Insurance sector says it is covered for any decline

Insurance companies are working to sustain initial robust growth in the sector

In recent years, providers have tended to offer long-term products (10-15 years, life-term) with larger payments to gradually replace five-year policies that mature. This improves customer service because with longer-term risks (accidents, illnesses, injuries, death) the range of probabilities will widen and the responsibilities of the company will be greater, Loc said.
Insurance customers recently dropped in number, but premiums collected did not decrease. Total sales were VND1,917.799 billion ($120.1 million) in the first quarter of 2006, an increase of 0.5 per cent over 2004. AIA increased 0.6 per cent, Bao Minh CGM increased 22 per cent, Bao Viet Life Insurance decreased 0.17 per cent, Manulife decreased 0.14 per cent and Prudential decreased 0.34 per cent against 2005, acceptable figures, Loc said.
He said a number of five-year policies (2000-2005) matured and had to be terminated as a matter of course. According to statistics, by the first quarter of this year only 50,000 life insurance policies were terminated while 250,000 of them matured.
Another factor is commercial banks, from 2004, have continuously raised interest rates on savings with many promotions, and fluctuations in gold prices and foreign currencies, influenced the life insurance market.
Life insurance policies are long-term, so payment of both principal and dividend is applicable throughout, though interest on deposits increases or decreases. At present, life insurers calculate dividends based on the average interest in the world credit market. When Vietnam joins the WTO and opens its finance, insurance and banking markets, interest rates must be close to international rates then, and this will cause people to be less interested in interest rates on deposits. By then they will opt for life insurance.
Loc also said that a decrease in life insurance companies is not an indicator, but merely a transition, and reducing agent numbers would improve quality.
Lam Hai Tuan, general director of ACE Life, said that the market in Vietnam is full of potential. Main customers are aged 26-45 and responsible for their families and relatives, especially those who are married and want to protect what they have created.
Tuan said that life insurance is on the increase and cited ACE as evidence. Though ACE has been in Vietnam for just over a year it grew 99 per cent in April, 20 per cent in May and 85 per cent in June.
Tuan said many companies put quantity over quality. The market is changing and it is time for more intensive development. Agents must not be simple go-between but analysts. They must be able to analyse customers’ needs to give appropriate answers.
More importantly, providers need to promote the idea that ‘the main objective of life insurance is to protect, not to invest’, and it’s not quite right to compare life insurance with investment in gold, securities or property, or even bank savings, he said. It is for this reason that many customers terminate policies when bank rates on deposits go higher (9-10 per cent/year) than insurance yields.
Tuan said it is time to offer products that are truly protective, with high nominal value. He offered one example: a customer has an annual income of VND100m and wants long-term protective products, for life insurance, so his relatives receive at least fivefold the insured income (VND500m).
“It is possible that this will limit the number of people buying life insurance but it will return to life insurance its real significance,” Tuan said.
Loc said that companies are offering policies that are both protective and economical.


No. 773/August 7-13, 2006