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Outlook for Vietnam's insurance industry

Outlook for Vietnam's insurance industry

Thursday 06, 10 2022
The Covid-19 crisis has offered opportunities for insurers to renew themselves, after a period of making efforts to provide multiple solutions to protect customers, helping them fight against COVID-19.

Insurance market is prospering

Vietnam's economy has shown signs of recovering after more than 2 years of fighting the crisis caused by the epidemic. GDP in the first 6 months of 2022 reached 6.42%, which significantly improved compared to 2.04% in the first 6 months of 2020. In such context, insurance business continued to maintain its stable growth. Premium revenue of the entire insurance market in the first 6 months was estimated to increase 14% over the same period last year.

Vietnamcredit - Ministry of Finance

According to the latest figures from the Ministry of Finance, by the end of July, total assets in the insurance market were estimated at VND 764,978 billion, up 21.35% over the same period last year. In particular, that of non-life insurance businesses was estimated at VND 110,601 billion while that of life insurance companies was estimated at VND 654,377 billion. This is a fairly positive growth rate.

Statistics show that investment into the economy was estimated at VND 643,443 billion, up 23.17% over the same period last year, of which investment from non-life insurance enterprises was estimated at VND 65,997 billion, and that of life insurance enterprises was estimated at VND 577,446 billion.

By the end of July, total insurance premium was estimated at VND 136,951 billion, up 15.24% over the same period last year. Non-life insurance premium was estimated at VND 38,484 billion, up 13.6% over the same period last year; life insurance premium was estimated at VND 98,467 billion, up 15.9% over the same period last year.

Notably, statistics from the Ministry of Finance show that, in the first 7 months of the year, the total value of insurance benefits paid by insurance businesses was estimated at VND 31,803 billion, up 11.05% over the same period last year. The amount paid by non-life insurance enterprises was estimated at VND 10,684 billion while that of life insurance enterprises was estimated at VND 21,119 billion.

Biggest challenge for insurers

Although the premium revenue of the entire insurance market has increased, there is a serious shortage of human resources. The main reason comes from the fact that the number of universities and academies with majors in insurance training is small and the insurance professional training at universities is generally still theoretical.

Faced with a shortage of high-quality human resources, many businesses have recruited personnel who are trained in other specialties and conducted short-term training in basic insurance knowledge.

Vietnamcredit - insurance market

In addition, that the Covid-19 pandemic raged for two years, plus the long-term social distancing caused many workers to fall into unemployment, has made people to choose jobs related to online insurance consulting.

Besides, in order to achieve the expected revenue, expanding the online consulting staff is a priority strategy of insurers during this time. The recruitment of unskilled personnel has caused many difficulties for not only businesses but also customers.

In particular, the shortage of personnel with digital transformation skills is also a dilemma for insurance businesses, hindering the assessment of possible risks related to information security.

Digital transformation in the insurance industry

When the pandemic is over, the importance of digital transformation in all fields and industries, including insurance, has become more obvious.

To make the most of this development momentum, insurers are rushing to perfect and deploy processes related to insurance procedures through digital platforms. Some insurance policies will also be gradually simplified towards digitization to increase automation.

Most insurers are implementing digital transformation programs, while the rest are expected to do so in the near future.

Currently, Vietnam is the 10th country in the world in terms of the percentage of people owning smartphones. The percentage of people using the Internet accounts for more than 70% of the population. Therefore, it is not difficult to understand why most insurance businesses have built their own application on smart devices in the past time, whether at a primitive or integrated level.

Promising outlook for the insurance industry

Vietnam's insurance market is considered to be potential with low penetration rate (premium revenue/GDP) and average premium (per capita insurance spending).

Vietnamcredit - Insurance penetration

Insurance penetration in Vietnam currently hovers between 2.3% - 2.8%, lower than in emerging markets and far behind the rate of 9.6% in developed markets. In Vietnam, per capita insurance spending currently hovers around USD 72-75, which is low compared to USD 175 in emerging markets and far behind the amount of USD 4,664 in developed markets.

The number of people participating in life insurance is only about 10 million people, or about 10% of the population. This ratio is expected to increase to 15% by 2025.

An increase in per capita income is one of the favorable conditions for the development of the insurance sector. According to the Government's 2022 socio-economic development plan, Vietnam's GDP per capita is expected to reach USD 3,900 in 2022. Vietnam has set a target GDP per capita of USD 5,000 by 2025, and USD 12,000 by 2045.

Along with that, the population of Vietnam is in the golden age with an increasing scale. The proportion of urban population is forecasted to grow from 37% at present to 45%.

According to World Bank, the proportion of the population belonging to the middle class in Vietnam will increase from 13% to 26% by 2026. In addition, the insurance industry is also supported by the restructuring of the medical examination and treatment system, the social insurance regime and the ability to increase the rate of customer access through the banking system.

Source: The Ministry of Finance, WB, theleader

Compiled by VietnamCredit

 

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