Oct 6, 2012

Vietnam - Motor vehicle insurance market still too much large to exploit

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VietNamNet Bridge – With the car sales steadily rising, the motor vehicle insurance market proves to be very promising for insurers.

The majority of Vietnamese car owners only take motor insurance policies against break down caused by accidents or theft. Meanwhile, very few ones think of taking accident insurance against the injury or death of the people inside the cars. This, together with the increasing high number of cars sold, both have insurers understand that the motor vehicle insurance market remains very lucrative.

In principle, motor vehicle insurance is a lucrative business, since it not only can bring high revenue, but also help non-life insurers consolidate their brands.

However, the insurance market segment has been influenced by the difficulties I the national economy. According to the Vietnam Insurance Association, in the first and second quarter of 2012, while life insurance premiums increased by 12.68 percent in comparison with the same period of the last year, the motor vehicle insurance premiums increased by 2.2 percent only.

This modest growth in the motor vehicle insurance premiums has been attributed to the gloomy car market with the number of cars sold down by up to 41 percent from the same period of 2011.

An executive of a joint stock company said that in fact, the motor vehicle insurance market can bring high turnover, but cannot bring profits to insurers. In order to scramble for clients, insurers now tend to lower the premiums and offer higher compensation levels. Meanwhile, the downgrading poor infrastructure has led to the higher risks to the car drivers in traffic.

However, understanding well that this is a lucrative market, insurers still have been trying to exploit the motor vehicle insurance market. Bao Minh has vowed to regain its motor vehicle market share after a period of leaving the business in a state of neglect.

Taking full advantage of its large network of branches and offices throughout the country, Bao Minh has poured more money into the information technology system and improved the compensation work to regain clients.

Meanwhile, AAA now sits down together with car garage owners to discuss the way to boost sales. Do Thi Kim Lien, General Director of AAA, said that AAA and car dealers cooperate to discuss the measures to cut down expenses and increase the sales, and find a common voice for the mutual benefit.

To date, AAA reportedly has established good relations with some 50 car garages throughout the country.

Liberty now keeps the strategic cooperation with Mercedes Benz, Ford, Toyota, Thaco Kia, Thaco Mazda and most of the authorized car sales agents throughout the country. The cooperation covers a wide range of activities, from the support in the advertisement for the brands, to the programs to offer insurance policies to car buyers.

BIC now reportedly cooperates with a large network of 250 auto garages. In late August 2012, BIC Vung Tau branch teamed up with Toyota Vung Tau and SHB Vung Tau to introduce a closed process: providing loans + selling cars + providing insurance services.
They also joined forces to stimulate the car demand by running a series of sale promotion programs, under which car buyers can get gifts, and get the 50 percent exemption of maintenance and accessory installation fees.

SHB has announced that it would accept lower lending interest rates for the clients, who borrow money to buy Toyota cars, while BIC has decided to offer the discounts of 15-30 percent in insurance premiums to car buyers.

Though the revenue has decreased in the economic downturn, insurers say the market remains very attractive and that it is still large enough.

A survey conducted by a foreign non-life insurance company shows that the sales of passenger cars in Vietnam increase by 16 percent per annum on average.

Compiled by Thu Uyen

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