Recently at a seminar on finance, insurance and banking organised by Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), Ravi Prabhakar from FairFax Group, which was a group based in Canada with a total premium of up to $16.3 billion, as well as a strategic partner that owned 35 percent of the capital of BIDV Insurance Company BIC, had an interesting sharing about the non-life insurance market.
According to Ravi, Asia was an impressive growth market with real Gross Domestic Products (GDP) much higher than developed economies. While developed markets only achieved growth rates of over one percent to less than three percent, even with negative growth, many Asian markets reached from five percent to nine percent, including the Vietnamese market.
The economies in Southeast Asia in particular and Asia in general also attracted abundant capital flows. Particularly, Vietnam had a golden population and the right conditions to increase productivity and labour efficiency, thereby, grow the economy in subsequent years. The region’s growth trend was forecast to continue in the coming years, with Vietnam’s growth keeping an average increase of 6.5%.
Regarding the insurance market, FairFax representative said that non-life insurance in Asia had grown by 12 percent per year in the past years and would continue to maintain a high speed until 2025, in which the number in 2019 and 2020 could achieve much higher growth rates than the previous period.
The driving force of this market included four pillars: rapid new car sales increase, steady export growth, the proliferating number of the middle class and finally, the rise in infrastructure investment.
Further analysis of the dynamics as mentioned above, according to Ravi, Asia was a market with much potential for economic development. The rapidly growing middle class would increase the demand for shopping and using banking services, including insurance. Moreover, with the rapid development of the internet and the cost of digital technology currently accounting for only three percent would be an opportunity for the digitalisation industry to overgrow. Insurance would join that trend to develop.
The momentum of rapid new car sales increases, at first, sounds contradictory because many non-life insurance companies were restrained for motor vehicle insurance products and did not sell insurance by all means as before. However, the FairFax representative’s explanation showed no contradiction.
Specifically, according to Ravi, motor vehicle products were not profitable for insurance companies. But in developed countries, motor vehicle insurance accounted for about 15 percent of the total insurance products, which could not be ignored. The critical thing was that businesses needed to be careful, research the characteristics and product properties to sell products to a suitable audience.
For example, a mother with two children would drive more carefully than unmarried youth; Or people using expensive BMW cars would also be more cautious than cheap cars users. Companies would consider the object of use and the value of vehicles to offer appropriate products.
Regarding motor vehicles, a representative of FairFax also said that businesses at present not only sold motor vehicle insurance as before but also cross-sold others, such as health insurance, sickness insurance, etc, so that the insurance company would have additional value, customers would also have more options and have better protection when there was an unfortunate risk.
In addition to the expected high growth, non-life insurance products would also be paid more attention by businesses shortly. According to FairFax’s research, in addition to traditional products that still played a core role, such as motor vehicle insurance, property insurance, health insurance, businesses would offer new suitable products in line with growing customer demand. For instance, delayed flight compensation products and compensation when bags were accidentally robbed were deployed by the Indian market.
