Life insurance in Vietnam continues on a steady growth trajectory. Total life insurance premiums collected in 1H2017 amounted to VND27.83 trillion (US$1.06 billion), according to the Ministry of Finance's Insurance Supervisory Authority (ISA). This is a marked increase from VND21 trillion in the same period last year, which was in turn a 37% rise from 1H2015.
There is great potential in the market, given that life insurance penetration level is at less than 1%. Only 7% of Vietnam's 93 million people have life insurance. Average premiums stand at $30, much lower than the global average of $595 and Southeast Asia’s $74, noted a Vietnam News report.
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. They are wary of it and think insurance is unnecessary, and they do not have a thorough understanding of its importance.
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—the fast-growing market and rising living standards had prompted a number of these foreign companies, including the UK’s Aviva Plc and Canada’s Sun Life Financial Inc, to step up their presence in the country.
In April, Aviva Plc acquired a 50% stake in Hanoi-based VietinBank’s life insurance joint venture, VietinBank Aviva Life Insurance Ltd (Aviva Vietnam). Meanwhile, Sun Life took full control of the joint venture PVI Sun Life Insurance Company Ltd last year, by acquiring the remaining 25% stake from PVI Holdings.
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.
Besides traditional sales methods, life insurers have also started partnering with commercial banks to increase sales.
Though bancassurance in the country has remained sluggish, contributing only 2% to the total turnover of the insurance market, analysts believe that this channel holds great potential, with some 35 commercial banks and financial institutions collaborating with insurers, said Vietnam News.