Despite uncertainty driven by Covid-19, Vietnam’s life insurance sector enjoyed 17% YoY growth in the 1H2021

The Covid-19 pandemic continues to significantly impact individuals, society, businesses, and the wider economy across the world. The insurance industry has not escaped the pandemic’s impact in Vietnam, but insurers have responded quickly to the crisis. As the economy recovers and responds to the pandemic, Vietnam’s life insurance sector is facing both challenges and opportunities in the medium to long term.

A bright picture of Vietnam’s life insurance sector in the 1H2021 recorded a strong Y-o-Y growth rate of 17%

Despite the negative impacts of COVID-19, in 2020 the life sector enjoyed double-digit growth of 21% in terms of gross written premium (GWP).

Although the growth rate is lower than corresponding average figures in the period 2016 – 2019 (around 24% - 30% per annum), the performance outperformed those of various markets in the world (e.g emerging markets up just 0.3%; developed markets contracted by 5.7%. Source: Swiss Re Institute’s Sigma Report) in 2020.

In 1H2021, thanks to the Vietnam government’s effective control of COVID-19, the sector witnessed a stronger recovery of year-on-year growth of 17% compared to the same period last year.

During the pandemic, the top 5 players (i.e Bao Viet Life, Manulife, Prudential, Daiichi, AIA) continue maintaining their strong growth momentum and market share.

For the first 4 months of 2021, the Big 5 holds a 78.5% market share in terms of gross written premium.

Regarding the product segmentation, the top 3 products (i.e investment-linked, endowment, and riders) keep accounting for around 98% of total GWP in the first 4 months of 2021.          

The strong growth rate could be explained by the following factors:

• Acceleration of digital transformation during the pandemic:

The Covid pandemic and strict social distancing requirements propel life insurers to accelerate their end-to-end digitalization for both their business operations and interactions with clients.

Application of innovative technology solutions such as e-application, e-contract, e-collection, e-claims, life insurance apps, connections with various fintech in payment, local banks and finance companies, e-commerce platforms, etc., to orchestrate a comprehensive life insurance ecosystem in order to support their agents to handle customer requests in the context of remote working, improving customer experience as well as reaching more customers directly with personalized offerings

Digital transformation also helps optimize both their front-end and back-end operational processes and costs.

• The development of multi-channel for distribution of life insurance products

In the past few years especially in the pandemic, besides wide traditional agent networks, bancassurance and digital platforms have steadily become prominent sales channels for life players.

Leveraging a wide established branch network, large retail customer base, and widespread brand awareness, commercial banks have become the ideal conduits for life insurance distribution. The contribution of bancassurance to new GWP increase from 6% in 2016 to around 30% in 2020 already.

The contribution of digital platforms (e.g life insurers’ websites/apps, insurtech, intermediate payment, e-commerce platforms) is still tiny but is expected to boom in the time to come.

In addition, in the context of social distancing (i.e few or no conference and/or face-to-face meetings with potential customers), leveraging high internet and mobile phone penetration in Vietnam, rising tech-savvy younger generation, the life insurers have also focused more on digital marketing campaigns on social media channels (i.e Facebook, YouTube, newspaper/entertainment websites …) to promote life products and reach out more target customers, help maintain their sales growth.

• Risk awareness

The pandemic has been a major catalyst for heightened awareness of health, mortality, and financial concerns among consumers, boosting a perception of insurance as a means to mitigate unpredictable life events. This contributed to the positive life GWP growth thanks to more people have become risk-averse and purchased new policies following the outbreak of COVID-19.

• Support from life insurers to address customers’ concerns on COVID diseases:

Almost all life insurers in Vietnam offer insurance policies to cover COVID diseases and accept to remove eligibility period requirements for COVID, which provide attractive benefits as well as address the customer’s concerns in the pandemic. This help contributes to strong life sales growth in the past two years.

• Low life insurance penetration in Vietnam compared to other peers in the region

Life insurance penetration in Vietnam is quite low compared to other neighboring countries in the Asia region, both in terms of GWP per capita and GWP as a percentage of GDP, implying large room for growth potentials currently and in the years to come.

The low penetration in the life segment in Vietnam together with appropriate and timely solutions of insurers to overcome obstacles in the pandemic help support high sales growth amongst leading players in the marketplace.

Life insurance sector outlook 2021: A year of new opportunities

In the long run, low life insurance penetration, customers’ risk aversion attitude, and a better understanding of insurance as a means to mitigate unpredictable life events, strong digital transformation trends, favorable demographic factors (e.g golden population structure, rapid urbanization, rising middle class and increasing income per capita, etc.,) as well as economic recovery post-COVID are expected to continue driving the growth of the sector in the time to come.

However, in the short run, the prolonged COVID and its variant waves in 2H2021 and upcoming years as we are observing throughout Vietnam for now would negatively impact customers who might suffer from losing jobs and/or income reduction during the pandemic. This would reduce their purchasing power to continue existing policies and/or buy new ones.

Low-interest rate and falling yield on government bonds due to strong liquidity in the banking system and SBV’s supportive monetary policy in the pandemic currently challenges to improve investment income, which is a major source of earnings for life insurers, in 2021.

Scarcity of underwriting experts and data science/digital talents might also be challenges faced by the insurers so as to deliver successful digital transformation

Regarding the top-line growth, based on the above rationales, the life segment is expected to enjoy around 20% - 22% GWP growth in 2021. 

Author:

Mr. Le Xuan Dong,

Head of Market Research and Consulting Services (“FiinResearch”)

FiinGroup Joint Stock Company

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