Vietnam's insurance market is considered to be potential with low penetration rates and average premiums. In addition, the number of life insurance policyholders is only about 10 million, equivalent to about 10% of the population. This ratio is expected to increase to 15% by 2025 by the Ministry of Finance.
Room for development
It is believed that Vietnam's insurance market still has a lot of room for development with low penetration rate (premium revenue/GDP) and average premium (average insurance spending per capita). Insurance penetration in Vietnam currently hovers at 2.3% - 2.8%, lower than in emerging markets and far behind the rate of 9.6% in developed markets. In Vietnam, per capita insurance spending is currently around 72-75 USD, which is low compared to 175 USD in emerging markets and far behind the amount of 4,664 USD in developed markets.
An increase in per capita income is one of the favorable conditions for the development of the insurance sector. Vietnam's socio-economic development plan for the period of 2021 - 2025 and 2021 – 2030 has set a target to raise GDP per capita from 2,750 USD in 2020 to 4,700 - 5,000 USD in 2025 and 7,500 USD in 2030.
Along with that, Vietnam's population is in the golden period with an increasing scale, the proportion of urban population is forecasted to grow from 37% at present to 45%. According to World Bank estimates, the proportion of the middle-class population in Vietnam will increase from 13% to 26% by 2026. Besides, the insurance industry is also supported by the restructuring of the medical treatment system, social insurance regime and the ability to increase the rate of customer access through the banking system (Bancassurance).
Despite the negative impacts of the Covid-19 pandemic, premium revenue grew impressively. According to data in the period 2015 - 2021, the total insurance premium revenue in Vietnam market has grown impressively from 19% to 26% per year. In particular, life insurance premium revenue increased from 24% to 35%/year, non-life insurance premium revenue increased from 8.5% to 16%/year.
The Insurance Supervision and Administration Department under the Ministry of Finance forecasts that important indicators in the insurance market will maintain double-digit growth in 2022, despite the complicated developments of the Covid-19 epidemic and difficulties in the progress of recovery of the economy.
Regarding the market, this agency forecasts that the total assets of the insurance market in 2022 will reach 808,908 billion VND, up 13.93% compared to 2021. Investment in the economy is estimated at 677,036 billion VND, up 17.32 % compared to 2021. Total insurance reserve is estimated at 533,758 billion VND, up 17.15% compared to 2021.
As for businesses, the total equity of insurance companies in 2022 is estimated at 165,069 billion VND, up 8.25% compared to 2021. Total insurance premium revenue is estimated at 253,730 billion VND, up 18.04% compared to 2021. The payment of insurance benefits in 2021 was estimated at 58,291 billion VND, up 17.61% over the same period in 2020.
Total insurance premiums arranged through insurance brokers are estimated at 14,513 billion VND, up 14.15% compared to 2021. Revenue from business activities of insurance brokerage businesses in 2022 is estimated at 1,107 billion VND, up 11.8%.
Similarly, the Analysis Center of SSI Securities Company (SSI Research) forecasts that sales of insurance products will recover well in 2022 with the strong opening of the economy in the second half of the year.
In addition, this agency expects that E-insurance will gradually be legalized for insurance products, including health insurance, property damage insurance, and cargo insurance, which will promote sales through online channels.
In addition, the cooperation between insurance companies and insurtech companies to enhance innovation in big data analysis will also help insurance companies diversify products and distribution channels.
SSI Research forecasts life insurance premium revenue in 2022 is estimated to increase by 22-24% compared to 2021. Non-life insurance premium revenue will reach 8-10% – lower than the pre-Covid-19 growth rate. Total insurance premium revenue is forecasted to reach 256,000 billion VND, up 18-20%.