Vietnamese insurers have been offered great opportunities to expand their market share in the regional market thanks to the formation of the ASEAN Economic Community (AEC). With total gross domestic product of US$2.6 trillion and a population of 625 million, ASEAN will represent a large market for insurance products, reported Viet Nam News, the nation’s official English daily.
According to Milliman – a US-based multinational consultancy provider, life insurance penetration rates in ASEAN markets are still at very low levels relative to those in more developed economies.
In 2013, Singapore was the most developed country in the ASEAN bloc and yet it only reached premium revenue of 4.8% of its GDP, which was much lower than that of Hong Kong at 12.1% and 8% in Japan.
Most of the ASEAN countries have a penetration rate of less than 2% and this will be a great opportunity for life insurers to expand their market share.
Creating a fair market for Vietnamese and foreign insurers
Mr Nguyen Viet Loi, Director of Institute of Strategic and Financial Policies (Ministry of Finance), was quoted in the English daily to say the removal of barriers and differences among AEC member nations will create a fair market for Vietnamese and foreign insurance companies.
He added that currently, foreign investors are now allowed to own a maximum of 49% stake in local insurance firms, highlighting the importance of foreign investors’ participation in enhancing the administration of Vietnamese insurance service suppliers, as well as in developing new products and improving service quality.
Besides opportunities, Vietnam will face many challenges when joining AEC, Mr Loi noted. This will put pressure on Vietnam to reform its policies in the field as other regional nations are quick to improve their liberalisation policies, he said.
A strengthened effort from insurance firms is needed to increase their competitiveness, he added.
Mr Tran Duc Trung Deputy Head of Insurance Market Development Division, Insurance Supervisory Authority, said it is necessary for both Vietnamese State management agencies and insurance firms to take synchronous measures in order to take advantage of opportunities brought by AEC and realise targets of market development in the field.
The Ministry of Finance should continue to reform the insurance-related legal system, and insurance firms need to devise more solutions to increase the efficiency of their operations and improve the quality of services, he said.