Development potential of insurance company in AEC (Part 1)

ASEAN Economic Community (AEC) create a common market for 10 economies in the region which helps Vietnam insurance company expand market share and participate more in regional markets.

Development potential of insurance company in AEC (Part 1)

Huge market share

Total GDP of ASEAN countries reach US $ 2.600 billion, growth is over 5% per year, population is over 625 million. With all the above elements, AEC is considered to have high potential for the insurance sector.

According to a report of Milliman Company (a multinational corporation based in the US dedicated to providing consulting services including insurance sector) participation rates of the life insurance in the ASEAN market is still low compared with developed countries.

Specifically, in 2013, Singapore, the most developed countries in ASEAN, reached only 4.8% of GDP for premium revenue, much lower than the rate of 12.1% in Hong Kong and 8% in Japan.

The ratio of the majority of the rest of the ASEAN countries is less than 2%. That scene opens a great opportunity which helps life insurance market expand market share.

Dr. Nguyen Viet Loi, Director of Institute of Strategic and Financial Policies (Ministry of Finance), said the development of sea transport, road and air within ASEAN will be a prerequisite for insurance company to develop new products.

In addition, Vietnam insurance company  will have more opportunities for abroad investment. The Vietnam insurance industry will benefit significantly from labor flows that helps solve the problem of high-level personnel, especially personnel about insurance actuary; investment, legal, risk analysis.

Further analysis of the opportunities that Vietnam insurance market will have when joining AEC, Dr Nguyen Viet Loi said that the elimination of barriers and differences between countries in the AEC will create a mass market equality for domestic and foreign companies, enhance the attraction of foreign capital in order to better meet the needs of domestic capital.

Currently, limited the percentage of ownership of foreign investors in the insurance sector is still maintained at 49% maximum. However, according to the commitments on liberalization of services, in 2015, countries must open all of the financial services industry to enhance the participation of foreign investors.

Thus, investors from the Member States may join AEC deeper into the insurance market of Vietnam and vice versa.

Along with that, the cooperation agreement labor mobility will facilitate high-tech workers to easily move between countries to tackle problems of senior personnel in developing ASEAN countries ( Cambodia, Laos, Myanmar and Vietnam), especially in the field of personnel insurance premium is still very scarce in Vietnam.