Among the 90 million people in Vietnam, only 8% have life insurance. The country offers great market potential for life insurance.
Foreign players are being attracted to Vietnam owing to its expanding population and growing middle class. And even though life insurance is available in the country from 1996, it is still seen as a new product. The 8% of the Vietnamese people holding insurance policies is modest, compared with other countries in Southeast Asia, such as Singapore (80%) and Malaysia (75%).
Free trade agreements (FTAs) signed recently by Vietnam, such as the EU-Vietnam Free Trade Agreement (EUVFTA) and the Vietnam-Korea Free Trade Agreement (VKFTA), combined with joining the ASEAN Economic Community (AEC) and the TPP, create opportunities for the development of Vietnam’s insurance industry as more and more foreign investors and expats come to work and live in the country.
The life insurance market in Vietnam recorded an overall positive growth in the early months of this year. According to the latest figures from the Insurance Supervisory Authority (ISA) under the Ministry of Finance, life insurance premium revenue reached US$949.2 million in the first six months, up 36.78 % year-on-year.
However, while insurers are implementing their own strategies to gain more market share and a bigger customer base, human resources might act as a hurdle to their plans. The increasing number of insurance companies over recent years, along with a lack of quality insurance training has created a serious shortage of skilled human resources for the sector, which has resulted in an unfair competition in attracting experienced employees and insurance agents.
In addition, many potential Vietnamese consumers still see insurance as an investment rather than a device to share financial losses caused by unfortunate circumstances. These consumers prefer bank savings or investing in gold or real estate to earn a higher rate of return rather than buying insurance.
According to insiders in the industry, the government must adopt clear legal provisions to facilitate the industry’s growth and also create a favourable investment environment for enterprises in the sector to promote the development of insurance in general and life insurance in the country. Economic strengthening and new innovations from continued FDI also should impact positively on household confidence and future demand for insurance products.