The insurance market is continuing to maintain the growth momentum from previous years. Financial capacity of insurance companies has been strengthened with 18 enterprises increasing their charter capital with a total amount of more than VND 20.4 trillion. Total insurance revenue of the whole industry reached VND 160,444 billion, equivalent to 2.9% of GDP. Insurance benefit payment was VND 38,524 billion, of which non-life insurance accounted for VND 19,874 billion while life insurance accounted for VND 18,650 billion.
Insurance products are increasingly diverse and designed flexibly to meet the needs of customers. There are approximately 850 non-life insurance products and 450 non-life insurance products. Insurance consultancy and business network is constantly expanding. Preliminarily, insurance enterprises have nearly 1,000 branches and representative offices operating nationwide.
In 2019, the entire insurance industry is expected to maintain a growth rate of 20%, enhancing the safety, sustainability and efficiency of the market and the ability to meet the diverse insurance needs of organizations and individuals, contributing to stabilizing the economy and ensuring social security. When the domestic economy is forecasted to grow steadily in the next few years, the middle class will expand, income will increase, and the demand for health and property protection will increase accordingly, which is the basis for the development of health and motor vehicle insurance products. Import and export commodity insurance will not experience good growth due to the impact of the decline in global trade.
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Although it is forecasted to be one of the most potential industries in Vietnam, the insurance industry will still face many new challenges in the near future.
Firstly, non-life insurance companies are facing difficulties in gaining profit. The growth of the whole insurance industry in 2018 reached a double-digit figure, which is only the growth of insurance premiums. From the profit perspective, more than 55% of the non-life insurance enterprises reported losses in 2018. The reason explained is that they were affected by the reduction of Government bond interest rates, along with the sharp decline of the discount rate applied to the technical contingency. Along with that, according to the Law on Insurance Business, many non-life insurance enterprises have to make large provisions, which may even account for two-thirds of operating expenses.
Secondly, insurers are competing fiercely to gain market share. Survey results of insurance companies showed that more than 92% of businesses said that "competition in the industry is getting fiercer".
There are 18 life insurance companies, most of which are foreign ones, sharing small pieces of cake. In contrast, the non-life insurance sector is attractive to new investors as the demand for motor vehicle and health insurance products is increasing, while there is a shortage of high-quality products, especially for individual customer. In addition, small non-life insurance enterprises are getting stronger and ready to compete with large enterprises. According to data from the Vietnam Insurance Association, the market shares of the top 5 leading insurance companies including Bao Viet, PVI Insurance, PJICO Insurance, PTI Postal Insurance and Bao Minh Insurance are on a downward trend (from 70% to 60%), which increase the market share for small non-life insurance enterprises.
Thirdly, the application of artificial intelligence (AI) in the insurance industry is also a big challenge. Like the banking industry, the insurance industry has a very large number of customers, and a huge customer data source. This is a favorable condition for the deployment of AI, with the goal of sorting, digitizing, and incorporating in-depth analysis of customer data to increase the efficiency of customer access and competitive advantage of businesses. However, during the application process, there have been some problems related to the confidentiality and protection of customer data.
Industry experts said that the Ministry of Finance's Circular No. 01/2019 / TT-BTC effective on February 16, 2019, amending Circular No. 50/2017 / TT-BTC allowing non-life insurance enterprises to make a number of changes related to the interest rates used to set up professional reserves will help improve the capital and interest situation of these companies significantly. For non-life insurance enterprises, if they take full advantage of market understanding, habits and bravely apply new technologies, there is a great chance for them to expand their market share in the coming time.
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Compiled by VietnamCredit