MINISTRY OF EDUCATION AND TRAINING
FOREIGN TRADE UNIVERSITY

DISSERTATION

TPP: CHALLENGES AND OPPORTUNITIES FOR VIETNAM’S
INSURANCE INDUSTRY

Major: International Trade Policy and Law

Full name: Nguyen Thuy Binh

Hanoi - 2017


MINISTRY OF EDUCATION AND TRAINING
FOREIGN TRADE UNIVERSITY

DISSERTATION

TPP: challenges and opportunities for Vietnam’s insurance industry
Major: International Trade Policy and Law

Full Name: Nguyen Thuy Binh
SUPERVISOR: Dr. Nguyen Binh Minh

Hanoi - 2017


DECLARATION
I declare that this dissertation is my own work. Where material is obtained

from other works, it has been fully acknowledged by citation in the main text and
included in the references.


TABLE OF CONTENTS

INTRODUCTION .....................................................................................................1
CHAPTER 1. OVERVIEW OF VIETNAM INSURANCE INDUSTRY ............5
1.1. History of Vietnam’s insurance industry ............................................................5
1.2. Overview of life insurance industry ....................................................................7
1.3. Overview of non-life insurance industry ..........................................................14
CHAPTER 2. TPP’S OVERVIEW AND VIETNAM’S INSURANCE
COMMITMENTS IN TPP .....................................................................................21
2.1. TPP’s overview and commitments in insurance industry .................................21
2.2. Current regulations and legislation of Vietnam relating to insurance ..............25
2.3. Vietnam’s insurance commitments in TPP .......................................................30
CHAPTER 3. CHALLENGES AND OPPORTUNITIES FOR VIETNAM’S
INSURANCE INDUSTRY AFTER EFFECTIVENESS OF TPP .....................40
3.1. Challenges for Vietnam’s insurance industry ...................................................40
a.

Challenges for life insurance industry .............................................................40

b.

Challenges for non-life insurance industry .....................................................44

3.2. Opportunities for Vietnam’s insurance industry ..............................................52
a.


Opportunities for life insurance industry .........................................................52

b.

Opportunities for non-life insurance industry ..................................................54

CHAPTER 4. VIETNAM’S PREPARATION FOR TPP &
RECOMMENDATIONS FOR VIETNAM ..........................................................65
4.1. Preparation of Vietnam ....................................................................................65
a.

Preparation of Vietnam’s authority ..................................................................65

b.

Preparation of Vietnam’s local insurers ..........................................................68

4.2. Recommendations for Vietnam ........................................................................72
a.

Recommendations for Vietnam authority ........................................................72

b.

Recommendations for local insurers ................................................................74

CONCLUSION ........................................................................................................77
REFERENCE ..........................................................................................................81



LIST OF ABBREVIATION
TPP:
MOF:

The Transpacific Partnership Agreement
The Vietnam Ministry of Finance

LIST OF FIGURES
Figure 1.1. Vietnam Life Insurance indicators ...........................................................9
Figure 1.2. Vietnam Life Insurance Market share in first quarter of 2016 ...............10
Figure 1.3. Year of establishment of Life Insurers and charter capital (billion dong)
in 2013 .......................................................................................................................11
Figure 1.4. Policy numbers by products in 2015 ......................................................13
Figure 1.5. Types of life products by insurer in 2015 ...............................................14
Figure 1.6. Vietnam Non-Life Insurance indicators .................................................14
Figure 1.7. Vietnam Non-Life Insurance Market share in first quarter of 2016 .......15
Figure 1.8. Year of establishment of Non-Life Insurer and charter capital (billion
dong) in 2013 ............................................................................................................16
Figure 1.9. Types of non-life products by insurer in 2015 .......................................18
Figure 1.10. Non-life loss ratio in 2014 ....................................................................19
Figure 3.1. Insurance Premium Growth Rate (2013) ................................................46
Figure 3.2. Insurance penetration rate for TPP countries .........................................47
Figure 3.3. ACE gross premium for developing TPP countries ...............................47
Figure 3.4. Impact of TPP on sectoral output by 2030 .............................................49

LIST OF TABLES
Table 1.1. Vietnam indicators in comparison with ASEAN countries and world in
2015 .............................................................................................................................8
Table 1.2. Numbers of life insurers .............................................................................9
Table 1.3. Numbers of non-life insurers ...................................................................15

Table 1.4. Vietnam’s non-life agents ........................................................................17
Table 2.1. Comparison of insurance cross-border trade in WTO and Vietnam’s
domestic law..............................................................................................................28
Table 3.1. Trade and investment effects of TPP (Unit: billions of 2015 dollars) .....57
Table 3.2. Importing cars of Vietnam in October 2016 ............................................61


INTRODUCTION
1.

Research background
Regional integration has become a new trend in the Asia- Pacific region,

which represents in the form of treaties. The Trans-Pacific Partnership Agreement
(TPP) was one among of those treaties. TPP is a multilateral free trade agreement,
which aims to create a free trade zone among Asian – Pacific countries. Singapore,
Chile, New Zealand, Brunei was the founders of this Agreement. They had signed
the TPP since 3 June 2005. However, until present the member number of TPP has
expanded up to 12 countries, including: Singapore, Chile, New Zealand, Brunei,
United States, Australia, Canada, Japan, Malaysia, Mexico, Peru, and Vietnam.
In TPP, member countries commit to open their market by tariff reduction,
non-tariff measure transparency, market access barrier elimination for foreign
companies from other member countries etc. For example, USA will remove tariff
for 74 percent of Vietnam exporting agriculture goods upon TPP’s effective date
and for 100 percent of goods after 10 years of TPP implementation. 38.4 percent of
Vietnam agriculture goods exporting to Japan will be eliminated upon TPP’s
implementation and 100 percent of goods exporting to Japan will be exempted from
tax after 15 years (Duy Anh, 2015). Given those tariff reduction, Vietnam will be
benefited by increase in exports to those major markets. In addition, foreign
investment into Vietnam will surge thanks to TPP.

Besides the above benefits, Vietnam also have market opening commitments,
bringing big challenges to domestic companies, whose competitiveness is still quite
low. One of those commitments refers to insurance market. Since Vietnam’s
insurance industry is among the youngest insurance markets in the world. The first
non-life insurance company of Vietnam was established just 51 years ago and of life
insurance company was 20 years ago, compared to hundreds-year companies in
other developed countries, such as: USA, Canada, Japan etc. Therefore, it is
predicted that Vietnam’s insurance industry will face tough challenges from
1


competition of foreign insurers. Of course, there will be opportunities for Vietnam’s
insurance industry from TPP. However, those challenges and opportunities is still a
controversial topic.
At the inception date of this research, TPP is highly likely to be implemented
by 12 member countries. Until now, the United States had changed its president
(i.e.: Donal Trump), who strongly opposes TPP. Therefore, this agreement is
predicted to be canceled. Despite of this fact, the value of this thesis is not reduced.
The reason is that international integration is an undeniable trend of the world.
Besides TPP, Vietnam is on the way to participate in similar multilateral free trade
agreements. Therefore, sooner or later Vietnam’s insurance industry shall face
similar challenges and opportunities brought by TPP. This research will give
readers an understanding of impacts that TPP and future multilateral treaties may
bring to Vietnam’s insurance industry.
2.

Literature review
From the very beginning of first discussion round, Vietnam’s insurance

commitment in TPP had attracted attention from local and foreign media,

researchers.
From foreign writers, TPP’s impact to Vietnam was a hot topic for foreign
newspaper and researchers. However, those articles and studies examined the
impacts of TPP in general. The impact of insurance to Vietnam received smaller
attention from foreigners. This topic had been analyzed on some foreign
newspapers, e.g.: the Insurance Journal of Canada, which discussed about the
potential of Vietnam insurance market thanks to TPP. It was also assessed by
foreign insurers, e.g.: ACE Group had published a small analysis named “TransPacific Partnership: Unlocking new opportunities”. However, it was very hard to
find an academic research of this topic. Some of them is working paper titled “The
Economic Effects of the Trans-Pacific Partnership: New Estimates” e.g.: by Peter

2


A. Petri and Michael G. Plummer in January 2016. But TPP’s impacts to Vietnam
insurance market was a very small part of the working paper.
From domestic writers, there were more articles discussing the impacts of TPP to
Vietnam’s insurance market, including: newspapers, conference, discussion papers.
Some local newspaper e.g.: Vietnamnet, Financial News of Vietnam, had quite
valuable analysis of this topic. Besides those newspaper, some conferences were
held by competent authorities for the discussion of this topic. Take example of the
Conference named “Opportunities, Challenges of TPP and new generation FTAs to
Vietnam’s insurance industry” held by the Vietnam Insurance Association and
Vietnam International Arbitration Center on 16 May 2015. This conference had
participation of some insurance specialists, which contributed their discussion
papers to the conference, i.e.: “TPP and challenges to Vietnam’s insurance
industry” of Master Ton Thi Thanh Huyen from National Economics University and
“Impact of TPP to Vietnam’s insurance industry” of Doctor Nguyen Binh Minh
from Foreign Trade University. Those two university are among top colleges in
Vietnam in terms of finance. Therefore, their discussion papers are more

argumentative academic than newspaper articles. However, until now there has not
been a comprehensive, large-scale research of this topic of the local. Some research
had analyzed the impacts of TPP to Vietnam in general, e.g.: dissertations.
However, there is absence of study focusing only on impacts of TPP to Vietnam’s
insurance industry. This thesis will concentrate on the analysis of TPP’s effects on
insurance industry only.
3.

Subject of the research
This thesis aims at the impacts of TPP on Vietnam’s insurance industry,

including the impacts on life and non-life insurance.
4.

Scope of the research
This thesis will not study all articles of TPP. Instead of that, it will only

analyze articles related to Vietnam’s insurance industry, which are included in
3


Chapter 11 and Annex III of the TPP. While examining those TPP’s articles, this
thesis will also study Vietnam’s current legal documents regulated insurance
activities (e.g.: Law on Insurance Business 2000, WTO agreement) in order to make
comparison between those documents and TPP as well as take research of
Vietnam’s insurance industry situation including life and non-life insurance market.
5.

Research question
This thesis will answer a question: “What opportunities and challenges will


TPP bring to Vietnam’s insurance industry?”. In order to find the answer, this study
will. Firstly, analyze insurance commitments that Vietnam made in TPP in
comparison with current legal framework in order to highlight the new regulations
in TPP. Secondly, examine the impacts of those new regulations to Vietnam’s
insurance industry, including opportunities and challenges. Some recommendations
for local insurers and authority will be given at the end of the thesis to help the local
utilizing those opportunities and overcome challenges.
6.

Methodology
In order to achieve the above purpose, this thesis will employ qualitative

research methodology. Particularly, this research will examine legal documents,
make comparison between different legal documents, gather insurance data, and
make analysis from those data.
7.

Research structure

This thesis comprises of 4 chapters, which are:
Chapter 1: Overview of Vietnam’s insurance industry
Chapter 2: TPP’s overview and Vietnam’s insurance commitments in TPP
Chapter 3: Challenges and Opportunities for Vietnam’s insurance industry after
effectiveness of TPP
Chapter 4: Vietnam’s preparation for TPP and Recommendations for Vietnam
4


CHAPTER 1. OVERVIEW OF VIETNAM INSURANCE INDUSTRY

1.1. History of Vietnam’s insurance industry
In 1964 Vietnam Insurance Company was established, which is the first
insurance company in the North of Vietnam, providing transported goods insurance,
hull insurance and accident insurance for passengers travelling in Vietnam. The
establishment of Vietnam Insurance Company had opened an era of insurance
monopoly in Vietnam.
Until 1979 – 1980, accident insurance for passengers was actually brought to
the market. The main target of this company was to support the foreign trade,
therefore, it had remained a very low insurance rate, making the company suffering
from loss at some times. Besides the insurance providing, this company was in
charge of cooperating with state trade agencies, transporting agencies to prevent and
minimize the loss to transported goods and hulls. From 1966, the company started
to reinsure to foreign insurance companies based outsides of Vietnam. By contrast,
in the South, there was 41 domestic insurance companies and 10 foreign companies.
Among them, Vietnam Assurance and Reinsurance company (VAR) was the
biggest company, accounting for 51% insurance contracts in the South (Baoviet,
2015, p.65). This company was a joint venture among Vietnam, French and Swiss.
In 1975, Spring Offensive was successful. The North and the South were
unified and both were under control of Vietnam. Vietnam authority requested all
insurance companies in South to end their business. All assets of those companies
were given to Vietnam Insurance and Reinsurance company – BAVINA (Baoviet,
2015, p.66) – a state company established in 1976. After that, in 1977, BAVINA
became a branch of Vietnam Insurance Company according to Decision No. 61 of
Government. Therefore, Vietnam insurance market was still state monopoly.
On 18 December 1993, Decree No. 100/CP was enacted, allowing the
establishment of joint venture companies, joint stock companies and 100% foreign
5


companies providing insurance in Vietnam. This Decree was the end of state

monopoly lasting for decades. As request of MOF, the Vietnam Insurance Company
was acted as a market founder. In particular, the Vietnam Insurance Company had
to contribute human resources, finance to create new insurance companies, which
were VINARE (1994), Bao Minh (1994), Bao Long (1995), etc. They were all nonlife insurers.
Until 1995, there was no life insurance operating in Vietnam market. In the
situation that the law had enabled foreigners to participate in insurance market,
Vietnam was on the edge of losing life market into foreigner’s hand if the authority
did not started to establish a local life insurers. Therefore, in middle of 1995, the
Vietnam Insurance Company acting as the market leader had started to carry out
research of life insurance and in June 1996, it established Life Insurance Company,
which is Baoviet Life nowadays. At that time, Baoviet Life only provided 2
products, which were: child education insurance (“An sinh giao duc’) and 5-year or
10-year-term life. Those types were considered to be the best suitable to Vietnam
market. Indeed, those 2 products are still core products bringing most revenue to
Baoviet Life at the present time. In addition, the legal framework was also
completed by the promulgation of Law on Insurance Business in 2000 to protect
legitimate rights of insurance purchasers. As the results, till 2001, there were 18
insurers and insurance brokers in Vietnam, but after just 3 years, the numbers were
increased up to 25 insurers, showing a very competitive and attractive insurance
market.
In terms of product lines, after 1975, Vietnam had chance to develop existing
insurance products as well as introduce new non-life and life insurance types into
the market, for example: physical and liability insurance of ship owners (1986),
farm animal insurance (1987), physical damage of vehicles (1991), liability
insurance of vehicle owner (1988), oil and gas insurance (1978), automated vehicle
insurance (1978), aviation insurance (1981), fire insurance (1989), pupils insurance
(1991), etc.
6



In 2003, Vietnam authority passed through Strategy for Development of
Vietnam’s Insurance Market during 2003 and 2010, in which equitization of local
insurers was one of the main target to attract foreign investment in terms of finance,
knowledge and technologies, which would finally enhance the competitiveness of
local insurers. The Vietnam Insurance Company was one of the first insurer to carry
out equitization process in 2007, before that it had restructured into an Insurance Finance Group in 2004.
Vietnam had taken some huge steps in international integration in terms of
insurance. In particular, in late of 2001, Vietnam and United States had signed the
Vietnam Bilateral Trade Agreement (referred as “BTA”) which opened the
cooperation of insurance. In 2007, Vietnam had officially joined WTO with
commitments to open the insurance market for all WTO members.
1.2. Overview of life insurance industry
Vietnam population has high growth rate and had reached over 92 million in
the end of 2015, helping it ranked third among ASEAN countries. It shares the same
demographic patterns with ASEAN countries, of which the largest proportion of
population is between 15-64 years old, followed by the 0-14 year old segment and
last but not least the people at the age of over 64. Those young people and
especially the elderly with idle in come are potential customers for life insurance
products. Though Vietnam’s GNI was quite low, only 1,980 USD in 2015, but the
average growth rate of Vietnam during 10 years was three times of such of the
world. It is forecasted that the income of Vietnam people will increase fast, and the
middle and upper class will be enlarged, who may afford for luxury goods as life
insurance. In addition, due to extraordinary characteristic of ASEAN people, who
save a major amount of their income in preparation for far future, Vietnam has a
high saving rates, of 30% in 2015. They may use those money to buy life insurance

7


as an investment-insurance method. Combining of all above mentioned indicators,

Vietnam shows to be a promising insurance market.
Table 1.1. Vietnam indicators in comparison with ASEAN countries and world
in 2015
Cambo-

Malay-

Philip-

Thai-

Indone-

Singa-

dia

sia

pines

land

sia

pore

92 mil.

15.6 mil.


30.3 mil.

1,980

1,070

10,600

3,540

5,600

5.66

6.82%

5.08

4.98

23

32

25

70

64


7

Country

Vietnam

Population
GNI (USD)

100.7

257.6

5.5 mil.

7.3 bill.

3,440

52,000

10,437

3.28

5.83

6.44


1.97

32

18

28

16

26

69

63

72

67

73

66

4

6

5


10

5

12

8

30

16.4*

29

37

30

33

48

21.34

31.26

15.49

34.45


40.04

29.95

31.13

49.20

24.57

mil.

70 mil.

World

mil.

Average
GNI
growth
ratesin10
years (%)
Percentage
of 0-14
years old
(%)
Percentage
of 15-64
years old

(%)
Percentage
of over 65
years old
(%)
Saving
rates (%)
Average
saving
growth
rates in 10
years (%)

Source: />
* Data in 2014
8


Total gross premium of Life insurance in Vietnam had an upward trend with an
average of growth rate at 19% since 2007 (after Vietnam officially joined WTO). In
2015, such growth rate climbed up to 30% (The Insurance Supervisory Agency of
Vietnam, 2016), while the average growth rate of the world was only 4.0% (Swiss
Re, Sigma no.3 2016). Vietnam life insurance growth rate was eight times higher
than such of the world. Life insurance market in Vietnam showed to be a fruitful
market. However, in term of penetration rate, Vietnam’s indicator was quite small,
i.e.: from 0.65% in 2012 (The Insurance Supervisory Agency of Vietnam, 2014) to
0.86% in 2015, compared to some ASEAN countries such as: Malaysia (3.2%),
Indonesia (1.1%) etc.

Source: Author’s illustration based on Vietnam Insurance Association reports

2007- 2015
Figure 1.1. Vietnam Life Insurance indicators
The number of life insurers joined into the market has increased continuously. Till
the end of 2015, Vietnam had 17 life insurance companies.
Table 1.2. Numbers of life insurers
Year
Number of life insurers

2007

2008

2009

2010

2011

2012

2013

2014

2015

9

11


11

12

14

14

16

17

17

Source: Data consolidated from Vietnam Insurance Association reports 2007- 2015
9


Among them only 1 state-own company , 2 joint stock companies, 3 joint venture
companies and 11 companies with 100% foreign investment capital. This number is
still on the way of increase since Vietnam life insurance is considered an attractive
market in the eye of foreign enterprises, according to Integrated Report 2015 of
Baoviet Group. In 2015, 7 companies had increased investment capital in Vietnam,
i.e.: Sun Life Financial, Manulife, Chubb, Fubon, Generali etc. New foreign
enterprises is seeking the way to join into Vietnam market, for example: MB Ageas
Life (Thailand), Samsung Life (Korea), Taiwan Life (Taiwan) (Baoviet Group,
2016)
In general, Vietnam’s life insurance market is dominated by foreign
companies in terms of numbers. However, the market has been led by 2 giant
companies, which are Prudential (an English company) and Baoviet Life Insurance

(a state-own company). Those 2 companies accounts for over 50% of total gross
premiums. For a long time, Prudential had taken the leading position, followed
closely by Baoviet Life Insurance. However, till the end of March 2016, Baoviet
Life Insurance had hold the first position in terms of gross premium, accounting for
28.5% market shares, compared to 26.1% of Prudential.

Source: Vietnam Insurance Association report Q1, 2016
Figure 1.2. Vietnam Life Insurance Market share in first quarter of 2016

10


Foreigner companies still dominate Vietnam’s life insurance market both in
terms of numbers and market shares. They make up for over 60% of gross premium.
Vietnam’s neighbors have the same circumstance, for example: Indonesia,
Malaysia, Philippines etc., in which local life insurance market is dominated by
foreigners (Ngo Trung Dung, 2015)
Among 6 local insurers, there are 5 insurers under control of state-owned
corporations, for example: the largest shareholder of Baoviet Life is MOF with 80%
of shares, of PVI SunLife is Vietnam Oil and Gas Group with 51% in 2014, of
VietinAviva is Vietnam Commercial Bank for Industry and Trade with 50% of
shares, etc. The participation of local private companies is still absent. In terms of
lifetime of local segment, Baoviet Life insurance was found earliest in 2004, other
local companies have been established recently in 2008 and mostly during 20112014 period. This means that local companies may lack of knowledge and
experience in insurance to compete with foreign companies, who already have a
long history of providing insurance in international market.

Note:

Insurers with 100% foreign capital

Insurers with majority local capital
Source: Author’s illustration based on Vietnam Insurance Association’s article
“Danh muc cac doanh nghiep bao hiem, tai bao hiem, moi gioi bao hiem”
Figure 1.3. Year of establishment of Life Insurers and charter capital (billion
dong) in 2013
11


Among 5 companies with local investment capital, Baoviet Life Insurance
belonging to Baoviet Group is originally established to provide insurance products.
Other 4 Insurers are opened as another investment channel of giant companies, for
example: Vietnam oil and gas exploitation (PVI Sunlife), state-owned commercial
banks (VietinAviva, Vietcombank-Cardrif, BIDV Metlife) or real estate group (Phu
Hung Life Insurance).
Regarding distribution channel, main distribution channel of life insurers are
agents. In fact, in 2015, the number of newly recruited agents was 245,451 person,
increasing 40.4% compared to such number in 2014. Agent number in total was
404,607 persons in 2015. Therefore, agents are predicted to remain as the main
channel in the near future. The leader insurers come out to be the owner of biggest
agent forces. In particular, Prudential had 181,638 agents in total in 2015, ranked 1st
in terms of agent numbers, followed by Baoviet Life Insurance with 76,074 agents
and Dai-ichi Life Insurance with 49,778 agents (Association of Vietnamese
Insurers, 2016, p.12).
Insurance brokers play very small role in life insurance’s distribution channel.
One of the reason may be vague awareness and even prejudice of Vietnamese
towards life insurance that the brokers ( Dang Dinh Chinh, 2012), who do not have
face-to-face interaction, find hard to get through in order to sell such comprehensive
invisible products like life insurance. In this case, the agents, who come to
customers and utilize direct contact, have higher chance to successfully persuade
them.

Besides agents, bancassurance and telesales are becoming new trend in
insurance market.
Furthermore, new model is also developed, including nest by AIA, AIA
exchange, which provide a unique friendly zone for agents and customers to meet
each other.

12


In terms of products, endowment insurance accounts for major part, which is
61.5% of policy number in 2015 (Association of Vietnamese Insurers, 2016, p.9),
followed by investment insurance with 29.3%, term insurance with 7.6%.
Endowment insurance, which give higher security to customer’s finance, seems best
fit Vietnamese taste.

7.60%

1.00%

0.60%

29.30%
61.50%

Endowment insurance
Investment insurance
Term insurance
Whole life insurance
Others


Source: Association of Vietnamese Insurer’s Report 2015
Figure 1.4. Policy numbers by products in 2015
However, traditional products including endowment, pure endowment, whole
life, term life, start to show downward trend. In the end of 2015, the total number of
in force policy dropped, compared to that in 2014.
In contrary, investment insurance and pension insurance have impressive
increase, i.e.: 128% and 172% respectively.
Each company finds their own strength in specific products, for example:
Prudential, Manulife, Generali, VietinAviva have strength in endownment
insurance, Baoviet Life Insurance, Dai-ichi have almost equal proportion of
endowment and investment insurance, while Prevoir and Vietcombank-Cardrif find
their advantages in term life insurance.

13


Source: Author’s illustration based on Association of Vietnamese Insurer’s Report
2015
Figure 1.5. Types of life products by insurer in 2015
1.3. Overview of non-life insurance industry
Vietnam’s Non-Life insurance also saw a steady growth in terms of total gross
premium during 2007-2015 period. The average growth rate in this period is 119%.
In 2015, Vietnam saw a very high growth rate, which is 19%, compared to just
3.6% of the world (Swiss Re, 2016, p.1). Similar to its life market, Vietnam non-life
insurance has low penetration rate, at an average of 7.7% during 2007-2015 period.

Source: Author’s illustration based on Vietnam Insurance Association reports
2007- 2015
Figure 1.6. Vietnam Non-Life Insurance indicators
14



However, unlike the life insurance market with few players, non-life segment
is more active market with many insures. The reason may be that: firstly, the nonlife market has been established much longer than life market, secondly, the charter
capital minimum level is lower, at 300 billion dong, compared to 600 billion dong
of life insurers.
Table 1.3. Numbers of non-life insurers
2007 2008 2009 2010 2011 2012 2013 2014 2015

Year
Number

of

insurers

non-life
22

27

28

29

29

29

29


30

30

Source: Author’s illustration based on Vietnam Insurance Association reports
2007-2015
Till the end of 2015, there are 30 non-life insurers operating on the market,
including: 3 state-owned companies, 16 joint stock companies, 3 joint venture and 8
companies with 100% foreign investment capital. As the result, insurers with local
capital dominate the market in terms of numbers. In terms of market share, local
players also take leading position. More than 60% of market share is hold by local
insurer, which are Petro Vietnam Insurance (PVI), Baoviet Insurance Corporation,
Bao Minh Insurance Corporation (Bao Minh), Post and Telecommunication Joint
Stock Insurance Corporation (PTI), Petrolimex Joint Stock Insurance Company
(PJICO).

37.8300%

21.29%

17.83%
6.57%

PVI
Baoviet
Bao Minh
PTI
PJICO


8.13% 8.35%

Source: Vietnam Insurance Association report Q1, 2016
Figure 1.7. Vietnam Non-Life Insurance Market share in first quarter of 2016
15


Those top companies have strong financial support from the government. In
particular, Vietnam oil and gas Group holds 35%of PVI, becoming the largest
shareholder, MOF holds 80% of shares in Baoviet, State Capital Investment
Corporation hold the largest shares of Bao Minh at 34%, Vietnam National
Petroleum Group holds 51% of PJICO. Since the monopoly market was only ceased
in 1993, Baoviet Insurance Corporation was the first insurer for nearly 30 years.
From 1994, other insurers started to be established according to government’s
decision, including Bao Minh, PJICO, Bao Long etc. In terms of charter capital,
Baoviet Insurance Corporation and PVI left other insurers far behind with 1,800
billion dong and 1,700 billion dong respectively. Other local and foreign companies
(except for Liberty) have charter capital of below 1,000 billion dong. This is
different from the life market, on which insurers do not have much difference
relating to charter capital. Among the below 1,000 billion dong-charter capital nonlife companies, 80% of them have even below 500 billion dong. However, company
size seems not to decide the winners. In fact, 3 of the top 5 leaders are small size
companies, i.e: Bao Minh with 755 billion dong of charter capital, PJICO with 709
billion dong and PTI with only 504 billion dong.

Insurers with 100% foreign capital

Insurers with majority local capital

Source: Author’s illustration based on MOF’s article “Danh muc cac doanh nghiep
bao hiem, tai bao hiem, moi gioi bao hiem”

Figure 1.8. Year of establishment of Non-Life Insurer and charter capital
(billion dong) in 2013
16


In terms of distribution channel, besides agents channel, brokers,
bancassurance, online sales, telesales also alternative channel of non-life insurers to
provide products to customers.
However, agents are still the main source to bring premium to insurers,
followed by brokers and bancassurance.
Online sales and telesales have been introduced into Vietnam market recently
and still on first stage of development.
Table 1.4. Vietnam’s non-life agents
Year

2007

2008

2009

2010

2011

2012

2013

2014


Number of agents

36,866

35,155

37,561

60,071

65,676

66,084

69,037

69,617

Source: Data consolidated from Association of Vietnam Insurers reports 2007-2015
In terms of product basket, non-life market have many more products than life
market. Insurers are continuing to develop new products.
Motor vehicle insurance accounts for the biggest shares in terms of total gross
premium, at 30% in 2015. The second position is health insurance with 24% of total
non-life gross premium. The third position is property and casualty insurance
accounting for 19% (Association of Vietnamese Insurers, 2016, p.7). As we can see
from the figure below, health insurance and motor vehicle insurance contributes
majority of premium to almost all insurers, except for PVI with largest premium
proportion derived from property and casualty insurance, in particular construction,
installation and operation of industrial projects.


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Source: Author’s illustration based on Association of Vietnamese insurer’s report
2015
Figure 1.9. Types of non-life products by insurer in 2015
However, health insurance is facing alarming high loss ratio due to two
reasons, including: inflation of medical costs, insurance frauds. This situation urges
insurers to change or die. In fact, in 2015 – 2016, non-life market had saw some
players withdraw totally or partly from this line of insurance, for example: Prevoir
stopped health insurance since November 2015, Baoviet and PVI tightened the
terms & conditions and increased premium to limit the participation of children
under 9 years old. However, there is still much of work that insurers need to do to
mitigate insurance fraud, for example: applying control mechanism at hospital to
prevent collusion between customers and hospitals, improving the health risk
assessment quality to detect fraud. Regarding motor vehicle insurance, there is
unfair competition among local insurers. Insurers compete by decreasing premium,
which is against the law, instead of competition by service and product
improvement. This is a sign of unsustainable growth strategy that local non-life
insurers are trapped in.

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However, in terms of average loss ratio combining all lines of insurance,
Vietnam’s non-life loss ratio is quite good.

Note: Loss ratio of Vietnam as of 2015
Source: Author’s illustration based on data from Association of Vietnamese

Insurers report 2014 and Swiss Re 2014
Figure 1.10. Non-life loss ratio in 2014
In terms of expertise knowledge, local insurers are still weak in actuary
calculation. In fact, very few local insurers have a real actuary. Baoviet seems to
play the role of leader in premium calculation, terms & conditions designing for the
other local insurers to follow. In fact, it is not difficult to find striking resemblance
between product wording, for example: health insurance, motor vehicle insurance,
private home insurance among local insurers. The difference is very small and
mostly in terms of premium. However, the foreign products are quite differently
designed, compared to local products.
Unlike local insurers, foreign companies do not have advantage of wide
national network in comparison with local companies, which is very crucial to
introduce non-life products to individual customers. Foreign companies only have
some branches based in major cities/ provinces, while local insurers usually have
nation-wide networks. Unlike life insurance industry, networks play very more
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important role in non-life market. The reason is that non-life insurance products
with small premium target lots of customers, from middle customers to high income
customers, who lives in all cities, provinces. However, life insurance with high
premium mostly target to high income customers, who lives in big cities, provinces.
Wider network will increase the chance for non-life insurers to contact with
potential customers. As the results, the local insurers dominated non-life market.
In general, due to the limitation of charter capital requirement, the number of
local life insurers is less than that of foreign insurers. Except for Baoviet Insurance
Company, other local insurers were established within 8 years. This leads to less
competitiveness of the local, compared to the foreigner. However, in the case of
Baoviet Insurance Company, local insurers seem to make determined efforts to
move forward and take the number one position in first quarter 2016 through

dynamic comprehensive pack of changes including products diversify, customer
services quality improvement, technology investments etc. The main life products
are endowment insurance and investment insurance.
By contrast, the non-life insurance market is dominated by local insurers
thanks to nation-wide networks. Vehicle insurance takes the first position in terms
of premium, followed by health insurance. However, due to lack of insurance fraud
controls and data-based premium calculation, non-life insurers are facing high loss
ratio of those two products.

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