Local enterprises make a move in Vietnam’s life insurance market

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PetroVietnam Insurance Corp. (PVI) is on track to launch its life insurance arm this year, according to PVI’s general director Bui Van Thuan.

PVI said it had studied the market for a long time and is carefully taking steps to establish its life insurance affiliate.

PVI is now the second-biggest non-life insurer in Vietnam with a revenue of VND4.46 trillion ($22.87 million) in 2010.  The insurer’s financial capacity is said to be sufficient for it to extend to the foreign-dominated life insurance sector.

Thuan said the company was quite confident with this move given its already strong position in the non-life insurance sector.

However, he indicated that PVI would have to cooperate with a big foreign life insurance firm “for technology purposes.”

Thuan said that technology, including sophisticated products matching targeted clients, was the most important factor in running a life insurance company.

“The market is good. We do not lack financial ability as a domestic firm, we have the advantage of understanding Vietnamese people. We just lack the hi-tech element,” he said.

In addition to PVI, Vietcombank-Cardif Life-insurance  (VCLI) also says it is changing its strategy for 2011 to improve on its weak performance in 2010

Since its establishment in mid-2009, VCLI has hardly brought out any products despite advantages gained through its affiliation with two parent banks -  Vietcombank and Seabank.

According to VCLI chairman Pham Thi Tam, the company is combining its products with the deposit service of the two parent banks and the new strategy will encourage people with money in the bank to take out their insurance products at the same time.

Meanwhile, BIDV Insurance Corp. (BIC), the insurance arm of Vietnamese bank BIDV, said it had been saving funds to jump into the life insurance sector. According to a representative from the company, as a new life-insurance company, they can expect losses in their first five years of operation. Therefore, it is vital to have sufficient capital.

Vietnamese insurers still have almost no profile in the local life insurance market, the only exception being Baoviet Holdings.

If it succeeds, PVI will become the second Vietnamese insurer after Baoviet Holdings, as VCLI is actually a joint venture of a foreign insurer with a Vietnamese bank. Nearly 70 percent of this market share is now held by 10 wholly foreign-owned enterprises.

“Life insurance is quite risky for domestic companies,” said Tran Vinh Duc, chairman of Bao Minh Corp. which is, like PVI, among Vietnam’s leading non-life insurers.

Duc said the business required huge financial resources and hi-tech insurance technology as well as some other factors that local companies still lacked.

He indicated that his company had no intention of branching out into the life insurance sector at this stage.

Kenneth Shih, vice chairman for Fubon Life Insurance Co., the latest foreign firm to start up operations in Vietnam, said that the country’s life insurance market still had great potential.