Insurance companies expect "after the rain, comes sunshine"

Life insurance companies are hopeful that the situation will be more favorable in the coming time.

Many figures showed a slowdown

According to the latest data released by the Vietnam Insurance Association, the number of new insurance contracts in the first six months of 2023 reached over 1 million contracts (main products), a 31.3% decrease compared to the same period last year. The total premium revenue from new insurance contracts across the market in the first six months of 2023 is estimated at VND15,508 billion, down 38.2% compared to the same period last year - the first time it has decreased in 30 years. Leading in premium revenue from new insurance contracts is Prudential with VND2,741 billion, Dai-ichi Life with VND2,046 billion, Manulife with VND1,976 billion, Bao Viet Life with VND1,912 billion, and Sun Life with VND1,183 billion.

The total premium revenue for the entire market is estimated to be VND77,831 billion, down 7.9% compared to the same period last year, with Bao Viet Life having the highest market share at over 20%, followed by Manulife, Prudential, AIA, and others.

According to data from the Ministry of Finance, in the first eight months of 2023, the total premium revenue is estimated at VND147.13 trillion, down 6.08% compared to the same period last year. While insurance benefit payouts reached nearly VND46.53 trillion, an increase of 20.78% compared to the same period last year.

Regarding business results, alongside many companies experiencing growth, many insurance companies have reported decreased revenue and profit due to market fluctuations and increased compensation costs.

As one of the rare insurance companies listed on the stock market, Bao Viet Group, with the main shareholder being the Ministry of Finance (holding 65% of charter capital), followed by Sumitomo Life Group (holding more than 22% of charter capital), still achieved satisfactory business results with a profit before tax of over VND1,164 billion in the first six months, up 11% compared to the same period in 2022.

According to SSI Securities Corporation experts, the life insurance market has been negatively affected by weak consumer confidence, with bancassurance being more affected than the agency channel. However, thanks to careful sales through the agency channel (accounting for 97% of new premium revenue), Bao Viet has been able to benefit.

Therefore, SSI experts predicted that Bao Viet's pre-tax profit in 2023 would reach VND2.2 trillion (an increase of 11.9% compared to the same period). In 2024, pre-tax profit will reach VND2.3 trillion (an increase of 3.3% compared to the same period) due to high-interest deposit contracts being reinvested at lower interest rates.

However, not as positive as the above state-owned enterprises, the insurance business of Prudential has experienced a downturn. According to its separate financial report for the mid-year of 2023, Prudential Vietnam recorded a total pre-tax profit of over VND1,601 billion, a decrease of nearly 43% compared to the same period last year. Similarly, Generali Vietnam also recorded a 34% decrease in profit from insurance business operations in the first six months compared to the same period last year, down to nearly VND718 billion, as the original premium revenue decreased by 9% to VND2,122 billion, and insurance compensation costs increased by 35% to nearly VND863 billion.

Not only has Sun Life Vietnam seen a significant decline in profits, but it has also recorded a post-tax loss of nearly VND278.6 billion in the first six months of the year due to the burden of eroding sales costs, which ate up all the profits from insurance business and financial activities. In the same period last year, the company recorded a loss of over VND461.3 billion.

Significant growth potential

Overall, the business outlook for insurance companies is expected to be "brighter after the storm" due to the positive prospects for the insurance industry in 2023, driven by significant growth potential and a more diversified distribution channel. The government's development direction for the insurance market in the coming years aims to achieve insurance industry revenues of 3.8-4.2% of GDP with 15% of the population participating in life insurance by 2025. It is projected to reach 4.2-4.5% of GDP with 20-25% of the population participating in life insurance by 2030.

For example, Prudential has implemented various activities to enhance customer experience, such as introducing a new life insurance policy in 2023 that consists of only eight pages, made from environmentally friendly materials, and is a simplified summary of important terms in the original policy for easier understanding and reading by users. In addition, many insurance companies are continuing to diversify their product offerings and utilize technology to make insurance fees more accessible to different customer groups.

In particular, the insurance market is expected to be further consolidated due to the regulatory efforts of insurance authorities. The Insurance Business Law is seen as a positive factor that will promote stable and sustainable development in the insurance market.

In a recent response to constituents' questions about insurance, the Ministry of Finance stated that it was taking comprehensive measures to enhance market transparency and protect the rights of insurance participants. The Ministry of Finance is continuing to improve insurance business laws and adding regulations to improve the quality of insurance agents. There are also specific regulations for selling insurance through banks.

Furthermore, the Ministry of Finance is strengthening the management, supervision, and inspection of insurance companies. The Insurance Management and Supervision Department (under the Ministry of Finance) has conducted surveys, collected information, and plans to inspect three life insurance companies, with further inspections and checks of other insurance companies in the pipeline. Any violations discovered will be strictly dealt with in accordance with the law.