According to figures released by the Vietnam Insurance Association, there are currently eight life insurance enterprises operating in Vietnamese market, with 150,000 insurance agents and more than 100 insurance products. The capital of insurance enterprises has totaled over VND8,000 billion with Bao Viet Company amassing VND1,500 billion, and Prudential US$75 million. According to the association’s 2006 report that the APE index for the whole market has fallen by 3-3.5 percent.  Compared to last year, Prudential APE index decreased by 15 percent. In addition, the number of insurance agents has been narrowed by 31 percent compared to last year. Moreover, the number of newly registered agents has also reduced by 42 percent. Currently, the decrease in the number of new contracts has not yet affected the revenue of insurance enterprises thanks to contracts signed in previous years. However, in the long-term, the decrease will make direct impact on the enterprises’ revenues, especially on the company’s profits and the rights of customers.

According to economic experts, the reason is that insurance companies are confused about how to launch suitable products, which can compete in the stock and credit markets. An insurance expert said that the consumer price index and fluctuations in the price of gold price and US dollars would also affect the consumers’ decision on using savings to buy life insurance. However, the main factor affecting the insurance sector is public awareness of the service. One insurance agent manager said that insurance buyers have become wiser and more prudent. Some people, who have spent a huge amount of their income to buy insurance have begun to realize that insurance may not make their money multiply as they first imagined.

To secure a larger market share, insurance companies have launched many new products and have coordinated with banks in order to create wide distribution channels. For example, Manulife cooperated with the East Asian Bank; Prudential with Vietcombank and Asian Bank; and Bao Viet life insurance company with the Agriculture and Rural Development Bank. Now, insurance buyers can transfer their payment through ATM systems or their accounts in banks.

However, product structures failed to meet the increasing demand from customers when their living conditions improved remarkably. In addition, thanks to increases in people’s income and investment opportunities, it is very easy for local people to access market capital. According to recent statistics, mixed products account for approximately 96 percent of revenue. This demonstrates that insurance businesses have not yet focused on developing special products like health insurance for customers. Current products can only provide medical rights with a rather low level (VND100,000/day in hospital), while people’s income has been raising, and the demand for health insurance for healthcare expenditure has also been rising. Furthermore, products with long-term investment have not yet been developed.

Insurance experts said that the participation of more foreign investors in the insurance sector will create healthy competition in the domestic market.

With a total population of over 80 million, Vietnam has only a little more than 6.5 million people who have purchased life insurance services, 15 million students participating in insurance studies, five million people buying human insurance and five million people buying insurance for vehicles. According to Kenneth Juneau, general director of AIA Vietnam insurance company, up to 95 percent of Vietnamese insurance market’s potential has not yet been explored. This is a great opportunity for foreign insurance companies who are keen on investing in Vietnam.