Vietnam's insurance industry is benefitting from the country's GDP growth, as is shown by the sector's 21% increase in total premiums to VND47.17 trillion (US$1.8 billion) in the first half of this year.
Insurance growth is forecast to continue as GDP growth is projected at more than 6% annually over the next three years, reported Vietnam News. Swiss investment bank UBS has forecast that Vietnam's economic growth will expand by 6.5% this year.
Of the total premiums, the revenue from life insurance was VND27.83 trillion and nonlife insurance premiums stood at VND19.34 trillion in the first six months of this year, said Ph?m Thu Huong, deputy director of the Ministry of Finance’s Insurance Supervisory Authority (ISA).
There is great potential in the market as the country has a life insurance penetration level of at less than 1%. Only 7% of Vietnam's 93 million people have life insurance.
However, there remain many challenges in the emerging sector.
ISA director Phung Ngoc Khanh said that awareness among Vietnamese people about life insurance may have increased, but most still don’t believe that insurance is worth the expense.
Life insurance policies are usually for the long term, so many customers are concerned about their financial ability to maintain premium payments. Doubts about the commitment of foreign life insurers to permanently operate in Vietnam also contribute to the low penetration rate.
In addition, many Vietnamese see insurance as an investment, rather than as a protection product. They prefer bank savings, or gold and real estate investments, which have a higher rate of return.
The low penetration rate also stems from the fact that life insurers have only focused their operations in big cities, overlooking 70% of the country’s population that live in rural areas.