Vietnam insurance industry has been maintaining a significant average growth rate of 29% every year since 2001, reports Vietnam finance ministry.
Year 2006 revenues account for more than 2% of Gross Domestic Product (GDP), double of revenues in 2001, according to news published in Vietnam Economic Times on November 23, 2006.
At present, nearly 800 insurance (life & non-life) products are there in Vietnam market. Since 2001, Vietnam insurance industry has made investments totaling US$ 6.87 Billion (VND 110 Trillion) for economic development of which 60% of investments were long-term.
Vietnam's insurance industry is smaller compared to the likes of Asian giants India and China. Though the coverage is low, insurance industry has grown dramatically. Total yearly premiums in 2005 were US$ 950 Million (VND 15 Trillion) from US$ 285 Million (VND 4.5 Trillion) in 2001. Life insurance industry has risen sharply to reach US$ 576 Million (VND 9.1 Trillion) of total premiums last year, up from US$ 463 Million (VND 7.8 Trillion) in 2004.
An insurance industry analyst at RNCOS said that the growth could be attributed to rising presence of overseas competitors that has forced the local companies, especially Bao Viet (Vietnam Insurance Corp) to become more competitive.
He further added, "Apart from overseas competition, lower wage rates, educated & consumer-oriented workforce, an underdeveloped financial system, which is on a verge to undergo a dramatic change & rising FDI (Foreign Direct Investment) are key driving forces that have contributed to the growth of the insurance industry."
However like other booming economies, Vietnam insurance industry has some 'early stage' challenges ahead. Complex bureaucratic process, less transparency, some fraud & corruption, and underdeveloped infrastructure are the key challenges for the industry.
Good thing is that govt. reforms are currently underway which are strengthening & modernizing insurance industry. And with WTO access, Vietnam's business environment is becoming further conducive to foreign competition.
Ministry of Finance also said that the upgrade process of legal system has been on an upswing to separate state management from supervising insurance operations in the country in order to give foreign giants a fierce competition from domestic players.
The move will probably invite heavy investments & competitive environment in the industry, said the ministry. Ministry is taking measures for diversifying insurance polices & is also looking forward to tap international markets.
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