Vietnam’s insurance industry is a big part of Vietnam financial sector and has grown rapidly in recent years. As incomes have risen and Vietnam’s middle class has begun to accumulate valuable assets, the need for insurance has become readily apparent. This culminated in 2022, with reported gross written premiums in excess of US$10.2 billion up from US$9 billion in 2021.
This rapid rise of insurance products in Vietnam, is also partially attributable to several types of insurance being compulsory by law. This includes for motor vehicle owners and businesses in the construction sector.
As a result, insurance has become a very popular sector for foreign investment. In 2022 there were at least 15 branches of foreign insurance firms operating in Vietnam, according to the Annual Report of Vietnam Insurance Market 2022.
Indeed, Vietnam’s insurance industry is moving in leaps and bounds, constantly evolving as new players and products enter the market. But in order to understand the intricacies of this market and the opportunities therein, a broad understanding of insurance in Vietnam is fundamental.
In this light, this article covers the broad strokes of the insurance industry in Vietnam including key regulations, private insurance products, the key industry players, and the recent bancassurance controversy.
The Vietnam Insurance Association
The Vietnam Insurance Association (VIA) is the peak insurance industry body in Vietnam. In operation since 1999, the VIA has been at the centre of the development of the insurance industry in Vietnam. Among its key functions, the organisation lists arranging training courses and seminars and making representations to the government on behalf of insurance companies.
There were about 76 members of the organisation as of August 2023. Among them were big name international insurance brands like QBE, Prudential, and Generali.
Box 1: Insurance industry to grow by US$1 billion by 2026
Vietnam’s insurance industry is expected to grow by an estimated 8.5 percent from VND 60.15 trillion or US$2.6 billion in 2021 to VND 90.24 trillion or US$3.5 billion in 2026. This growth is expected to be supported by Vietnam’s rapid economic growth and regulatory policies, for example new compulsory insurance for construction contractors and mandatory fire and explosion insurance.
Regulations
There are a number of Decrees, Circulars, Laws, and Decisions that govern insurance in Vietnam. This section covers those elements most important for foreign insurance firms, though there are quite a few more.
Law on Insurance Businesses
At the heart of Vietnam’s insurance industry is the Law on Insurance Businesses. This dictates the regulatory framework within which insurance business must operate. The latest iteration of this law was approved in June of 2022 with a number of circulars, decrees, and decisions guiding its implementation.
Foreign ownership limits, requirements
Foreign investors can own up to 100 percent of the charter capital in an insurance business per Article 68 of the Law on Insurance Businesses.
There are, however, a number of additional requirements for foreign insurance companies looking to contribute capital to an insurance firm in Vietnam. These include:
- Proof of no criminal proceedings against the company in the last three years;
- It must have experience providing the insurance services it intends to provide in Vietnam with the last seven years; and
- It must have had total assets of at least US$2 billion in the year preceding its application.
See also: Vietnam’s Foreign Ownership Limits: Quick Guide 2023
Charter capital
On July 1, 2023 the Government of Vietnam issued Decree 46 revising minimum charter capital requirements for insurance firms in Vietnam. These are:
- Life and health insurance businesses: VND 750 billion (US$31 million).
- Unit-linked insurance or retirement insurance businesses: VND 1 trillion (US$41.2 million).
- Unit-linked insurance or retirement insurance businesses: VND 1.3 trillion (US$53.6 million).
Note that the second and third points above appear identical in the decree. Insurance firms should plan for a minimum capital contribution of US$41.2 million, the higher of the two, though could reasonably expect to only need US$53.6 million.
Compulsory insurance
Decree 7 outlines insurance that is compulsory in Vietnam. This includes third party insurance for cars, motorcycles, and mopeds, as well as for construction businesses including professional liability insurance, third-party insurance, and worker’s compensation insurance.
Box 2: Top 10 life insurance firms in Vietnam dominated by foreign firms
A Vietnam Report study from June 2024 contained a list of the ten most reputable life insurance companies in Vietnam with nine of the top 10 foreign firms. The market research firm combined survey data, with media analysis, and financial statements to draw its conclusions, though clear methodology was not provided.
Private insurance products in Vietnam
Note that there are a number of insurance products in Vietnam administered by the state. These include unemployment insurance, social insurance, and health insurance. This article, however, focuses on private insurance products.
Auto-insurance
Car and motorbike insurance in Vietnam is compulsory, however, whereas most cars have insurance, most motorcycles and mopeds do not. Of note, when there is an accident on the road it is generally settled off-book by the parties involved–scratches and minor fender-benders that do not involve injury are generally part and parcel with travelling on Vietnam’s often chaotic streets and more often than not go unreported.
See also: Vietnam’s Auto-Insurance Industry: Overview
Health insurance
Basic health insurance is provided by the Vietnamese state and paid for by employees out of their paychecks. The private healthcare sector, however, tends to be much more advanced and equipped than the public healthcare system and this has seen private health insurance become increasingly popular. Many employers include private health cover in their benefits package for their employees.
See also: Vietnam’s Health Insurance Industry: Overview
Life insurance
Life insurance has experienced a boom period in recent years. Gross written life insurance premiums in 2022 were just over US$7.3 billion. This was up from US$6.55 billion in 2021. This is partly due to a growing interest in life insurance products as the cost of living increases and Vietnamese consumers look to safeguard the financial safety of their families. That said, it may also be partly due to alleged aggressive sales techniques (see ‘controversy’ section below).
See also: Vietnam’s Life Insurance Industry: Overview
Key insurance companies in Vietnam
Vietnam’s insurance market is generally divided into two markets: life insurance and non-life insurance. The non-life insurance market is the smaller of the two accounting for just US$2.86 billion in gross written premiums (GWM) in 2022. Conversely, the life insurance market in 2022 brought in US$7.35 billion in GWM, according to The Annual Report of Vietnam Insurance Market 2022.
In this light, all three top-performing insurance firms in Vietnam were concentrated in the life insurance market. These were:
Bao Viet
The top performer in the insurance market in Vietnam in 2022, across the board, was Bao Viet. Bao Viet earned US$1.35 billion in GWP in the life insurance sector alone. In the non-life insurance sector, it also had US$402 million in GWP. Bao Viet is one of Vietnam’s longest-running insurance firms. It first started operating in 1965.
As of the end of 2022, domestic investors owned 72.7 percent of Bao Vietnam. This was mostly split between the State Capital Investment and Trading Corporation (SCIC) and the Ministry of Finance. Foreign investors controlled the remaining 27.3 percent. There is currently a 49 percent cap on foreign ownership of Bao Viet.
Manulife
Unlike Bao Viet, Canadian multinational, Manulife, is focused on the life insurance market in Vietnam. In 2022, Manulife’s GWP in Vietnam hit US$1.3 billion, up from US$1.22 billion in 2021. Its market share of Vietnam’s life insurance market was 17.7 percent.
Manulife has been operating in Vietnam since 1999. It is headquartered in Ho Chi Minh City.
Prudential
The United Kingdom’s insurance behemoth Prudential was the third top performer in Vietnam’s insurance sector in 2022. It recorded GWPs of US$1.28 billion up from US$1.19 billion in 2021. The firm has been operating in Vietnam since 2011.
Controversies
Vietnam’s insurance sector has struggled over the last year or so with a number of high-profile instances of consumers claiming they were duped into purchasing insurance products.
Manulife Vietnam and Saigon Commercial Bank
In 2023, serious allegations emerged involving Saigon Commercial Bank (SCB) and Manulife Vietnam, where bank customers were reportedly deceived into purchasing insurance policies through misleading tactics. Customers were allegedly told by SCB staff that they were depositing money into high-interest savings products, but in reality, they were sold insurance policies from Manulife Vietnam. This practice was driven by bancassurance agreements, in which bank employees received commissions for selling insurance, incentivising the mis-selling of products.
The incident sparked outrage among customers who found themselves locked into long-term insurance policies instead of the straightforward savings accounts they believed they were opening. The situation underscored the risks associated with bancassurance arrangements, where banking staff, often untrained in insurance products, aggressively pushed these policies to meet sales targets.
Ngoc Lan and MVI Life Insurance
What’s next?
Insurance in Vietnam is still a relatively new product but it is gaining in popularity very quickly. With foreign insurance firms able to wholly own insurance businesses in Vietnam, the industry is likely to continue to expand quickly. This is in line with strong growth in Vietnam’s financial sector more broadly including in banking and securities.
That said, Vietnam’s economy is very dynamic and prone to change quickly. Foreign firms keen to keep abreast of the latest developments should make sure they subscribe to the-shiv.
Last updated: August 14 2024: Added boxes 1 and 2