By the end of 2020, the Vietnam market has 69 companies operating in different insurance segments, of which 31 are non-life insurers, 18 are life insurers, 2 re-insurers, 18 insurance brokers, 1 branch of foreign non-life insurers, and 21 representative offices of foreign insurance companies.
The market is providing 850 non-life insurance schemes and 450 life insurance policies. By the end of 2020, there are about 10 million people are participating in life insurance nationwide, equivalent to 10% of the population. The number of people participating in short-term medical and health insurance is about 4 million people. In the meantime, 12 million students have health and accident insurance. During 20 years of operation, these businesses have compensated and paid insurance benefits up to VND 340 trillion.
The market is concentrated, market share has been divided into top players.
Source: ISA, VNC
However, the market share of the top 5 tended to decrease, from 63% in 2015 to about 58% in 2019 and the remaining was nearly 55% by the end of 2020. In recent years, the competition not only in the Top 5 largest market share but also in the lower-group businesses such as MIC, VBI, ABIC, VBI, BSH, Samsung Vina, VNI, VASS ... thanks to the speed rapid growth. With a flexible development strategy, observers believe that the market share from these businesses will continue to increase in the coming time. These entities have the ambition to drastically change their market share through occupying positions in the Top 5.
Life insurance products are developing more and more diversified to meet the needs of insurance participants. In addition to implementing health insurance and health care products with diverse interests, life insurers also develop investment-linked insurance products associated with the growth of the stock market.
Insurance Intermediaries Performance
Insurance brokerage activities continued to develop stably, playing an important role in supporting the development of the insurance market. Three companies with the largest market share ranked in order are Aon, Marsh, Willis Tower Watsons with a total market share of 85.9%. The market share of the FDI sector was 92.5% while domestic companies’ one was 7.5%.
Two players in Vietnam’s re-insurance market are PVIRe and VINARE. Both firms saw significant growth in premiums revenue, however, the future profit are expected to remain the same.
In recent years, insurance has been and is a key point in the growth strategy of many commercial banks. According to the statistics of life insurance companies, the new insurance premium revenue accounted for about 90% of the total market premium, of which bancassurance contributed 30%. Instead of training their skilled workforce, life insurance companies competed to give large upfront payments of hundreds of millions of US dollars for banks to distribute their insurance products.
Fierce competition has taken place between top players. Thereby, companies with small capital, weak in technology can hardly develop and has loss risk in the long term, even leading to many consequences for regulators, insurance companies, and customers.
According to data from AXCO (2020), Vietnam has a lower penetration level compared to some peer countries expressed by GDP contribution percentage and the premia per capita. Besides, this industry has made strong progress in terms of both market size and value in recent years. Vietnam’s gross written premium has grown from VND 36,552 billion (USD 1.7 billion) in 2011 to VND 182,654 billion (USD 7.9 billion) in 2020, indicating a 19.57% CAGR and making Vietnam one of the fastest-growing insurance markets in the region.
Vietnam’s insurance market is at an early stage of development, so the exploitation potential is still very large. Due to attractive high growth potential, foreign enterprises tend to enter the market through a cooperative model or M&A activities.
With the rise of modern technologies include cloud computing, big data analytics, artificial intelligence, the blockchain,…insurance companies can focus on a more targeted approach when identifying customer groups. With a deeper well of customer information to hand, premium price are becoming fairer and more accurate. They can also develop automated handling with on-demand case information.
After years of preparation and negotiation, Vietnam and the European Union have entered the EU - Vietnam Free Trade Agreement (“EVFTA”), which came into effect on 01 August 2020. Generally, Vietnam maintains the level of most commitments in the WTO Schedule and Vietnam's domestic regulations regarding direct insurance but expands market access commitments in terms of reinsurance and insurance brokers.
In 2020, the Government continues to issue new decrees and circulars to improve the legal framework of the insurance business more suitable for opening up and to deal with the impact of the Covid-19 pandemic.
Circular 89/2020/TT-BTC revised regulations on professional provisions to help businesses reduce pressure on capital in the short term and have a suitable time for the implementation of overall financial plans, business stability. This Circular takes effect from 26 December 2020.
Decree 03/2021/ND-CP issued by the Government on 15 January 2021, stipulates that insurance enterprises can actively consider and increase the premium price up to 15% of the premium calculated by the Ministry of Finance, coverage time lasts up to 3 years. Also, the insurance enterprise is responsible for advance compensation for damage to the health and life of the customer. This Decree takes effect from 01 March 2021.
According to Insurance Industry Report 2021 published by VietnamCredit in March 2021 Vietnam’s Insurance Industry has some opportunities and faces some challenges.
The insurance sector development benefits from Vietnam's favorable macroeconomic conditions and financial stability. Moreover, people's awareness of health protection is increasing, especially in the middle class. The heightened risk awareness following the arrival of the Covid-19 pandemic will drive demand for health insurance.
The required legal capital of Vietnam is still low compared to the financial capacity of world financial institutions. Furthermore, the trend of state divestment in non-life enterprises also increases the attractiveness of this sector to foreign investors.
EVFTA came into effect on 01 August 2020 which offers opportunities to cooperate with qualified foreign investors, capital, technology. This helps the insurance industry’s growth and development to a high level.
The average income level of Vietnamese households is still low compared to the affordable cost of life insurance. In particular, the Covid-19 pandemic increasing unemployment, reducing wages which lowers the disposable income of the people. Moreover, the confidence of the Vietnamese people in insurance companies is very low.
Domestic firms are under pressure to narrow the market due to the expansion of the government’s mandatory health insurance program as well as competitive pressure and the risk of takeovers or mergers when EVFTA came into effect. While the Covid-19 pandemic is quite complicated and has not been effectively controlled, they need to find solutions to reduce costs to maintain profit margins.
Most of the large and efficient domestic insurance companies have completed their search for foreign strategic partners. So the opportunities for new FDI capital may be limited. Likewise, falling interest rates and capital market volatility can affect investment returns.
For more information about the insurance situation in Vietnam and top 10 outstanding companies, please refer to the Insurance Industry Report 2021 of VietnamCredit.
Written by Helen Vu - Vietnamcredit