The gross written premium of Vietnam’s life insurance sector is set to rise from VND 27.3trn ($1.2bn) in 2014 to VND49.9trn in 2019, according to a report published by Timetric’s Insurance Intelligence Center (IIC).
The IIC report, Life Insurance in Vietnam, Key Trends and Opportunities to 2019, explains that Vietnam has one of the world’s most dynamic and rapidly expanding insurance industries, providing growth potential for life insurers.
A low insurance penetration rate, favourable demographics and product launches are all driving factors for the Vietnamese life insurance market, according to the IIC report.
For example, compared to other emerging economies in Asia, life insurance penetration in Vietnam remained low at 0.7% in 2014, while India, Indonesia and Philippines had respective rates of 2.69%, 1.05% and 1.32%. By the end of April 2015, only 5.96 million life insurance policies were sold in Vietnam.
Vietnam’s total population, meanwhile, was 90.6 million in 2014, of which 24.7 million were aged 15-29 years. The country’s unemployment rate also fell from 2.6% in 2010 to 1.8% in 2014. Higher employment opportunities improved middle-class spending power, encouraging investment in savings products.
The IIC report adds that during 2010-2014 insurers capitalized on increases in per capita income and life expectancy by launching new products.
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For example, Prudential Vietnam launched two new universal life products: Pru-Flexicare and Pru-Protect Well in May 2014. The products provide a guaranteed rate of return of 5.5?6.5% during the initial three years. Pru-Flexicare targets customers with a stable income, while Pru-Protect Well is a single-premium policy for consumers with idle cash looking for investment tools.
AIA Life also introduced Golden Age Pension Plus, a voluntary pension plan in January 2014. The plan targets employees with contractual jobs. Cover accumulates contributions from both employers and employees.
In terms of challenges facing Vietnam’s life insurance sector, the IIC report cites low insurance awareness is a critical factor affecting life segment’s growth.
It adds that a major portion of Vietnam’s workforce employed in the insurance industry lack the required skill set to underwrite insurance, primarily due to a lack of training. However, as foreign insurers enter the segment, competition is projected to increase.