Insurance Economics - NEU

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Group 1 – Actuary K60

Insurance Economics - NEU

CONTENTS :
1. What is the non – life insurance ?
a. The definition
b. The types of non – life insurance
c. Why need to buy non-life insurance
2. General information about Vietnamese non- life insurance market
3. The revenue ( profit, opportunities )
4. Strength, compensation
5. Challenges

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Group 1 – Actuary K60

Insurance Economics - NEU

1. What is the non – life insurance ?

a. The definition
Non-life insurance is any type of insurance other than life insurance. While life insurance is broken
down into permanent and term life policies, non-life insurance includes many types of other
insurance policies. Non-life insurance may cover people, property or legal liabilities.
The characteristic of non-life insurance is a special type of service in which customers buy insurance
and pay premium in order to receive large compensation commitments from the insurance company
when facing risks.
b. Types of non – life insurance
General insurance can be categorized in to following:
 Auto Insurance
 Health Insurance
 Property and Casualty Insurance
 Fire & Explosion Insurance
 Hull and P&I Insurance
 Cargo Insurance
 Liability Insurance
 Aviation Insurance
 Business Interruption Insurance
 Credit & Financial Risks Insurance
 Agriculture Insurance
 Guarantee Insurance
c) Why need to buy non-life insurance
 Reduce financial burden: When the risks occur, insurance helps us to cover part or the whole
of the loss.
 Safe for high value assets: Join insurance for timely financial support to overcome the
unfortunate risk of happening with valuable assets.

2. NON-LIFE INSURANCE BUSINESS PERFORMANCE

In FY 2017, non-life gross written insurance premiums were VND 41,594 billion with an
increase of 12.83% to FY 2016. The market share was still highly concentrated to the “big 5” non -
life insurers. They were Bao Viet (19.36%), PVI Insurance (16.08%), Bao Minh (8.16%), PTI
(7.71%) and Pjico (6.28%). 25 other non - life insures and branch of the foreign non-life insurance
company in Vietnam only had a small contribution to premium income as of 42.41%.
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Figure 1. Insurance Premium Market Share by Non - Life Insurers FY 2017

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Insurance Economics - NEU

Distribution of Premiums and Premium Growth by Line of Business

Compared to FY 2016, most of key lines of business achieved high growth rate such as
Health insurance (26.67%), Fire & Explosion insurance (16.68%), Liability insurance (16.18%),
Credit and Financial risks (15.07%), Business Interruption insurance (11.12%), Automobile
insurance (10.13%), Property and Casualty insurance (5.66%), Cargo insurance (5.61%),
Agriculture insurance (1.13%). Meanwhile, the other lines still stood at very low level such as
Aviation insurance (decreased by 9.74%), Guarantee Insurance (decreased by 4.73%), Hull and P&I
(decreased by 3.75%).

Figure 2. Gross Insurance Premiums in FY 2016 - FY 2017

Unit: VND billion

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Insurance Economics - NEU

Figure 3. Distribution of Gross Insurance Premiums by Line of Business in FY 2017

In FY 2017, Automobile insurance accounted for the highest proportion of 32%, followed by
Health insurance (29.39%), Property and Casualty insurance (14.39%), Fire & Explosion insurance
(7.85%), Cargo insurance (5.63%), Hull and P&I (5.51%), Liability insurance (2.25%), Aviation
insurance (1.68%). Meanwhile, the other lines still stood at a very low level such as Business
Interruption insurance (0.61%), Credit & Financial Risks insurance (0.53%), Agriculture insurance
(0.11%), Guarantee Insurance (0.06%).

4. Claim Payments & Strength

a. Claim Payments

In FY 2017, the gross claim payments and net retained claim payments were VND 15,957
billion and VND 12,139 billion, respectively. Non-life insurance business has performed well its
role in preventing and mitigating risks exposed to the insured, thus reducing the burden of the
State Budget

Non-life Claim Payments for the period FY 2013 - FY 2017

Unit: VND billion

Claim payments FY 2013 FY 2014 FY 2015 FY 2016 FY 2017

Gross claim 10,668 10,954 13,851 13,246 15,957

payments
Net claim payments 7,256 7,877 9,057 10,463 12,139

Regarding insurance payment, the total amount of compensation and insurance payments of listed
insurance companies in the second quarter of 2019 increased by 1.9%, but for the first 6 months of
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Insurance Economics - NEU

the year, it still decreased by 1.3%, making for a 6-month compensation rate at 67.5% - much lower
than 76.8% in the same period of 2018.

Except for Bao Minh, which increased from 40.9% in the first 6 months of 2018 to 41.8% in the first
6 months of 2019, the rate of compensation of all other insurance enterprises has significantly
decreased, of which the most in MIC (from 44% to 28.6%) and Bao Viet (96.3% to 82.4%).

If excluding Bao Viet, the average compensation rate of the remaining 9 insurance enterprises was
41.3%, down from 45.1% in the first 6 months of 2018.

The positive compensation situation and the 6-month operating expense ratio were 38.4%, a slight
decrease compared to 38.7% in the same period last year, which made the combined rate of
insurance enterprises decreased, the number of enterprises having profits from insurance business
activities has increased.
b. Strengths

Maintain growth over 20% for 8 consecutive years. According to statistics, Vietnam's insurance
market has an average increase of 23% in the period of 2011 - 2015, and 21% in the period of 2016 -
2018. According to forecasts, Vietnam's insurance market will continue to maintain. maintain this
"style" in 2019.

The investment is quite safe. The insurance investment is considered to be quite safe as most of
them are Government bonds, bank deposits and corporate bonds with relatively stable interest rates
on the market.

Diverse insurance products. Insurance products are increasingly diverse, designed flexibly to meet
the needs of customers. Total insurance products on the market are estimated to be up to 850 non-
life insurance products and 450 life insurance products.

Wide network of consultants and businesses. The network of insurance consultancy and experience
is constantly expanding, insurance enterprises have nearly 1,000 branches and representative offices
operating nationwide.

5. Challenges
a. Inflation
Uncontained inflation threatens the country’s economic growth, and will dampen demand for
insurance.
b. Lack of trust
This is a reason why many individuals don`t bother with insurance. Many non – life insurance firms
fail to pay claims, and they don`t own up to offering some benefits. Therefore, most people just see
insurance as one of the unnecessary expenses.
c. Competition
Today, there are many non-life insurance companies on the market and therefore there is an
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intensive challenge for insurers. Each company looks for the best way of selling their insurance
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products in the best possible way and targets a particular group of individuals. Most non-life

Group 1 – Actuary K60

Insurance Economics - NEU

insurance businesses, especially the new ones are the most doubted companies. In fact, most people
trust some of the existing insurance firms compared to the new businesses since the new enterprises
are operated on a thin line between failure and success—and no one will want to take such risks
with the little among of money that they have.
d. Lack of market and risk expertise
Lack of breadth and depth in local capital markets poses difficulties for insurers to generate reliable
and stable investment returns. Obstacles to improving risk management practices also persist,
including underdeveloped IT infrastructure, a dearth of industry talent, a lack of catastrophe models,
insufficient pricing and reserving expertise, and a generally low awareness of risk.
e. Excessive politicization of the insurance industry
Without a doubt, politics play a significant role in non-life insurance companies` operations
depending on the power play & calculations that are dominant in the operating domains of the non-
life insurance firms. The premiums to pay, the outcomes of risk investigations, and the damages and
benefits to pay depend on political conspiracy sometimes.

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Group 1 – Actuary K60