Jan 05, 2019 / 17:31

Vietnam insurance market grows 24% in 2018

The Hanoitimes - The high growth of the sector is mainly attributed to personal insurance, including life insurance, healthcare insurance and motor vehicle insurance.

For the whole year of 2018, total market premium revenue is estimated at VND133.65 trillion (US$5.75 billion), up 24% year-on-year, marking the fifth year in a row that the Vietnam insurance market has achieved a premium growth rate of over 20%, according to the Insurance Supervisory and Authority (ISA).

Upon breaking down, life insurance premiums came at VND87.96 trillion (US$3.78 billion), up 33% year-on-year, and non-life insurance premiums reached VND 45.69 trillion (US$1.96 billion), up 10% year-on-year.

The high growth of the sector is mainly attributed to personal insurance, including life insurance, healthcare insurance and motor vehicle insurance, stated Viet Dragon Securities Corporation (VDSC). 

High economic growth, increasing income per capita, aging population, increasing hospital fees and low ownership of vehicles will be the main factors to support the demand for personal insurance.

Since 2015, life insurance has grown rapidly at an average rate of 33% per year, compared with 21% per year in the period 2012-2014. The growth is explained by product diversification, increased capital, and the agency channel promotion, transaction bureaus and bancassurance conducted by life insurance businesses. Accordingly, from 2015, the proportion of life insurance in total premium revenue has expanded.

Economic development has expanded the middle class, leading to increasing demand for savings and investments. Along with the development of financial markets, these factors stimulate the growth of investment-linked insurance products (Universal life and Unit link). 

The proportion of investment-linked products is increasing annual premium equivalent (APE) revenue (67% in the first nine months of 2018 compared to 33% in 2014). Investment-linked insurance will be the main source of revenue for life insurance companies in the future.

The proportion of Vietnamese that have a life insurance is still low compared to many countries in the region and the world. It shows that this industry still has a great growth potential. The middle class is, and will continue, to grow rapidly (expected to account for 50% of the population by 2035 compared to 11% in 2015). This will be the major stimulus for personal insurance (life, health and motor vehicle insurance).

Wholesale products for businesses and organizations (property & damage insurance, cargo insurance, fire insurance, etc.) are slowly recovering after the economic downturn in 2013-2014. 

Healthcare insurance and motor vehicle insurance are still the two main products. The proportion of these two types of insurance in the total non-life insurance premium has continuously risen from 46% in 2011 to 61% in the January – September period in 2018, proving that the insurance industry is increasingly focusing on the retail segment.

Environmental pollution, aging population and increasing hospital fees are factors that boost the demand for healthcare insurance. Vietnam's population is rapidly aging with the proportion of people aged 45 and over rising from 26% in 2010 to 31% in 2016. 

Currently, according to the Ministry of Health, seven people out of 10 suffer from non-infectious diseases (cancer, diabetes, cardiovascular diseases, etc.). Non-infectious diseases cause 77% of annual deaths and the cost of treating these is 40-50 times higher than other diseases.

The demand for car ownership will continue to increase, following the expansion of the middle class in the population structure and the policy of reducing the car import tax from ASEAN countries to 0% from 2018 from 2018, under the ATIGA Agreement. 

Car ownership penetration is still low compared to that of many countries. Above all, it is mandatory for vehicles to be insured. These factors create a huge growth potential for motor vehicle insurance (more than 90% is auto insurance).