Positive outlook with a plenty of room for insurers to improve earnings in the coming time is making Vietnam’s insurance industry more attractive to foreign investors.
According to experts, Vietnamese people are paying more attention to insurance deals in order to prepare for risks, especially in health care and disease prevention, which contributes to create great opportunities for foreign life insurers to develop.
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| Foreign insurers have raised capital to gain bigger share in the Vietnamese market. |
Reports from the Ministry of Finance’s Insurance Supervisory Authority (ISA) showed that the domestic insurance business in the third quarter of this year kept thriving with a high growth rate of 19% year-on-year and the industry’s growth rate target of 20% this year is feasible.
A recent survey of market research firm Nielsen also showed that Viet Nam became the country with the highest proportion of people saying that their spare money goes on medical insurance premiums, followed by Switzerland, Indonesia and China.
According to Louise Hawley, managing director of Nielsen Vietnam, Vietnamese consumers are not just worried about their health but they are taking action to protect it. This is the reason that Viet Nam ended the third quarter this year with the highest tendency towards spending for healthcare insurance.
Realizing the big opportunities in the Vietnamese market, new foreign investors are targeting the market through merger and acquisition with domestic insurers to rapidly enter the market while the existing ones are increasing investment capital to gain a bigger market share.
It was reported that roughly half a dozen big names, including Allianz, Nippon Life, MS&AD Insurance, Sun Life Financial and Manulife Financial Corp are vying to buy the Vietnam business of Britain’s Aviva in a move to continuously have an exclusive 18-year agreement to distribute life insurance products through VietinBank’s network.
Vietcombank is also expected to announce an insurance distribution agreement with a foreign partner in the near future as it was reported that Hong Kong billionaire Richard Li’s FWD Group has surpassed many rivals, including Prudential, to cooperate with Vietcombank.
Besides, it was reported that Bank for Investment & Development of Vietnam (BIDV) is also exploring selling its stake in a life insurance joint venture with MetLife Inc.
Meanwhile, existing foreign insurers in Viet Nam are also increasing capital to gain bigger pie in the domestic fast-growing market.
This year, Manulife has increased its charter capital to nearly VND9.7 trillion (US$418.6 million). Hanwha Life Vietnam and Generali Vietnam have also followed the suit with investment capital hike to VND5 trillion ($215.7 million) and VND4.85 trillion (US$209.3 million), respectively.
According to Phung Ngoc Khanh, ISA’s Director General, the above figures have showed the strong confidence of investors in the Vietnamese insurance market and created a great momentum for its development in the coming years.
Untapped market
Experts are upbeat about the Vietnamese insurance industry’s health in the coming years, forecasting it would maintain an annual double digit growth rate.
The growth potential is great as the country has one of the world’s lowest life insurance penetration levels at less than 1% of GDP. The average insurance premium in Viet Nam stands at US$30, much lower than the global average of US$595 and Southeast Asia’s average of US$74.
Data of the Vietnam Insurance Association showed that only 8% of Viet Nam’s population currently has life insurance.
The potential for further development is enormous, especially as the middle class continues to expand rapidly and awareness of risks such as increased cancer, experts said.
Meanwhile, a report of Viet Dragon Securities Company said that the products of domestic companies are relatively similar. More foreign companies, thanks to their ability to provide differentiated products with better profitability, are targeting the Vietnamese market and choosing to buy shares of domestic firms so as to penetrate the market rapidly.
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