Insurance faces many challenges before


Insurance faces many challenges before
Insurance faces many challenges before

Insurance faces many challenges before

Starting from January 1, 2008, according to WTO commitments, Vietnam's insurance market will actually open completely, with the permission of foreign-invested insurance companies to provide insurance services. compulsory insurance.


At that time, domestic insurance enterprises will have to face greater competitive pressure, when the participation of foreign investors in Vietnam's insurance market is more, deeper and wider.


Although New York Life recently suddenly said goodbye to the Vietnamese market, the presence of Dai-ichi, a Japanese life insurance business, as well as the appearance of HSBC in this field, proved that Vietnam's insurance market is very attractive in the eyes of foreign investors.


Challenges for both sides


According to Mr. Kenneth Juneau, General Director of AIA Vietnam, 95% of the potential of Vietnam's insurance market remains untapped and this is a great opportunity for foreign insurance companies. This is also what the General Director of AIA expects, and also poses many challenges for Vietnamese insurers and foreign insurers operating in Vietnam.


Allowing foreign-invested enterprises to purchase insurance from overseas insurers could have a major impact on insurers currently operating in Vietnam, and perhaps the affected group.


The most affected are foreign-invested insurance companies, because at present, the main customers of foreign-owned non-life insurance companies are foreign-invested enterprises operating in Vietnam. Vietnam.


These foreign-owned enterprises, especially subsidiaries of transnational corporations, when given the freedom to choose insurance providers, are most likely to choose to use the services of these companies. Overseas insurance under the parent company.


AON is the first insurance brokerage enterprise to set foot in the Vietnamese insurance market. Recently, the Ministry of Finance has granted permission to bring the total number of insurance brokerage companies operating in Vietnam to 7 companies, of which 4 are joint stock companies and 3 are 100% foreign owned.


Vietnam's commitment to allow the provision of cross-border brokerage and consulting services will create favorable conditions for overseas insurance brokerage companies to access foreign-invested enterprises in Vietnam. introduce overseas insurance services.


This is one of the big challenges for brokerage companies operating in the Vietnamese market, especially domestic brokerage companies due to their network of relationships with overseas insurance companies, their knowledge and skills. As well as the experience of overseas insurance of Vietnamese enterprises is very limited, if not completely absent.


Competition in thenon-life sector


According to experts in the insurance industry, competition will be greater in the field of non-life insurance than in life insurance, due to the fact that the life insurance market has been open for more than a decade, while the non-life market has not.


It is possible that in the near future the effects of the removal of restrictions on national treatment and the provision of compulsory insurance will not be apparent, since in most of these insurance sectors the acquisition of Getting a contract depends a lot on the relationship between the insurance company and the project owner.


Foreign-owned insurance companies, which have just entered this market, have not been able to have a good network of relationships with project owners like domestic insurers, similar to life insurance businesses. Newly established foreign countries will also need many years to acclimate to the local culture, gather information, build a network of insurance sales, etc.


However, these advantages of insurance companies in the country. water will gradually disappear in a longer future, when foreign-invested insurance enterprises have established relationships, and the equitization process of State-owned enterprises is implemented more widely. with it the 5 year transition period for the opening of the non-life insurance branch will pass.


Geographically, although there will be no restrictions on the number of domestic branches for foreign-invested insurers, the competitive pressure from this issue will probably not be great. Currently, foreign insurers are mostly concentrated in large urban areas due to their greater attractiveness and small number of foreign enterprises. market narrowness in urban areas.


For the reinsurance market, the National Reinsurance Company of Vietnam (Vinare) will lose the guarantee of a large amount of compulsory reinsurance premiums.


Competition in this area will be huge, as the customers of domestic reinsurers are foreign insurers rather than individuals, so cultural barriers do not help the reinsurers. Domestic reinsurers avoid competition with larger and more experienced and reputable foreign reinsurers, as in the case of primary insurance.


To face this challenge, Vinare was also reorganized in 2004 to have better capital mobilization capabilities and a more flexible organizational and management mechanism. In recent years, the ratio of compulsory reinsurance premiums to total premiums has begun to decline, giving way to voluntary reinsurance premiums.


The insurance market is expected to grow in size, so domestic insurers still have the opportunity to grow premiums and increase income, and this is the concern of businesses, not must be market share.