Fubon Financial climbs into life insurance market

Fubon Life Insurance (Vietnam) Co. Ltd, wholly owned by Taiwan’s Fubon Life Insurance (Taiwan), was given the green light by Vietnam’s Ministry of Finance on December 23.

The new company will be based in Hanoi with a branch in Ho Chi Minh City. It is scheduled to start operating in the first quarter of 2011.

Fubon Life Insurance’s vice chairman Kenneth Shih said the Vietnamese market offered “large room to develop”.

Shih said 5 per cent of Vietnam’s population have purchased life insurance policies, whilst a ratio of up to 40 per cent should been reached within next five to 10 years.

“It shows a great potential for growth as an emerging life insurance market,” said Shih.

The Fubon Life Insurance’s joining comes amid the increasingly market tapping of several foreign insurance firms into Vietnam. Ten out of 11 life insurance firms are foreign ones, of which haft has widely expanded their roots across the nation for 10 years.

However, the long-established firms such as Prudential, Manulife, AIA, Dai-ichi Life Vietnam and ACE Life, alone have a 68.1 per cent market share. Meanwhile, the new players are sharing the tiny portion of 1.3 per cent market, according to statistics from Vietnam’s Department of Insurance Management and Supervision.

“We do not see it [the tiny market shares for the new firms] as the problem as the growing market is to bring new great opportunities for firms who join it, even for the later comers,” said Shih.

Shih  said the problem was insurance agents’ skills to change Vietnamese people’s behaviour to use life insurance products.

“Vietnamese behavior is similar with Taiwanese in past 15 years when the people were still strange with life insurance services,” Shih said “However we had successfully improved this problem and hope to do it again in Vietnam.”

The new company is to be developed under the build-operate-transfer (BOT) model. Taiwanese executives and insurance agents, comprising the short-term and the long-term teams, are arriving Vietnam to recruit and train local employees. Within six months the short-term teams will repatriate, followed by the long-term ones in about two years and transferring operations to local employees within next two or three years.

Shih expects Fubon Life Insurance Vietnam to gain a market share of 5 to 10 per cent for the “build” period. For long term, the expectation is set at some 25 per cent as it is in Taiwan.

Fubon Financial is Taiwan’s second largest financial group with total assets for 2009 stood at over $100 billion. Its activities extend across financial sectors with arms cover several Asian nations, among them China and Thailand.

Fubon Life Insurance Vietnam was launched after the Taipei Fubon Bank (Vietnam) and Fubon Insurance (Vietnam) set up by the group in 2007 and 2008 respectively.