Fidinam Podcast: Global FDI & Tax Updates

Vietnam: Exploring Vietnam's Booming Insurance Market

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Join us in this episode of the Fidinam Podcast as we delve into Vietnam's rapidly growing insurance sector. Host Francesca welcomes Quinn Miller, Founder and Managing Partner of EB-ASIA, to discuss key topics such as market demand, regulatory changes, and the effects of digital transformation on the industry.

This episode provides valuable insights for foreign investors interested in navigating the unique opportunities and challenges within Vietnam’s insurance market.

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Francesca:

Hello everyone. And welcome to the Fidinam Podcast: Unlocking Vietnam, a podcast aimed at sharing the experiences of foreign companies and entrepreneurs doing business in Vietnam. I'm Francesca Severoni from Fidinam, a Swiss business and tax consultant firm that supports foreign firms and investors in setting up and running the business in Vietnam. Today, we are diving into the topic of Vietnam's insurance market, a sector experiences rapid growth driven by economic development, digital transformation, and changing demographics. Joining me today to understand these trends is Quinn Miller, founder and managing partner of EB Asia, the branch of the group Tenzing Pacific. which focuses on delivering insurance packages to businesses in Asia. Welcome Quinn and thank you very much for joining me today.

Quinn Miller:

Thank you Francesca, it's great to be here and I'm happy to share some of my insights and knowledge.

Francesca:

Thank you. So today we will discuss this interesting sector from different perspective from, market demand to regulatory changes, foreign investment and market competition, as well as health insurance and digital transformation. We are going to cover this topic in a general way because the insurance business is quite broad and it is also governed by specific laws which differ among all insurance business lines and also between local and foreign investors. For foreign investors in particular, it is important to know that this is a conditional sector. in fact, Vietnam's WTO Schedule of Commitments allows foreign investors to engage in insurance services, of course, subject to certain conditions. this applies to both insurance companies and insurance intermediaries. So depending on the specific scope of activities, capital requirements may differ, as may other financial and tax licenses requirements. Therefore, depending on the situation, it might be necessary to set up a different, corporate framework. In this regard, we will be happy to arrange a, an introductory call to discuss specific, situations in more detail, but for now, so coming back to the discussion, with you, Quinn, to begin, could you shortly present a little bit about yourself and also share your perspective on the evolution of Vietnam's insurance market over the past 10 years and explain also a little bit, what factors are shaping, its growth today.

Quinn Miller:

All right. Very good. Yeah. yeah, I'm Quinn Miller. I'm one of the partners at Tenzing Pacific Services, which has been around in Vietnam since 2013. I joined in Q1 2014, so I'm coming up on my, 11 year anniversary. So I've been in the insurance industry here in Vietnam for a long time, and I've seen a lot of change, in that time for sure. so back, as a whole though, the insurance industry, I think it's important to point out. is still very new in Vietnam. it only got started in the 90s. There were a few carriers then, a couple of the big brokers came in. it really, it's only been in the last 10 years or so that you've seen that sort of evolution come into place. so that's number one, more providers, number two, more brokers. So you've seen in the past. I think a lack of education about what insurance is, what it's not, which has led to a lot of, miss selling. It's also led to a lot of, not people not having confidence in the product that they're buying. where it's going is only good. you're seeing things change, every year you're seeing Vietnam develop, you're seeing, More companies under the market and you're seeing that competition drive the industry forward.

Francesca:

Thank you very much, Quinn. Thank you for the introduction, which actually set the scene for a deep dive into the topic of market growth and demand. in this regard, we have to consider that the insurance sector in Vietnam is driven, as you said, by an increasingly demand driven by also young and urban population. With growing incomes and awareness around health and financial security as well, the market, as mentioned, the market demand is definitely, evolving, yet insurance penetration is still lower than in neighboring countries. In your opinion, what are the key reasons behind the relatively low market penetration in Vietnam compared to other Southeast Asian countries? Which factors contribute to this hesitation, and what potential enablers could positively impact growth in this industry in Vietnam?

Quinn Miller:

Yeah, great questions. I think first to start. When you're thinking about insurance from a company perspective, you have your Vietnamese social insurance that's mandatory for all, full time employees, whether they're, Vietnamese staff or your expat staff. So a lot of companies previously solely relied on that social insurance. And now when you would try to approach them as a broker, they weren't open to, taking out a private insurance because a private health insurance doesn't mean you can get rid of your social insurance application. So I think that was one of the reasons why market penetration rates, for group health insurance as an employee benefit, were so low. But now that's changed. People understand, as you said, the rising, workforce in Vietnam, the salaries are increasing. If you look at the tech industry alone, for example, super competitive industry, manufacturing, super competitive, and companies are finally starting to realize that, hey, it's not purely just about the salary anymore. We have to offer a private group health insurance as part of our package if we're looking to attract, and retain, your best talent. Otherwise, what happens is you're going to have a sort of revolving door of employees, which I don't think any business owner wants to have. that's, I would say it's been the biggest, contributing factor to the growth from the employee benefit side is it's no longer seen as, hey, this is something optional. It's more seen. This is a mandatory.

Francesca:

I think this is a very good point, especially when we talk about, Vietnam becoming, developing very fast. So also the demand is really becoming a high end demand in all sectors. So in terms also, of attracting, People, qualified people, I think it is very important to start also thinking about, other ways to give to them the proper incentives in the long term. And

Quinn Miller:

there's also, there's a rising cost to healthcare, not just in Vietnam and Asia as a whole. It's usually, so it's called medical inflation. and that's usually runs around 9 percent per year. So that's, hospitals building new facilities, hiring more doctors, getting better equipment. So the. Cost of health care in Vietnam, if you're relying solely on the social insurance, and public hospitals, there's a whole bunch of gray areas. It's a bit of a mystery box as to how it works, what's the process. And so a lot of people are looking to shift their health care away from the social insurance and more towards, the private, hospitals. And when they're realizing the prices, especially if it's for long term care, Or more expensive surgeries or extended stays in hospitals. it can put a serious stance in your, finances and your life savings. And that's, the whole purpose of insurance is to mitigate your risk against, those liabilities. And I think employers are now seeing that. so they're wanting it for themselves. And now they're offering it as an employee benefit for their staff.

Francesca:

Yeah, definitely. Thank you very much. Now, moving from the market demand and growth, to the regulatory changes, allow me to provide a little bit of context in this regard. So this year, significant regulatory updates such as the adoption of IFRS 17 standards are impacting how insurers, operate in Vietnam. Taking the example of IFRS 17, this is a transformational step for the insurance sector to align with global standards. While it presents operational and financial challenges, the move is expected to improve the overall stability, transparency, and also attractiveness of the Vietnamese insurance market, to foreign investors. And this is just one example of Vietnam's effort to develop its financial and regulatory, infrastructure with the ultimate goal of fostering a competitive and also resilient industry. Better equipped to serve a growing and increasingly sophisticated customer base, let's say. now as the insurance sector matures, such improvements are expected to increase. So in your opinion, based on your experiences. How have regulatory changes over the past decade impacted insurance businesses in Vietnam? How has the industry evolved and what future trends do you foresee in this regard?

Quinn Miller:

Yeah, great question. historically speaking, it's not an overly regulated market in some regards. There were a lot of regulations in place that I think actually hindered growth, that hindered user experiences, not only. For the end user, but also for the insurance company and, brokers. before physical copies of every paperwork were required to submit claims and now you're starting to see things more go towards, you don't have to submit paperwork. physical copies anymore. But as a whole, if you look at Asia, Vietnam's got a long way to go. it's not a market like Hong Kong. It's not a market like Singapore, which, are very regulated. So a lot of companies, when you're looking at not health insurance, you're looking at business insurance, it's not a mandatory requirement. So what we see typically is people who are. reaching out for, public liability insurance or property insurance or professional indemnity insurance. they're not mandatory required to have that. I think that will be changing in the future. Right now, what we see is people who are reaching out for that type of insurance, they're doing it more so because they need it to secure a contract that they're, trying to win. so where it's gone, was not very regulated. You're, you brought up the adoption of IFRS 17. That's a good example. there's lots of development that's going to only continue. and the digital transformation is really the next stage. So right now there's no digital application forms. at all. Everything's still a paper application. So that slows everything down. Claims get paid very slowly because of this as well. So that's really the next evolution is to digitalize, make things easier, have more apps available. Some providers have apps, some don't. have more payment installment options right now. If you are paying quarterly, it's not an auto charge. That's a regulation that would, for example, need to change because right now. It's a quarterly payment that requires somebody to, do a bank transfer four times a year rather than, on a personal policy, put it on your card and have it auto charged. these are the sorts of changes that I see, foresee happening. in the next two to three years. I think Vietnam is very aware as a whole that digitalization needs to happen. and that includes the insurance industry. So I'm excited to see the changes that are coming ahead.

Francesca:

Thank you very much for giving us your perspective. I think that, having seen now, Vietnam, how also quickly they, they do try to improve, and this also regards this kind of regulations to also to attract foreign investors, but also to retain, foreign people that are already in Vietnam. This is something that, they need to adjust. And as you mentioned, they are already aware about it. and we'll see how they will do it in the next couple of years. So thank you very much. Now, let's focus on the FDI and international competition, has been widely mentioned now, the non life insurance sector in Vietnam has been growing steadily with strong interest from foreign investors, attracted by the country's economic expansion. the stable outlook has created a favorable environment particularly for commercial lines and property insurance, which are seeing increased demand due to the, infrastructure and foreign business investments. So in this context, given that Vietnam's insurance sector is becoming, a magnet for foreign investment, with international insurance, contributing expertise in innovation and risk management, how do you see the presence of international players impacting the local market for both life and no life insurance in the long term?

Quinn Miller:

Yeah, that's a, it's a great question. And I think the international players were, who are entering Vietnam. if you're looking at the life insurance industry, you have all your AIAs, Prudentials, Manulife and dozens more. that's an investment. It's a life insurance with an optional health insurance product. And then you're looking at your international, your, commercial insurance. So companies like, QBE and Chubb are good examples. where they've come into the market and they specialize more on, the commercial lines, like the property, the professional indemnity, the general and public liability. from the health insurance perspective, that's where I see a lot of, the, I think inspiration and growth and the pushing of the Vietnamese health insurers is understanding here's how international insurance works. And if we want to, get to scale, we need to adopt some of their practices. for example, Bao Viet, one of the, country's largest, non life providers, they're starting to move towards, the digital app. You have an app on your phone, you can submit claims with no paperwork, up to 10 million dong, for example. so I think that inspiration has been driven a large part by the international players who have entered, Vietnam. And so those would be companies like Allianz, like April, like Henner, like Luma. they're international players who partner up with a, a Vietnamese insurance company, and then they, work in conjunction with each other.

Francesca:

Since you mentioned health insurance, So let's narrow down the topic on this, Vietnam has made remarkable strides toward universal health care coverage with around 90 percent of the population covered by some form of health insurance. at the same time, private health insurance options are expanding, as you also are mentioning, offering broader access to health care services. In this regard, could you please give us an overview of the role private health insurance plays in Vietnam's health care landscape, including what your unique challenges and opportunities do private insurance. face in expanding their offer if you can a little bit elaborate what you have just mentioned.

Quinn Miller:

Yeah, with the Vietnamese in particular, I think a lot of Vietnamese, they tend to buy from brands that they know that they see that have offices, all throughout Vietnam. And the distribution model for a lot of the international providers that have come in is they don't have direct sales teams. They only work with brokers. So I think some of their market penetration rates are, due to the fact that, they're, they don't have direct sales forces. They don't have thousands of agents across the country. So there's a whole bunch of products that are available in Vietnam that I think a lot of the Vietnamese. are a little bit, apprehensive about and that's purely just because they're not familiar with the brand and they prefer to go with the brand name that they know that they see all the time. but there are so many new options in Vietnam. If you look at, our quoting system, for example, five years ago to today, It's probably, quadrupled in terms of the number of products we have available to offer, and what you're seeing is this evolution of the insurance companies themselves before they were very rigid in their offering, saying, Hey, we have five plans, plan one, two, three, four, five. Now, a lot more of them are offering the ability to tailor your plan a little bit more. So you're covering only what you need and only what you want. And you're not overpaying for things that you don't need and you don't want. So that's another little evolution, for the expat side of things. I think the expats are completely fine. dealing with brokers and, not going direct with, to an insurance company, but I still think, a lot of Vietnamese prefer to go, direct to an insurance company rather than with a broker because of this false stigma that there's some sort of, extra associated costs to use a broker, which there are not the same price you go to with, Liberty Vietnam, direct to Liberty or direct through a broker. It's exactly the same. So these are some of the challenges that, you know, me as a broker has to, overcome. but as a whole, that market evolution, there's so many more products, again, from some of those names I just mentioned, Allianz, April, Henner, Luma, those are four examples where just between the four of those, they would have thousands of plan combinations where you can tailor your plan based off of the benefits you want, the limitations of those benefits, your coverage area, your deductible, whether you want just Southeast Asia, or if you were looking for a more international policy, that's worldwide, excluding the USA, for example.

Francesca:

Thank you very much. so for the audience, if you have any questions, that Quinn is, he has a lot of network here in Vietnam, so he might also suggest to you that the best, coverage that you might need.

Quinn Miller:

Do you know the 10, 000 hour rule?

Francesca:

What do you mean?

Quinn Miller:

The 10, 000 hour rule is if you've done something for 10, 000 hours, you're technically an expert in your area. Calculate it up. I'm about 25, 000 hours of insurance in Vietnam. So I think, I think I can answer most questions that anyone would have.

Francesca:

That's perfect. So one more question. we have, you mentioned that already during the discussion, and this is about the digital transformation. So you already gave a little bit of the opinion, but I think it's a topic that is worth to mention because, of course, in many industries around the world, we are talking about digitalization. So it's very important to understand how in this sector, here in Vietnam, we are positioned at the moment. in terms of, artificial intelligence, big data, digital platforms to improve also the efficiency. what are some of the most promising, digital innovations currently reshaping this sector, if there is, are insured tax and tech partnership making. Insurance more accessible to younger digital first consumers or is there still a long way to go in this direction. What's your experience on that?

Quinn Miller:

It's a fantastic question. It's a subject I'm quite passionate about because it's a major pain point and a thorn in my side and my whole team side is. why aren't things more digital? Why isn't everything on an app? Why isn't there automated underwriting if the person's not declaring any pre existing conditions, for example? some of those regulations, they will change, it's just a matter of when. Those are the sort of regulations that are holding things back. But, for example, Most insurance companies now they're no longer issuing physical insurance cards. They're no longer issuing, physical policy documents or certificates and folders. Everything is on an app. that's one evolution that's already in place. I think the next evolution in place needs to come more on the underwriting side of things where it shouldn't take three to four business days to turn around a clean application. That should automatically happen. and underwriting decisions do need to happen, quicker using AI. The same could be said for claims decisions as well. those ones I think will take a little bit longer, to kick in, whether that is two years from now, three years from now, but the way things are going, I'm very confident that, the government understands that digitalization must occur, and that will only make things, easier for all parties involved.

Francesca:

I think the government, is very well aware and about that they have also some sort of plans for the next coming year. So definitely finger crossed that we are going to see that also in the insurance sector. everything will be easier. And, by the way, in this regards, we will have also a, another episodes, regarding digital transformation or digitalization in general. stay tuned for the next episodes. Thank you very much, Quinn, for sharing your insights into Vietnam's insurance markets, today with me. Thank you very much. I think, you provided a lot of interesting, insights, so thank you very much. and thank you to everyone for listening. If you have any questions about the best insurance cover for you and your business, or how to set up and run your business. in Vietnam, please have a look in the description section. You will find our contact information and, myself and Quinn, we would be very happy to get in touch with you and also to have an introductory call, if there is the wish to. More episodes to come, as I mentioned, so stay tuned and bye.