The total premium collected by insurance companies in Việt Nam in the first half of 2017 has grown 21 per cent year-on-year to VNĐ47.17 trillion (US$1.8 billion). — Photo vinacorp.vn

HÀ NỘI — The total premium collected by insurance companies in Việt Nam in the first half of 2017 has grown 21 per cent year-on-year to VNĐ47.17 trillion (US$1.8 billion).

Of the total sum, the revenue from life insurance premiums is VNĐ27.83 trillion and non-life insurance premiums is estimated at VNĐ19.34 trillion, said Phạm Thu Hương, deputy director of the Ministry of Finance’s Insurance Supervisory Authority (ISA).

Besides maintaining a high and sustained growth rate, the financial status of insurance firms improved in the first half of the year, Hương said. Their total assets grew by 19.11 per cent year on year to VNĐ264.64 trillion, of which life insurers accounted for 73.4 per cent.

During this period, insurance companies invested VNĐ217.59 trillion into the economy, which is a rise of 17.88 per cent, compared to the corresponding period last year.

The insurers also purchased 15-year and 30-year term Government bonds worth VNĐ15 trillion in H1.

The fast-growing insurance market, poised to thrive thanks to rising living standards, has prompted a number of foreign companies, including the UK’s Aviva Plc and Canada’s Sun Life Financial Inc, to step up their presence in Việt Nam through mergers and acquisition or joint ventures in the past months.

In April, Aviva Plc acquired 50 per cent stake in Hà Nội-based VietinBank’s life insurance joint venture, VietinBank Aviva Life Insurance Ltd (Aviva Vietnam).

In late 2016, Sun Life took full control of the joint venture PVI Sun Life Insurance Company Ltd, by acquiring the remaining 25 per cent stake from PVI Holdings.

The insurance industry is expected to benefit from the country’s projected gross domestic product (GDP) growth of more than 6 per cent annually over the next three years.

It also has great potential as the country has one of the world’s lowest life insurance penetration levels, at less than 1 per cent of the GDP.

Steve Clark, chief executive officer of Prudential Vietnam Assurance, told Thời báo Kinh tế Việt Nam (Vietnam Economic Times) that the penetration rate of life insurance, usually measured as the number of individuals who own life insurance, is still low in Việt Nam relative to other Southeast Asian countries.

The average insurance premiums in Việt Nam stand at $30, much lower than the global average of $595 and Southeast Asia’s $74.

Only 7 per cent of Việt Nam’s 93 million people have life insurance, and the sector contributes a modest 2 per cent to the GDP, compared to 2.6 per cent in Indonesia and 11 to 14 per cent in South Korea and Singapore.

However, there remain many challenges in the way of further growth of this sector.

ISA director Phùng Ngọc Khánh said that awareness among Vietnamese people about life insurance may have increased, but most still don’t believe that it’s worth the expense. In fact, almost all Vietnamese people are wary of it and think it unnecessary to buy insurance because they don’t have a thorough understanding of its importance, he explained.

Life insurance products usually involve a long-term contract, so many customers are also concerned about their financial capacity to fulfil it in the future, Khánh said. Doubts about the commitment of foreign life insurers to permanently operate in Việt Nam also contribute to its low penetration rate.

Many potential customers continue to see insurance as an investment, rather than as a device to share financial losses caused by ill-fortune. They prefer bank savings or investing in gold or real estate, which have a higher rate of return.

The low penetration rate also comes from the fact that life insurers have only focused their operations in big cities, overlooking 70 per cent of the country’s population that lives in rural areas, Khánh said.

To increase sales and promote products, besides traditional sales methods, life insurers have also started partnering with commercial banks. Though the bancassurance market in Việt Nam has remained sluggish, contributing only 2 per cent to the total turnover of the insurance market, analysts believe that this channel holds great potential, and now some 35 commercial banks and financial institutions are collaborating with insurers. — VNS