At this year’s annual general meeting of insurance companies, the professional loss cannot cool down as the non-technical competition to sell insurance to have revenue at all costs still exists.
According to Vietnam Reinsurance Corporation (VNR), in 2017, competition by lowering fees, expanding insurance conditions/terms, increasing service fees, controlling risks still remained an uncomfortable problem of the market, seriously affecting business results.
“The entire market has 29 non-life insurance companies but in 2017, only a few companies were profitable which were very modest compared to premium revenue/fee income. The combined cost ratio was close to 100 percent or higher”, said VNR leader.
The combined cost ratio was the sum of costs charged to original premium revenue. If this ratio was more than 100%, it means that businesses suffered losses from insurance business.
Meanwhile, also according to this reinsurer, the rising trend of compensation was still very difficult to be controlled and was high compared to fee income. The insurance of property, hull, and motor vehicles was popular with the combined costs of more than 100%. The compensation rate for technical insurance is also on the upward trend.
At PTI, in the report to shareholders, Bui Xuan Thu, general director of the company said in 2018, the worry about losses and compensation rate for professions with the history of high compensation such as motor vehicle, health or fire insurance still remained, while unexpected natural disasters and rising costs due to unfair competition were still the risks to the loss of insurance companies. Though the market has many positive signs, it is difficult to expect a breakthrough in insurance market in this year.
According to the submission at the annual general meeting (AGM) on April 12, 2018, PTI only plans for net profit for insurance business at 1.5 billion dong, compared to 21 billion dong in 2017. The company also considers tightly controlling the compensation situation in order to ensure business effectiveness, especially vehicle insurance, as one of the key tasks to do this year.
Meanwhile, at PJICO, in the report of the general director to the annual general meeting, in 2017 alone, the losses due to consecutive floods and natural disasters caused this company to suffer from the loss of about 130 billion dong. As a result, the compensation for original premium in 2017 was 1.327 trillion dong, accounting for 50.8 percent of the original insurance revenue, up nine percent from the previous year. However, thanks to the profit from financial activity, PJICO still attained 156.35 billion dong pre-tax profit, up 24.7 percent from 2016.
Leaders of some other insurance businesses also expressed their determination in promoting business activities to reach breakeven point for core insurance and attain profit. Specifically, strict management will be put on health care insurance product which is having high revenue growth but high risks of profiteering. CEO of an insurance company said in 2018, his company will stop granting life insurance letters to people aged more than 65 and stop granting child care insurance letter due to the high risk of losing control for this product.
However, according to experts in the industry, as long as there is non-technical competition to sell insurance to obtain revenue at all costs, the insurance loss cannot cool down, resulting in the fact that customer service quality cannot be improved.
“In insurance business, it is difficult to come up with the concept of “delicious, nutritious, cheap” like many other conventional commodities, as it is related to the liability later, except for the case that the number of people participating in insurance increases in the form of wholesale, so they enjoy good price. Therefore, running after customers’ criteria of “delicious, nutritious, cheap” will cause shortness of breath to insurance businesses.
