacted by three 'lost decades' of economic development due to war; but is now gaining ground on its fellow ASEAN (Association of Southeast Nations) members. Since the 1997 Asian economic crisis, the Vietnamese economy has boomed due to the Communist Party of Vietnam (CPV) changing from its communist policies and central planning approach, adopted in the late 1980's, and applying its 'doi moi' (renovation) policy. The economic reforms have enabled the country to become one the fastest-growing economies in Asia, and leaving it with the potential to rival the four "Asian Tigers" of Hong Kong, Singapore, South Korea, and Taiwan. The impact of the global economic downturn contributed to Vietnamese domestic inflation hitting 26% in 2008 due to overheated economic growth; partly reflecting the Vietnamese government's renovation policies expanding at a too rapid pace. The demand of Vietnamese goods declined as overseas markets contracted and had a severe impact on the country's exports. However, in 2009 Vietnam still recorded a 5.3% increase in GDP, a sign of the positive fiscal stimulus measures taken by the Vietnamese government. Although the macro-economic position still remains a concern for Vietnam and foreign investors - the fiscal deficit is up to 9% - with a persistent trade deficit and pressure for the Dong to be devalued, a reform of state-owned enterprises and domestic investments remains a key for Vietnam's long term stability and would likely see renewed interests from a myriad of foreign enterprises. By the end of 2010 it is predicted that the Vietnamese insurance market will be valued at in excess of VND 4,8000 billion (US$ 249 million.), with premiums amounting to more than VND 4,200 billion (US$ 218 million) - a 15% increase compared to 2009. The Business Monitor International (BMI) has released a report on the future value of Vietnamese insurance markets, predicting the sector will rapidly soar to a value of VND 58,451 billion (US$ 3 billion) in 2014. Vietnam is now included in the group of six emerging markets, known as CIVETS, which includes Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa. Vietnam is ranked as the third most favored economy within this group. This is combined with the Asian Development Bank (ADB) releasing findings indicating that the Vietnamese economy is on track to reach the National Assembly's GDP growth target of 6.5% - the outlook for this Southeast Asian country looks positive. Insurance Companies Mentioned: Dai-ichi Mutual Life Insurance Established in 1902, Dai-ichi Mutual Life Insurance Co. is the oldest mutual insurer in Japan in Vietnam, Dai-ichi Life ranks third with 50 offices, 400 staff and 13,000 agents. The Dai-ichi Mutual Life Insurance Co. acquired Vietnam's Bao Minh-CMG joint venture in 2007 to establish Dai-ichi Life Vietnam and increased its chartered capital to US$25 million. The Generali Group The Generali Group is one of the most significant participants in the global insurance and financial products market. The Group's Parent and principal operating Company is Assicurazioni Generali, the market leader in Italy. A workforce of 85,000, the Generali Group has over 70 million clients worldwide and operations in 68 countries. ACE Life Vietnam ACE Life is one of the leading life insurers in Vietnam in terms of corporate prestige, customer service and the quality of human capital. In 2008, the company achieved a 184% increase in premiums from the previous year, sustaining its leadership position in the local life insurance market in terms of premium growth. Korea Life Insurance Korea Life was found in 1950, committed to the growth and development of the life insurance industry by protecting the rights and interests of the industry and policy holders. Korea Life held 4% of the life and non life insurance market in 2009. Bao Viet Holdings BaoViet Holdings, through its subsidiaries, primarily operates in the insurance industry in Vietnam. The company provides general and life insurance, and reinsurance service.