Though still small in
terms of premium income, Vietnam’s life insurance market is
attracting a steady stream of new foreign entrants. The attraction
is the prospect of immense growth potential driven by the country’s
large, youthful population and an economic growth rate that is
second only to that of China’s.
In the shadow of
high-growth insurance markets in China and India when it comes to
media coverage, Vietnam is steadily progressing as yet another
major Asian insurance success story. Punctuating Vietnam’s
insurance market’s potential was its ability to largely shrug-off
the impact of the global financial crisis by continuing to generate
solid growth during 2008 and 2009.
Despite being dominated by
two players, BaoViet Life and Prudential Vietnam, Vietnam’s life
insurance market’s high growth potential continues to attract
foreign players. Joining their ranks soon will be Italian insurer
Generali which has just received a preliminary licence from the
Ministry of Finance to run life insurance operations in the
country. The new wholly-owned unit, to be named Generali Vietnam
Life Insurance Company, will begin operations within the next six
Speaking enthusiastically of
the potential Vietnam holds, Generali Group MD Sergio Balbinot
said: “The licence will give fresh impetus to our expansion
strategy in countries with high growth potential.” Generali’s move
into Vietnam will increase the number of Asian markets in which it
operates to eight. The other markets are China, Hong Kong, India,
the Philippines, Indonesia, Thailand and Japan.
Balbinot continued that
although Vietnam is second only to China in terms of GDP growth,
life insurance penetration in Vietnam stands at barely 0.7% of its
“In other words, we are in a
market offering huge opportunities for the insurance industry,”
said Balbinot. He added that Vietnam has a population of 85m with
an average age of 27.
According to Swiss Re, in
2009, Vietnam’s life market generated total premium income of
VND11.95trn ($671m), an increase of 15.9% compared with 2008.
However, in US dollar terms, a sharp decline in the exchange rate
of Vietnam’s currency, the dong, resulted in premium income in
US-dollar terms, increasing at a far more modest 6.2%, from $632m
in 2008 to $671m in 2009. This pace was well below the CAGR of
25.8% recorded between 2000 and 2009. Vietnam’s Ministry of Finance
predicts that the life industry will enjoy premium income growth of
just under 12.5% in 2010.
The US Central Intelligence
Agency estimates Vietnam’s GDP growth to have been at a solid 5.3%
in 2009, though this was well below the CAGR in GDP of 7% between
2000 and 2009. GDP growth in 2010 is forecast at 6.5%, according to
UK bank HSBC.
optimism, according to another foreign insurer operating in
Vietnam, Korea Life, while only 5% of Vietnamese have life
policies, at least 30% of the population can afford life
Hopefully, life insurance
will also play catch-up with general insurance. According to Swiss
Re, general insurance premium income in Vietnam stood at $769m in
2009 – an increase of 14.5% compared with 2008. There are 27
insurers competing in Vietnam’s general insurance market which has
as its three largest players BaoViet, PVI and Bao Minh, with market
shares of about 30%, 28% and 16.5%, respectively.
One home-grown life
Vietnam by Generali will bring the total number of life insurers in
the country to 12 of which BaoViet Life is the only truly
Vietnamese-controlled life insurer.
BaoViet Life is a subsidiary
of Baoviet Holdings (BVH), which was the pioneer of insurance in
Vietnam. BaoViet was established by the Vietnamese government in
1965, as the Vietnam Insurance Company (VIC), and the name BaoViet
was adopted in 2007. During its first three decades, VIC operated
solely as a general insurance provider and it was only in 1996 that
a life insurance unit – now BaoViet Life – was established. It was
also the first life insurer in the country.
In another pioneering move,
in 2007, BVH became the first state-controlled company to be listed
on Vietnam’s Ho Chi Minh City Stock Exchange. Following the initial
public offer, the state retained a 65.34% interest, while domestic
strategic investors held 7.22%, foreign strategic investors 18%,
leaving the general public the balance. The largest foreign
interest was bought by HSBC, which paid $254m for a 10% stake with
an option to increase this to 25% over five years.
In October 2009, HSBC
received regulatory approval to exercise its right for the first
time and increased its stake in BVH to 18%, at a cost of $102m.
HSBC has indicated that it wants to take its stake up to 25% when
regulatory approval is given.
According to the professional
services firm Towers Watson, BaoViet Life had an average market
share of 25% during the four quarters of 2009 and maintained this
share in the first quarter of 2010. For the full year, BaoViet is
targeting to increase new contract premium income by 40% and total
premium income by 9% compared with 2009.
Of the remaining life
insurers all, but Vietcombank-Cardiff are wholly-owned by foreign
insurers. French bancassurer BNP Paribas has a 40% stake in
Vietcombank-Cardiff Life Insurance (VCLI), together with Vietnamese
banks Vietcombank, which has a 45% stake, and SeABank which owns
the remaining 12%. VCLI commenced operations in June
Heading the list of foreign
players and the market overall is UK insurer Prudential’s
subsidiary Prudential Vietnam, which according to Towers Watson
achieved an average
32% market share during the four quarters of 2009 and a 33% market
share in the first quarter of 2010.
Prudential Vietnam was
established in 1999, shortly after the establishment of the first
foreign life insurer Manulife Vietnam, by Canadian insurer Manulife
Financial in June of the same year. Prudential Vietnam has 1.67m
policies in force, employs some 33,300 tied-agents and has 155
Though Manulife Vietnam ranks
second amongst foreign life insurers, it trails Prudential Vietnam
by a significant margin. According to Towers Watson, Manulife
Vietnam achieved an average 10.8% market share during the four
quarters of 2009 and a 12% market share in the first quarter of
2010. Manulife Vietnam is clearly fighting back, having increased
the number of its tied agents from 5,500 at the end of 2009 to over
8,400 by September 2010.
Manulife Vietnam is also
facing a strong assault on its position as second-largest foreign
life insurer from a number of strong competitors, including ACE
Life Vietnam and AIA Vietnam who ended 2009 with market shares of
10% and 9%, respectively.
AIA Vietnam is a unit of
American International Group’s Asian arm AIA Group, in which it now
holds a 41.6% stake following AIA’s listing on the Hong Kong Stock
Exchange in October 2010. AIA Vietnam began operations in February
2000 and now employs about 12,000 tied agents and has 31 offices in
26 cities and provinces across Vietnam.
In 2009, AIA Vietnam achieved
24% growth in premium income and an 80% increase in first year
premium income. Also notable was that 85 of its agents qualified
for them Dollar Round Table club in 2009, an honour that less than
1% of agents worldwide achieve.
Also pressing hard on
Manulife Vietnam’s market share is ACE Life Vietnam (ALV), a unit
of Swiss-domiciled ACE Ltd – a relative newcomer, having begun
operations in the country in March 2006. ALV has made significant
progress and in 2009 achieved a market share on par with that of
ALV reported a 59% increase
in premium income in 2009, assisted by its universal life products
which it pioneered in Vietnam in 2006. ALV’s success has also been
achieved with a modest tied-agent force of about 5,500, roughly 5%
of the total number of tied-agents in Vietnam.
The generally high number of
tied-agents in Vietnam – about 110,000 in total – reflects the key
role they play in insurers’ marketing efforts.
Though on the increase,
bancassurance partnerships account for a minimal portion of total
life insurance sales. In the general insurance market,
bancassurance accounts for about 10% of market-leader BaoViet
Insurance’s premium income.
However, life insurers are
laying the foundation for bancassurance to play a far stronger
distribution role. As with many other areas holding the promise of
major growth, only 18% of Vietnamese have a bank account, according
Prudential Vietnam’s use of
the bancassurance channel dates back to April 2002 when it formed
an alliance with Asia Commercial Bank. In 2003, alliances with
Vietnam Commercial Bank and Vietcombank were added. In 2005,
Vietnam’s largest commercial bank, The Vietnam Bank of Agriculture
and Rural Development, became a distribution partner. The bank,
better known as Agribank, has 2,200 branches across Vietnam and
employs some 30,000 people.
Over the past 18 months,
Prudential Vietnam has added VP Bank, Binh Bank and Maritime
Commercial Bank to its list of bank distribution
Manulife Vietnam has
indicated that while its tied agents will continue to provide its
core marketing thrust for the foreseeable future, it is aiming to
tap the bancassurance channel as well. Within four to five years,
Manulife Vietnam is targeting the bancassurance channel to account
for between 20 and 25% of its total premiums, a Manulife senior
executive, David Wong, told Vietnamese newspaper The Saigon
Times in August this year.
Manulife Vietnam has
distribution alliance with two banks in the country, Asia
Commercial Bank and Techcombank. Distribution of the insurer’s
products by these banks is mainly through telemarketing channels –
the first time this method has been adopted in Vietnam. Prudential
Vietnam has also recently begun using the telemarketing
BaoViet Life, in addition to
its close ties with HSBC, has recently forged distribution
agreements with Saigon Commercial Bank, Mekong Delta Housing
Development Bank and Eastern Asia Commercial Bank. AIA Vietnam
recently signed an agreement signed with TienPhong Bank.
There are also 10 insurance
broking firms operating in Vietnam with their primary focus being
on general insurance.
Another fast-rising contender
in Vietnam’s life market is Japanese insurer Dai-ichi which is
bringing to bear a formidable sales effort supported by 14,000 tied
agents and 52 offices. Dai-ichi entered Vietnam’s life market in
January 2007 through the acquisition of Bao Minh CMG Life, a joint
venture between state-owned general insurer Bao Minh Insurance and
Australian bank Commonwealth Bank of Australia.
When Dai-ichi acquired Bao
Minh-CMG, it had a market share of 4.8%. In 2008, its market share
stood at about 6%, and in 2009, on the back of a 44% increase in
premium income, reached some 8%. Indicating its aggressive growth
objectives in Vietnam, in early 2008 Dai-ichi increased its Vietnam
unit’s capital from $25 to $72m which made it the second largest
life insurer in Vietnam in terms of capital. According to Dai-ichi
Life Vietnam’s general director Takashi Fujii, a 10% market share
is targeted by the end of 2012.
Trailing way behind the
top-five foreign life insurers in Vietnam is Taiwanese insurer
Cathay Life, which opened a representative office in Vietnam in
2004, and in 2007 was granted an insurance licence. Cathay Life’s
first Southeast Asia unit, Cathay Life Vietnam (CLV), was
established with an initial capital investment of $60m and
commenced business in July 2008. According to Towers Watson, CLV
achieved a market share of 2% in the first nine months of
Impressively, CLV has caught
up rapidly with a more entrenched insurer, Prevoir Vietnam Life
(PVL), which in 2009 also achieved a market share of about 2%. PVL
is a unit of French insurer Prevoir which established a
representative office in Vietnam in 2001 and was licensed to
operate as an insurer in March 2005.
PVL was established with a
capital base of $10m and has as its most significant distribution
partner Vietnam Post and Telecommunication Corporation (VNPT). The
exclusive distribution alliance with VNPT was established in
late-2009 and gives PVL exclusive rights to market through
Vietnam’s 8,000 post offices for 10 years.
Another new entrant into
Vietnam, Korea Life, also got off to a good start in 2009 by
achieving a market share of about 1% in what was less than a full
12 months of operations. Korea Life established a representative
office in Vietnam in December 2005 but it was only in March 2009
that it began operations as a licensed insurer with an initial
capital of $60m.
At the time of Korea Life
Insurance Vietnam’s (KLIV) launch, Korea Life stated that it aims
to secure a 5% market share by 2013, which it estimated would
represent premium income of about $35m. KLIV has so far established
five branches and employs some 3,000 tied-agents. The number of
tied-agents is targeted to reach 6,700 by 2013.
Generali is the latest but
will not be the last foreign life insurer eyeing Vietnam’s
potential. Also on its way to Vietnam is Japanese insurer Sumitomo
Life, which in October 2009 forged an alliance with Vietnam’s
biggest bank, state-owned Vietnam Bank for Agriculture and Rural
Development (VBARD). An application for an insurance license is
pending and once granted the intention is to establish a 50:50
joint venture life insurance company. A main thrust of the new
insurer will be through VBARD’s 2,200 branches.
Commonwealth Bank of
Australia (CBA) has also made a re-appearance on the Vietnam life
insurance scene after a three year absence following the sale of
its stake in Bao Minh-CMG to Dai-ichi. CBA’s new involvement
follows the acquisition in September 2010 of a 15% stake in
Vietnamese bank Vietnam International Bank (VIB).
As part of the investment,
CBA will implement a five-year capability transfer programme. CBA
said in a statement that the programme will include shared business
initiatives which are expected to see VIB emerge as a full service
bancassurance group. CBA is Australia’s fifth largest life insurer
through its wholly-owned unit CommInsure.
As a developing economy,
Vietnam is still very much a work in progress and can be termed a
frontier market. But it is making significant strides in uplifting
its citizens economically, something that holds significant
potential for the insurance industry.
Vietnam’s progress in
eliminating poverty was highlighted in a study that non-government
developmental organisation Oxfam released in September
In a comment published by the
UN Office for the Coordination of Humanitarian Affairs, Oxfam’s
Vietnam country director, Steve Price-Thomas said: “Vietnam’s track
record is one of the best in the world. They are absolutely a role
model within East Asia and more broadly in the world. Vietnam has
cut hunger and reduced poverty from about 58% of the population in
1993 to just 18% today. To put it in perspective, this means that
since 1993 roughly 6,000 people per day have been pulled out of
However, per capita GDP
remains low at $2,900 in 2009, according to the Central
Intelligence Agency. This leaves considerable scope for the
development of micro-insurance in Vietnam.
At least one life insurer,
Manulife Vietnam, has taken up the challenge. In its first project
outside of mainstream insurance, Manulife has developed
micro-insurance products, and in September 2009 began piloting a
project in an alliance with the Vietnam Women’s Union, with 11m
members – the country’s largest mass organisation. Manulife reports
that the initial response has been encouraging with almost 10,000
Women Union members having signed up for a micro-insurance contract
by the end of 2009.
The pilot project gathered
momentum in 2009. By July 2010, the number of Women Union members
having signed up for insurance reached 50,000, with Manulife
targeting to reach 80,000 by the end of this year.
On overall prospects in
Vietnam, Michael Hung, Global Banking Director for HSBC Vietnam,
probably summed it up best when he said in recent interview:
“Vietnam shares many of the advantages that were recognised
previously with China, such as a large, young, relatively cheap
work force, political stability, and numerous efficiencies and
opportunities to be unlocked in the respective economies’
transition from central state control to
While Hung noted that the
country is not the easiest in which to do business, he stressed:
“Many businesses that are already here would not want to be
And if all goes according to the Vietnam government’s
plan, there should be plenty of growth to satisfy insurance market
participants. In the government’s sights is a tripling of annual
per capita spending on all forms of insurance, from $16 in 2009 to
almost $50 within three years. This would raise the proportion of
aggregate insurance premiums from 1.6% of GDP to more than 4% of