After an initial decline last year, nearly 50% of businesses expect the insurance sector to grow by 5-10% in 2024, a report from Vietnam Report has shown.

Locals at an insurance company in Hanoi. Source: BaoViet

The report suggested that some 32% of businesses participating in their survey believe that the economy can grow steadily at a rate of 5.5% this year.

“This might foster a favorable business environment, benefiting insurance companies,” stated the report.

As businesses and consumers become more confident about the economic prospects, they are likely to invest and spend more, leading to increased demand for insurance, it noted.

Vietnam Report's survey results, conducted with insurance experts and companies between May and June, indicate that 45.5% of businesses expect the insurance industry to grow by 5-10% in 2024.

Currently, the insurance penetration rate in Vietnam is between 2.3-2.8% of GDP, which is lower than the ASEAN average of 3.35%, Asia's 5.37%, and the global average of 6.3%. This is attributed to low public awareness of insurance and lower average incomes compared to developed countries. However, it also indicates significant growth potential for the market.

According to the Vietnam Report, the confidence crisis in the life insurance sector in 2023 will continue to impact the market this year, with brand credibility declining and customers becoming more cautious.

Moreover, competition in the industry is intensifying as more domestic and international companies enter the market.

Last year, the main sales channel for the insurance industry, bancassurance (cross-selling through banks), faced negative news, leading to the first decline in revenues in a decade of steady growth. Additionally, global economic fluctuations and financial instability resulted in increased claims.

Data from the Insurance Supervisory Authority (Ministry of Finance) show that total insurance market revenues were down  8.3% compared to the previous year. Life insurance revenue fell by 12.5%, while non-life insurance grew slightly by 2.4%. This marks the first year of negative growth for life insurance in its 20 years of development.

Additionally, the average cancellation rate of life insurance policies in Vietnam after the first year is around 20-30%. For bancassurance, this rate is as high as 73%. "This is a very alarming figure," Vietnam Report noted, adding that it has a negative impact on the sustainable development of the market.