In the first half of 2017, Vietnam’s insurance sector has seen an increase in total premiums to VND47.17trn (US$1.8 bn), resulting in the insurance industry benefitting from the country’s GDP growth.
Vietname News has reported that insurance growth is set to increase as the GDP growth is projected at more than 6% annually over the next three years.
Swiss investment bank UBS has forecast that Vietnam's economic growth will expand by 6.5% this year.
From the total premiums, the revenue from life insurance was VND27.83trn and nonlife insurance premiums were at VND19.34trn in the first six months of this year, said Phm Thu Huong, deputy director of the Ministry of Finance’s Insurance Supervisory Authority (ISA).
There is great potential within the market as the country has a life insurance penetration level at less than 1%. Only 7% of Vietnam's 93mn people have life insurance. However, there many challenges still remaining in the emerging sector.
ISA director Phung Ngoc Khanh said that although awareness among Vietnamese people regarding life insurance may have increased, most still do not believe that insurance is worth the expense.
One main worry for customers is that the life insurance policies usually span over a long term period, and many are concerned for their financial ability to maintain premium payments.
Doubts about the commitment of foreign life insurers to permanently operate in Vietnam also contribute to the low penetration rate.
In addition, many Vietnamese see insurance as an investment, rather than as a protection product. They prefer bank savings, or gold and real estate investments, which have a higher rate of return.
The low penetration rate also stems from the fact that life insurers have only focused their operations in big cities, overlooking 70% of the country’s population that live in rural areas.