The top 10 reputable insurance companies in 2020 has just been published by Vietnam Report along with some comments on the situation of the insurance industry growth and the changing trend of this industry to adapt in the “new normal” context.
The ranking is announced in two lists: the Top 10 reputable life insurance companies in 2020 and the Top 10 reputable non-life insurance companies in 2020.
Accordingly, the three leading units of the Top 10 reputable life insurance companies include Bao Viet Life Corporation, Prudential Vietnam Company Limited, and Manulife Vietnam Company Limited.
Meanwhile, leading the Top 10 non-life insurance companies this year are Bao Viet Corporation, PetroVietnam Insurance Corporation (PVI) and Post and Telecommunications Joint Stock Insurance Company (PTI).
In 2020, despite numerous economic fluctuations due to the severe impact from the Covid-19, the insurance industry has still maintained growth momentum. The total insurance premium revenue is estimated at 160.180 trillion dong, up by 20.54%, in which the revenue of non-life insurance companies is estimated at 52.387 trillion dong and that of life insurance companies is estimated at 107.793 trillion dong. Insurance companies recorded an estimated 44.006 trillion dong of compensation.
However, due to the epidemic, insurance companies must consider and reassess their operating and distributing models through three aspects: customers, sales force and support (such as investing in data and digital technology tools). This helps insurers be prepared for unpredictable risks.
Specifically, more than half of the insurers said that decisions related to risk management, human resource management, service management and customer support, customer access and digital transformation are step by step changing along with the outbreak of the epidemic.
The social distancing has significantly affected the distribution channels and customer access of insurance companies in the direction of (1) promoting the transition to using digital tools, (2) using self-service with agents and customers, and (3) converting process from offline to online.
However, the Vietnam’s insurance market is forecasted to maintain a growth of over 20 percent in 2020. In the short term, the survey of insurance companies conducted by Vietnam Report in June 2020 showed that up to 90.5 percent of insurance companies are optimistic about the prospects of the whole insurance industry in the last six months of 2020.
According to Vietnam Report, the insurance industry in the “new normal” context has three opportunities, four challenges and five strategies.
Three opportunities
Vietnam Report’s surveyed pointed out the Top 3 biggest opportunities of the insurance industry in the near future, including (1) the strong development of technology which is applied in all stages of the insurance value chain; (2) people’s increasing awareness and understanding of insurance; and (3) the recovery prospects of macro economy which has entered the “new normal” state.
Thanks to the development of information technology, insurance companies have more distribution channels besides traditional channels like agents/ consultants.
Online sales channels via mobile applications, Chatbot and social networks are becoming popular and creating favourable conditions for interaction with customers. Vietnam Report’s survey pointed out that before buying insurance, 75.7 percent of customers used digital tools to make decisions to purchase the products.
In the context of the ongoing epidemic around the globe, the trend of shifting insurance distribution from offline to online has become clearer than ever, which is convenient for both insurance companies and customers while ensuring social distancing.
The Covid-19 epidemic has changed consumer behaviours such as working from home, travelling by plans, etc. It particularly makes us more concerned about health and risk issues. This is considered a positive signal of the insurance market.
According to the evaluation of the insurance business community, this is also one of the three biggest opportunities of the industry in the near future, in addition to the development of technology and the economic recovery prospects.
Four challenges
Insurance companies are also facing many challenges, including four main ones, namely (1) the increasing competition of the industry, (2) the risk from natural disasters, severe weather, epidemics; (3) the shortage of high quality human resources with clear understanding of the insurance market; and (4) the inadequate information technology infrastructure.
In recent years, insurance companies in both non-life and life segments have raised their charter capital to promote investment in recruiting personnel, technology, implementing market expansion projects, developing distribution channels, increasing risk provisions under new regulations, and increasing compensation capacity.
For life insurance segment, apart from Bao Viet a domestic business, the race is really a playground for Foreign Direct Investment (FDI) firms which have been operating in Vietnam for a long time. These units have experience investing in emerging markets, strong financial potential, understanding of local consumer culture and sustainable development strategy.
For non-life insurance segment, the Top 5 units with the largest market share is shrinking, making way for the lower group.
In addition to positive sides, the market also sees negative sides due to the “non-technical” competition such as accepting to reduce premium to gain market share at all costs despite losses, the attraction of personnel from business to business when there is sales pressure, etc. They may lead to consequences for the management authorities, insurance companies and customers.
Although the opportunities from the 4.0 Industrial evolution are huge, the application of 4.0 technology in the insurance industry has not been yet focused, Insurtech is still in the early stage of formation and has not recorded significant achievements. Most of Vietnam’s insurance companies are focusing on developing technology applications at the most basic level such as building applications on smart devices (90/5%), distributing products via new sales channels: online and social networks (85.7%), using automatic customer answering technology (chatbot, 42.9%), deploying core insurance software (28.6%), distributing products via websites comparing insurance products (Web aggregator, 23.8%), etc.
As for typical Insuretech products such as On-demand insurance or peer-to-per insurance remain rare. The main reason is that the information technology infrastructure has not kept up with the growth and demand of the market such as cybersecurity risks, etc. The greatest strength of Insurtech is database, but market information remains asymmetric so the insurance industry needs to invest in information technology infrastructure in order to take advantage of the opportunities from the 4.0 Industrial evolution.
Five strategies
So far, most insurance companies have been getting ready for the “new normal” period. Technology is considered to be a good priority in terms of strategy for insurance companies in this context.
After a period of developing with agent model, the life insurance market of Vietnam began to witness the formation of other distribution channels such as Bancassurance, Direct Marketing, or Telemarketing, Workside, etc.
Among the above channels, bancassurance is forecasted to be potential with the strong boom in 2019 with large-scale cooperation deals and the sharp rise in the proportion of total revenue.
Experts participating in Vietnam Report’s survey said that the bancassurance growth trend will increasingly be heated up and attract numerous large investments.
In addition, the cooperation between e-commerce and insurance helps boost online insurance sales channels, helping users actively access products and services.
In the “new normal” context, insurance companies should adjust their distribution channel system in towards digital aspect, based on three action groups.
Insurance companies should decide the optimal transition channels. Direct agents remain an important part of the distribution system in the coming years, particularly for life insurance segment and large-scale commercial insurance products. Nevertheless, insurance companies need to set up more digital sales channels to serve customers who prefer remote interaction through digital technology.
Insurance companies need to identify necessary modifications and new technologies for the “new normal” period. They should consider technology and digital technology as the core differentiating factors that create business value, thereby determine their desired adjustments to the existing technology.
Insurance companies should also be ready to make strategic M&A decisions in order to enhance distribution.
Cooperating with Fintechs and Insurtechs could be a new direction for insurance businesses. Insurers should proactively identify gaps in the distribution ecosystem as well as relationships with potential M&A partners in order to reach new customer groups and new types of products.
