Vietnam set for insurance boost

Doctors stand to benefit from the introduction of mutual insurance

Mutual insurance, an organisational structure in which the insurance policyholders have ownership rights in the company, will initially be encouraged in agriculture, forestry, aquaculture and occupational sectors for lawyers, consultants and doctors, the Ministry of Finance (MoF) said.
Le Song Lai, deputy director of the Insurance Department under the MoF, said mutual insurance would be especially encouraged in sectors with high risk and strong demand.
“For example, current insurers don’t want to participate in crop and poultry insurance because it is too risky, while it is badly needed for farmers to ensure their stable income,” Lai said.
Lai says if the decree is approved, the MoF will work with the Vietnamese Farmers Association, the Vietnam Association of Seafood Exporters and Producers, and associations of lawyers, doctors and pharmacists to set up mutual insurance companies.
“The ministry will assist the establishment of mutual insurance companies with reductions in corporate tax, legal capital and technical and product design support,” he said.
The draft proposes a legal capital level of VND70 billion for creation of a mutual insurance organisation, which it recommends should also have at least 10 initial members.
The decree was written based on various studies on mutual insurance groups in many countries, including the US, France, Germany, India, China, New Zealand and the Philippines.
A collaborative team of representatives from various ministries returned to Vietnam last week after a 10-day study of mutual insurance in the US.
The programme, which was organised by Liberty Mutual, focused on the formation, organisation and regulations of mutual insurance companies.
The purpose of the visit was to assist the Department of Insurance, under the MoF, with the development of the new decree on mutual insurance.
The formation of mutual insurance companies has a long history in the US but is new to the Vietnamese insurance industry. Historically, it has been very popular among farming communities and associations.
“Our efforts to make this programme a useful learning experience for the group have paid off,” said Tom O’Dore, chief representative for Liberty Mutual in Hanoi.
The team had an opportunity to meet with senior officers at Liberty Mutual’s Boston headquarters, the National Association of Mutual Insurance Companies, the National Association of Insurance Commissioners, the Massachusetts Department of Insurance, and several life and non-life mutual insurance companies.
In addition, the team had the opportunity to visit the Liberty Mutual Research Institute for Safety, which has begun a research project in Vietnam with the National Institute of Occupational and Environment Health to study the cause and prevention of occupational accidents in small- and medium-size enterprises.
“Supporting the development of the insurance industry in Vietnam is important, but helping people live safer, more secure lives is our priority,” said Tom Leamon, director for the Liberty Mutual Research Institute for Safety.
In Vietnam, France’s Groupama is the only insurer operating in the agricultural insurance sector.
The company, however, has been struggling to survive due to high risks and a poor understanding of insurance on the part of local farmers.
After around three years cultivating the market, Groupama is seeking approval from the MoF to expand into non-agriculture areas to cut its losses and ensure profitability.
Lai said the MoF was considering what would be acceptable products for Groupama.
“In theory, Vietnam is a good potential market for the development of mutual insurance. However, it will also depend on many other factors to develop,” he said.