Expectations for Vietnam insurance market in 2024

Customer Trust Crisis

In 2023, the Vietnamese insurance market experienced a significant crisis of client trust that affected not only a few businesses but the whole industry. Although the episodes of consumer trust exploitation are isolated incidents that do not reflect the broader status of the insurance sector, the negative impact has had far-reaching ramifications for the whole system.

According to freshly released statistics from the General Statistics Office, insurance market income in Q4/2023 is expected to be 11.9% lower than at the same time last year. Life insurance income declined by 17%, while non-life insurance revenue climbed by 2%.

Total insurance market income is expected to be 227.100 trillion VND in 2023, down 8.33% from the previous year. The life insurance segment remained the primary source of revenue declines. The earnings from life insurance is anticipated to be over 156.000 trillion VND, a 12.5% decrease from the previous year. This is also the first year of negative growth in the life insurance industry's 20-year history.

The Ministry of Finance has worked hard this year to build and complete the regulatory framework for insurance company operations, releasing Decrees and Circulars outlining the Insurance company Law. These activities attempt to encourage market development that is safe, stable, and long-term.

Younet Media, a major organization in social media data analysis, has produced a study report indicating that recent contentious insurance situations have greatly damaged customers' perceptions of the sector. Customers' unfavorable opinion about the insurance business, in particular, has increased to its highest level in three years. This has an impact not only on the success rate of consultations but also on the capacity to execute contracts with potential consumers in the life insurance market.

Market Access Limitations

Dr. Bui Duy Tung, a lecturer at RMIT University, told the Business Forum that the Vietnamese insurance business is primarily reliant on conventional sales channels such as bancassurance and direct selling through agents. This contrasts with the more diverse strategy taken in the United States and Europe, where independent brokers, direct internet sales, and digital platforms all play a big role. The reliance on a small number of channels may limit  market access and consumer segmentation possibilities.

First, as compared to the European model, Vietnam's bancassurance concept has several flaws. Vietnam's legislative system is still growing and is not as comprehensive as Europe's tough regulations, hurting transparency and consumer protection. In comparison to European banks, insurance products in Vietnam are less broad and lack customisation. In Vietnam, strategic alliances between banks and insurance firms are not well integrated, hurting the provision of related financial services.

Second, the Vietnamese market is less developed, with recent issues undermining customer confidence in bancassurance. Furthermore, unlike in Europe, where customers frequently have more information and can make more educated judgments regarding insurance products supplied by banks, financial expertise and consumer education about insurance goods in Vietnam still require additional improvement.

Third, the knowledge and comprehension of insurance consumers in Vietnam vary from worldwide norms, particularly in the United States and Europe. Financial literacy, particularly regarding insurance, is limit ed in Vietnam, limit ing customers' capacity to make educated insurance selections. In personal financial planning, Vietnamese cultural norms generally stress family assistance. In contrast, insurance is a significant aspect of personal financial management in the Western world.

"In Vietnam, insurance is viewed as a savings or investment instrument rather than a risk management tool." Trust in insurance providers has been impacted by recent market scandals, although in more established markets such as the United States and Europe, trust levels are normally greater due to consistent management methods and a solid past," Dr. Tung assesses.

Goals and Challenges for the New Year

The Ministry of Finance has clearly increased its inspection and supervision efforts in order to achieve risk-based management. Concurrently, it encourages the development and diversification of new insurance products such as aged insurance, integrated health support services, agricultural insurance, disaster risks, and green insurance...

Some insurance firms, such as MB Ageas Life, also focus on producing flexible insurance solutions that match customers' different demands, maximizing information, and customizing client experiences through online apps and services.

According to the Insurance Supervisory Authority (Ministry of Finance), the Vietnamese insurance business is anticipating a prosperous year in 2024 with significant financial targets. In particular, overall industry assets are expected to reach 1.004.421 trillion VND, representing a 9.97% increase over 2023.

The insurance business also contributes to the economy favorably, with an anticipated investment capital of 850.264 trillion VND, an 11.51% growth over the previous year. Total insurance premium revenue is forecast to reach 243.472 trillion VND, with non-life insurance accounting for 79.687 trillion VND (a 12% increase) and life insurance accounting for 163.785 trillion VND (a 5% increase). This expansion demonstrates the industry's robust recovery and progress following the challenges of 2023.

Faced with economic constraints, the Insurance Supervisory Authority sees healthy growth in the life insurance business as a key challenge. However, with government assistance, resolve from the Ministry of Finance, and company initiatives, the Vietnamese insurance market is steadily transforming in a favorable way.

According to an Insurance Supervisory Authority representative, "the insurance business will continue to develop to deliver higher-quality goods and services while concentrating on consumer demands with a clear understanding of internal difficulties and the adoption of appropriate remedies." This will help to repair confidence and promote market growth."

According to an expert, stabilizing the Vietnamese insurance market in 2024 might be supported by a variety of remedies, including: first, improving state administration, the legislative framework, and market monitoring to ensure compliance with insurance requirements. Controlling legal capital, hazards, and technical reserve restrictions are all part of this.

Second, improving insurance businesses' capability via enhanced risk management, service quality, and the creation of new insurance products to fulfill the different demands of the public.

Third, using information technology to improve operations, increase operational efficiency, and make it easier for customers to buy insurance and settle insurance claims.

Fourth, public awareness of the necessity of insurance is raised through communication efforts and financial education, with the goal of encouraging individuals to engage in insurance.

Fifth, working with multinational insurance businesses to gain experience, keep up with current trends, and implement modern management techniques.

Sixth, having systems in place to resolve complaints and disputes quickly in order to minimize the negative impact on the industry's reputation and customer trust.

These solutions, when effectively implemented, will not only help stabilize the Vietnamese insurance market but also contribute to the sustainable development of the industry in the long term. The combination of strict state management, the innovation of insurance companies, and the widespread participation of the public will create a transparent, efficient, and trustworthy insurance environment."