How to secure a larger piece of the cake with the same advantages is a thorny problem for many businesses operating in the field of insurance.

Opportunities for insurance businesses

In the current context when socio-economic development is experiencing positive changes, the domestic insurance market is witnessing impressive achievements in terms of both operation scale and quality. At present, the Vietnamese insurance market has 37 enterprises, including 21 non life insurance firms, seven life insurance businesses, eight insurance brokers and one reinsurance company. In 2006, the insurance sector recorded a total revenue of VND17,752 billion, up 14.08 percent over the previous year. The sector’s total investment in the domestic economy reached VND30,676 billion, or VND4,952 billion higher than one year earlier. In general, since last year many businesses have been implementing the equitization process and reorganizing their structures in order to improve management skills, increase financial capacity and list their shares on stock market. As a result, most insurance enterprises and insurance brokers have achieved considerable growth and efficiency in business operation.

On the other hand, the domestic insurance market has effectively managed its role in risk prevention, investment mobilization and disbursement, thus securing sustainable socio-economic growth.

According to the head of the Insurance Department under the Finance Ministry Trinh Thanh Hoan, with the socio-economic development strategy through to 2010, GDP per capita will reach US$1,050-1,100/person/year, while annually GDP growth will hit 7.5-8 percent, and possibly even more than 8 percent. The sectoral structure in GDP will see a positive shift from agriculture into industry and services. Export turnover and social investment will increase sharply.

The legal framework for business operation in the insurance sector has been completed gradually, while measures for the insurance sector’s development have been worked out so as to raise the role of the sector in various fields of everyday life. The investment environment has improved to create favourable conditions for insurance enterprises to increase their business operations.

Public awareness of the role, benefit and ways to join insurance services has improved remarkably. Furthermore, the insurance sector’s integration has opened up more opportunities to access new markets, new products and new technology in this field. These are most advantageous for insurance businesses and brokers to realize their targets through 2010, thus developing a comprehensive, safe and effective insurance market and fulfilling requirements of the national economy. The sector aims to achieve an average growth of 24 percent annually in the 2001-2010 period. The proportion of the whole insurance sector’s revenue is expected to reach 4.2 percent compared to GDP in 2010.

However, the integration process also brings about certain challenges for businesses operating in accordance with market principles in a transparent manner. Each insurance enterprise must restructure its organization and balance the market. Accordingly, the market share of domestic businesses may be narrowed, while the market share of foreign businesses is likely to be widened. Hence, Vietnamese enterprises must sharpen their competitiveness to secure a firm foothold in the domestic market.

Solutions for Vietnam’s insurance market

In fact, Vietnam’s insurance market has great potential, so it is not too difficult to achieve the set targets. Deputy Minister of Finance Tran Xuan Ha said to reach the set targets State management agencies and insurance businesses have to take synchronized measures. At the macro level, insurance management companies should refine legal documents for insurance in accordance with principles of integration and the real situation of the market in each stage. In addition, the companies should create a legal foundation for insurance and broker companies to seize opportunities to develop business activities. Besides, it is necessary to set up an information system between the Ministry of Finance (MOF) and insurance companies to ensure the efficiency of management. The MOF should also strengthen inspection, supervision and implementation for the business activities of insurance enterprises, set up warning systems, and strictly punish unhealthy business activities. State management agencies will also promote cooperation with international insurance management associations to share experiences in technology and human resources.

Regarding solutions for enterprises operating in the field of insurance, Mr Trinh Thanh Hoan said that the first solution is to strengthen financial capacity and competitive edge in the market through payment ability, and ensure commitments for insurance participants.

From now till 2010, insurance enterprises have to increase legal capital according to regulations of the Decree No 46/2006/ND-CP dated March 27, 2007 on the implementation of some articles of Law on Insurance Business. Under the decree, non-insurance companies should reach a legal capital level of at least VND300 billion, and life insurance companies have to reach a level of VND600 billion.

In addition, each insurance enterprise is expected to diversify products as a vital requirement. Therefore, each enterprise should invest in studying its overall development strategy and promote the application of information technology in all business activities. Each enterprise should be responsible for thorough research on its commitment to integration, especially information on proper strategies, and plan to compete with rivals in the region.

On the other hand, it is necessary to invest in producing different kinds of products to meet market demands for insurance. Mr Hoan said, there remain some fields which enterprises have not yet investigated such as calamities insurance, agriculture, credit insurance, financial risk, pharmaceutical business, heath care and law-enforcement.

In addition, it is necessary to have cooperation between insurance enterprises in order to ensure a level playing field and to avoid unfair trade practices.