HA NOI — The cumbersome organisation of State-owned insurance enterprises has driven up bad debt levels in the industry, while unfair competition within the segment has lowered premiums and negatively affected the performance of companies in the sector, said the Director of the Ministry of Finance's insurance supervisory department, Trinh Thanh Hoan, at a meeting in Ha Noi last Friday.
Deputy Minister of Finance Tran Xuan Ha said some companies continued to see shortcomings related to accounting and risk management, which led to inefficient investments and losses.
Bao Minh Insurance Corporation chairman Tran Vinh Duc told Thoi bao Kinh te Viet Nam (Viet Nam Economic Times) that difficulties in the economy were a significant challenge to insurers, both in marketing products and collecting premiums.
While companies had managed to buck inflation and hold the line of management costs and compensation totals, premiums have remained stagnant and their incomes from financial investments have been slashed by decline on the stock and property markets.
"For insurance businesses, profits from insurance services are very important, but with the present high costs, it's extremely hard to gain profits from the services," Duc said.
Insurers last year paid total compensation of around VND16.5 trillion (US$793.27 million), an increase of 56 per cent over the prior year, while life insurance payments alone reaching VND7.7 trillion ($370.2 million), according to ministry figures. Overall, however, the insurance sector managed to maintain stable growth despite the economic downturn, and most insurers were able to assure payment capacity and capital sources.
Insurance premiums totalled about VND46.8 trillion ($2.25 billion) last year, 23.2 per cent higher than in the previous year and representing 1.85 per cent of the nation's gross domestic product (GDP), the ministry's insurance supervisory department reported. Under the national strategy for the development of the insurance market, the sector would contribute 3-4 per cent of GDP by 2020.
The Ministry of Finance last year licensed four new insurance companies, lifting the total number of domestic insurers to 57. Thirty-two foreign insurers had representative offices on the local market, the department said.
Ha said the legal framework for the sector would be gradually completed between now and 2020 to help insurers lift their governance to international standards. Weak firms would be restructured by 2015, and proper policies issued to help firms ensure capital security, risk control and information transparency between 2016 and 2020.
Going forward, he urged insurers to restructure investments and products, supplement capital to match risk levels, and assure payment capacity in every phase of their operation process. — VNS