Lesson 1: Improving the business environment and enhancing the competitiveness of the insurance market

Editor's note: The existence and development of insurance activities not only meet the need to ensure safety for individuals and businesses, but also meet the ever-increasing capital needs of the expanding reproduction process, especially in a market economy. By collecting premiums on the principle of advance payment, insurance organizations hold a very large monetary fund that demonstrates their commitment to customers but is temporarily idle. Therefore, insurance organizations have become large, important investors for other activities of the national economy. Not only playing the role of a safety tool, insurance also plays the role of a financial intermediary, holding an important part in large industrial and commercial enterprises.

Starting from this issue, Nghe An Newspaper will inform readers about the insurance market, one of the very important medium and long-term capital mobilization channels for the economy.

141 trillion VND wasreinvest in the economy

Currently, Vietnam's insurance market has 61 insurance companies, including 29 non-life insurance companies and one branch of a foreign non-life insurance company in Vietnam, 17 life insurance companies, 12 insurance brokerage companies, 2 reinsurance companies (with 752 branches, 852 offices with over 350,000 agents). In the period 2011-2014, the insurance market grew at an average rate of 12.7% per year. The total revenue of the market in 2014 was 67,169 billion VND, accounting for 2.44% of GDP.

With the above roles, insurance plays an extremely important role in the economy, especially in the economy transitioning to operating under a market mechanism. With the main function of concentrating and accumulating capital to ensure the reproduction process is regular and continuous, this function is even more important for our country today when it can actively contribute to increasing the main investment capital from within the economy, mobilizing and making the most of the monetary funds scattered among the population.

Because of the above positive effects of insurance, in any country, whether developed or developing, the Government always seeks many different ways to promote and encourage the development of insurance activities, increase the number of compulsory insurance types, exempt income tax for insurance business people, personal income tax on insurance premiums received by insured people, create favorable conditions for insurance investors...

Transaction at AIA Vietnam Life Insurance Company. Photo: PV

According to data from the Department of Insurance Management and Supervision (Ministry of Finance), in the first 6 months of 2015, the insurance market continued to achieve positive results. In terms of scale, total insurance premium revenue of the whole market is estimated at VND 29,831 billion, up 16.7% over the same period in 2014. Non-life insurance premium revenue is estimated at VND 14,120 billion (up 5%); life insurance premium revenue is estimated at VND 15,711 billion (up 29.75%). Regarding the payment of insurance benefits, the total actual compensation and insurance payment is estimated at VND 11,434 billion. Of which, non-life insurance companies are estimated at VND 5,083 billion, life insurance companies are estimated at VND 6,351 billion. It is noteworthy that the total investment back into the economy of insurance companies reached 141,532 billion VND, an increase of 16.5% compared to the same period in 2014. Of which, non-life insurance companies reached about 30,100 billion VND (an increase of 16%); life insurance companies reached about 111,432 billion VND (an increase of 16.63%).

Improved business environment

At the Annual Conference of the Insurance Industry on March 27, 2015, Minister of Finance Dinh Tien Dung directed the overall solutions for the development of the insurance industry to implement the development strategy goals approved by the Prime Minister for the period 2011-2020. One of those solutions is to improve the business environment and enhance the competitiveness of insurance companies. Accordingly, in order to complete the legal framework, the Department of Insurance Management and Supervision has organized research, summarized, evaluated and proposed amendments and supplements to Decree 45/2007/ND-CP, Decree 46/2007/ND-CP, Decree 123/2011/ND-CP to complete legal regulations in the insurance business sector, in line with the development situation of the market and international practices, creating favorable conditions for businesses to take advantage of opportunities for development. The revised and supplemented contents focus on reinsurance transfer, insurance agents, insurance commissions, registration, approval of insurance products, investment activities, etc. to be submitted to the Ministry for consideration and decision.

At the same time, the Department has continued to closely coordinate with the Ministry of Justice in amending and supplementing the regulations on insurance in the Civil Code and the Penal Code (such as removing the insurance contract chapter, adding provisions on criminal handling of insurance profiteering acts). Organizing seminars, exchanges and dialogues with insurance companies on solutions to improve the business environment, enhance the competitiveness of companies in each life, non-life and insurance brokerage sector, in order to promptly remove difficulties and obstacles in each sector, so that companies can make the best use of opportunities for development.

Many representatives of the world's largest investment corporations have commented very positively on the Vietnamese Government's efforts to improve the competitive environment and perfect the legal framework to pave the way for insurance companies to operate and develop, at the roundtable conference in the insurance sector - one of the main activities of the recent conference to promote attracting foreign indirect investment in the United States.

BIDV MetLife General Director Dustin Ball said that in addition to the positive results from innovation initiatives, especially those related to capital markets, insurance companies also welcome the Vietnamese Government's decision to issue longer-term bonds, which is very important for the development of the insurance market. Vietnamese investors will benefit from economic drivers, including high economic growth, lower interest rates and a growing middle-income population - General Director Dustin Ball emphasized.

Sharing the same view, Manulife Vietnam General Director Paul George Nguyen also said that it is not only at this conference that the insurance company sees the support of the Ministry of Finance and the Government for investors. In 16 years of operation, Manulife has seen that the Vietnamese environment has many advantages, creating favorable conditions for our success. The Government has always been proactive and timely in amending and supplementing policies to remove difficulties and obstacles for businesses, supporting business development.

In addition, the Ministry of Finance is always ready to dialogue with FN to listen and understand the market's operations, learn about challenges and obstacles to have appropriate solutions on mechanisms, policies, and management and supervision to promote market development. It can be said that during more than 16 years of operation in Vietnam, in addition to the support of customers, the company's efforts in investing in technology systems, improving services, improving products, ... Manulife Vietnam would not be able to achieve success without a business environment and a reasonable legal framework created by the Government and the Ministry of Finance of Vietnam - said General Director Paul George Nguyen.

Red River