It has a great significance as Vietnam has been integrating deeper and deeper into the world economy.

In addition to analysing competitiveness of the insurance industry in Vietnam, the report discusses impacts of economic integration on this sector. Experts say assessment of market opening in the insurance industry as well as forecast about impacts of this in the future plays an important role in preparation for the post-WTO era.

Upon on accession, foreign insurance firms in Vietnam will be allowed to 100% foreign invested branches and 5 years later they will have the permission to provide non-life insurance service.

According to Mr. Le Song Lai, Deputy Director of the Insurance Department under the Ministry of Finance, Vietnam has been gradually opening the insurance market to foreign companies since 1996. Since then, foreign-invested insurance firms have played an active role in changing the face of the market through increasing revenue, enhancing financial capacity, promoting technology transfer, training, rising contribution to State budget, creating jobs, making competition more healthy, etc. There are currently 15 foreign-invested insurance companies and 25 representative offices in this field in Vietnam. In addition to being under general impacts of deeper integration like other sectors, the insurance sector will also be influenced by the Vietnam – US Bilateral Trade Agreement. However, such impacts are considered on the basis of experience but forecast like in other industries.

The Vietnamese market is seen as quite open to foreign insurance firms. There are currently some restrictions but most of those are on non-life insurance service. It raises a question that whether foreign companies will dominate the insurance market in the coming time? They are gaining more share in life insurance service. For example, after 6 years of operating in Vietnam, Prudential has represented a market share of 40% for life insurance service.

However, in the non-life insurance market, foreign firms represent only 7% due to legal barriers. Once the barriers are eliminated, the share taken by foreign companies will rise but not many of them will eye motor insurance which currently makes up 30% of the non-life insurance market.

Many companies will merge to become bigger ones. To prepare for bigger competition, Vietnamese firms have been reorganizing. The Vietnam Insurance Corporation has restructured into a financial – insurance group. Bao Minh and Vinare have been equitised and had their share listed in the stock market.

Companies will compete with each other by their quality and diversification of services as well as convenience of distribution, Mr. Lai further said.

Source: Vneconomy