Generali Group, one of Europe’s largest
insurance providers and Europe’s biggest life insurer, will officially present
its Individual Life and Group Business to the market in Ho Chi Minh City this
week, marking its full presence in Vietnam after two years operating as a
representative office.
On the
eve of the opening, Generali Vietnam Life Insurance LLC general director Lam
Sui Kong talks to VIR about his firm’s business strategy in Vietnam.
After
two years researching Vietnam’s life insurance market, what challenges and
opportunities have you experienced?
On the
opportunities side, the macro picture always draws easy attention. In terms of
demographics, Vietnam is a populous country of 90 million and is still growing
with most of them young people. In terms of economic fundamentals, Vietnam is a
growing economy even though this is not without worries and concerns especially
in relation to inflation and growth. Furthermore, the low insurance density,
about $8.6 premium per capita and insurance penetration at 0.7 per cent premium
per GDP mean that there is a lot of room for the market to grow.
However,
a favourable macro environment might lead to different growth scenarios. The
devil is in the detail, especially in our business sector where consistency in
strategic direction and persistency in the excellent execution of the strategy
are two critical success factors.
On a
micro level, in terms of demand, the market has the potential to develop in
terms of products and services requirements. Currently, only about 20 per cent
of the population can afford life insurance with an average household income of
VND10 million ($478) per month, according to survey on household living
standards 2008 by the General Statistics Office. The pool of clients, who can
afford life insurance is growing. We are only seeing the first phase of market
development compared to other developed markets.
The
life insurance market opened only 13 years ago. There is a lot of room to
improve. I see a lot of mileage for a company to do things in a better way,
from how it recruits agents, how it trains agents, how it develops products and
how it serves customers, just to name a few areas.
On our
challenges, 97 per cent of the life insurance market in Vietnam is agency
driven and a mass recruitment approach prevails. Although the annual agent
recruitment statistics appear high, most of the agents are recycled from one
insurer to another within a fairly short period of time. Hence, the retention
rate is very low, as is productivity. It is not surprising why the industry is
also struggling to attract new blood. At the same time, group business is still
in a nascent stage of development in terms of client understanding and infrastructure.
The
biggest challenge is the time required to develop skilled staff, to build an
effective and productive distribution channel and to deliver a return to our
shareholders within a reasonable time frame.
For our
business, there is no short cut in building and growing a business in an
emerging market. The macro opportunities do not guarantee quick success. I
always liken the setting up of a start up operation in an emerging market to a
marathon race. The macro opportunities are for the spectators to understand.
The runners will tell you what it takes to prepare before you even start, not
to mention to finish the game and win the race.
Generali
Group is present in over 60 countries worldwide, in Asia, in China and in India
through joint ventures. So, why has it chosen to directly enter Vietnam?
In
Asia, we operate in China, India, Hong Kong, Japan, Thailand, the Philippines,
Indonesia and Vietnam. Asia represents a strategic region for Generali due to
its high economic growth and high household saving propensity. The launch of
Generali Vietnam Life is part of the group’s expansion strategy in the region.
In
China and India the entry strategy has been driven by the local regulations
that impose a cap on the maximum Foreign investment in insurance companies (50
per cent in China and 26 per cent in India). Having said that, we always
maintain the option of working with strategic partners of choice provided they
are aligned with Generali strategic goals and able to add value to the
insurance business. This partnership might occur in different forms and at
different stages of our development.
What is
your business strategy to tap Vietnam's life insurance market as it is said
that the Vietnamese market’s low penetration is due to the low awareness of
life insurance products?
The low
insurance penetration is a result of many factors. While people might have a
low awareness of life insurance products, they should not have a low awareness
of the importance of protection and saving needs for them and their families.
The
future development of Vietnam’s life insurance market lies in growing the needs
of customers. People will only be interested in understanding our products if
they know how the products can fulfill their needs. This highlights the
importance of the professionalism of our agency force. We need them to
understand the needs of the clients as a precedent to selling our products,
rather than just go for a product push.
We
adopt a multi-distribution channel strategy with business model covering
individual and group employee benefits business through tied agents, brokers,
banks and financial institutions channels. By doing this, we will be able to
capitalise on the unique franchise of the Generali Group in the group employee
benefits solution segment at the same time when we are building up our tied
agency force. On a selective basis, we will also develop alternative
distribution channels such as banks and financial institutions.
We have
made a strategic choice in developing a quality focused model to support agency
productivity. This encompasses an all rounded approach to focus on quality
recruitment, training and development, mentoring and activity management of our
agency force.
In
addition to that, we have diversified products. For the individual life
business, we have launched savings, protection and hospital income products.
They will enable us to fulfill the full life cycle needs of our target client
segments.
For group
business, we have launched a full suite of products covering the employee
benefits spectrum. This includes term life, personal accidents, medical
reimbursement, hospital income and income compensation.
Generali
Vietnam will operate a business in Vietnam under a full licence from May. What
is the significance of this milestone to the company?
We
first opened our representative office in July 2009. Last month, we celebrated
our first anniversary as a licenced life insurance company. We started group
business last year in October and with the launch of our Individual Life
business now, we are implementing our multi-distribution business model. We are
proud to have reached this important milestone.
How do
you expect the development of Vietnam’s life insurance market to proceed in the
next five years?
It is
difficult for anyone to read into the future. However, I believe that the
following trends will continue. First of all, increasing consumer
sophistication will lead to increase demand for professionalism in insurance
agents. Customer service will assume much more importance in differentiating
life insurers.
A clear
shift from product push approach to advised based and needs based sales
approach. As a result, there will be increasing pressure on the sustainability
of the mass recruitment model.
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