Non-life segment leads the pack in insurance gains

Last year’s total insurance premium revenue was estimated at $9.6 billion, while Ministry of Finance data reveals an 8.1 per cent decrease in total insurance premium revenue.

Non-life segment leads the pack in insurance gains

A substantial portion of this downturn emanates from the life insurance sector, still reeling from an early-year crisis of confidence.

“The decline in the life insurance sector has been stark and unexpected,” explained Dr. Nguyen Huu Huan, a lecturer at the University of Economics Ho Chi Minh City. “It reflects a deeper issue of consumer trust and market stability.”

In the first nine months of 2023, as per the General Statistics Office, there was a 6.9 per cent year-over-year decrease in total insurance premium revenue, translating to approximately $6.96 billion.

Within this, the non-life insurance sector bucked the trend with a 2.6 per cent rise to about $2.2 billion, while life insurance suffered a 10.7 per cent contraction to roughly $4.78 billion.

Bancassurance, a vital growth driver in the life insurance domain, also witnessed a downturn. From contributing 46 per cent to new insurance sales in 2022, bancassurance has seen diminishing returns in 2023. Reports from eight prominent banks show a 26.1 per cent year-over-year drop in bancassurance income, totalling around $396 million. Some institutions like SeABank have seen a plunge of nearly 80 per cent.

Nguyen Hong Son, CEO of Chubb Life Vietnam, said that it has not been directly affected by the crisis of confidence in bancassurance, but its traditional distribution channels experienced indirect impacts.

“Our decrease in new business sales was substantially lower than the market’s average decline of around 38 per cent,” Son observed. “Throughout the years, despite engaging with numerous banks, we recognised that while the bancassurance channel offers vast potential, it also carries significant inherent risks.”

In the shadow of the life insurance sector’s challenges, the domestic non-life insurance industry has emerged as a robust success story.

Excluding the influence of Bao Viet Group, non-life insurers listed on the stock market reported a 59 per cent surge in after-tax profits for the first nine months of the year.

This performance is not just confined to insurance activities; financial operations have seen significant growth, 15 and 47 per cent, respectively, over the same period last year.

Last year marked a distinct shift in investor sentiment towards the non-life segment. In a notable move, Pyn Elite Fund increased its stake in Military Insurance (MIC) in November, acquiring an additional 2.55 million shares to hold 8.08 per cent of the company. This follows a series of investments by the Finnish fund into MIC, reflective of the sector’s growing appeal.

Another significant foreign entry is South Korea’s DB Insurance, which expanded its foothold in Vietnam by acquiring 75 per cent stakes in Aviation Insurance and Saigon-Hanoi Insurance.

Despite current and near-term challenges, the Vietnamese insurance market remains ripe for development. The insurance penetration rate in Vietnam, which measures premiums against GDP, stood at a modest 2.6 per cent in 2022, with projections to increase to 3.5 per cent by 2025.

“When compared to developed markets like the US and the UK, where penetration rates hover around 12 per cent, Vietnam’s market has significant room to grow,” shared Ngo Trung Dung, deputy secretary-general of the Insurance Association of Vietnam. “Only about 12 per cent of the Vietnamese population is currently enrolled in life insurance. With an average annual insurance spending of just over $105 per person in 2022, the market’s potential is palpable.”

Do The Vinh, CEO of insurtech firm IBAOHIEM, stated that the rapid tech evolution is setting the stage for exponential growth in Vietnam’s insurtech market.

“While Vietnam’s insurance market in 2023 estimated a modest growth of about 2 per cent, preliminary data from insurtech companies indicates a potential 30 per cent revenue growth from online channels,” Vinh said. “This trend suggests a gradual revenue shift from traditional insurance practices to tech-driven solutions. Once a legal framework is fully established, digital insurance is poised for rapid growth.”

Non-life insurance sees rosy first-half performance The non-life insurance segment recaptured momentum, reaching double-digit growth in premium revenue in the first half of this year, with the indemnity rate also being forecast for an upsurge.

Non-life insurance to engage customers The insurance landscape in Vietnam is undergoing massive change. The risks Vietnamese people are exposed to on a daily basis are on the rise and becoming increasingly unpredictable.