Vietnam s life insurance sector eyes growth amid widening protection gap

Vietnam's life insurance sector is optimistic about growth despite a widening protection gap. The country's rapidly ageing population, growing middle class, rising healthcare costs, and increasing incidence of critical illnesses among younger people have created favourable conditions for the industry. However, only around 11-12% of the population has life insurance coverage, leaving approximately 90 million people without this form of financial protection.

The insurance industry's premium-to-GDP ratio stands at 2-2.5%, compared to the regional average of 3.5% and the 7-10% seen in developed countries. Growth slowed in 2023 due to a crisis of confidence caused by poor sales methods, limited consumer understanding of insurance's purpose, information gaps between insurers and customers, and unclear benefit illustrations.

Economic expert Ngo Tri Long highlighted that customers often struggle to differentiate between guaranteed and investment-based benefits in long-term insurance contracts. Industry expert Ngo Trung Dung stated that inadequate initial advice leaves customers with little option but to surrender their policies when they face financial difficulties.

Regulators have tightened insurance laws, including a 21-day consideration period for policy cancellation and clear limits on health disclosures. Prudential Vietnam's chief corporate and external affairs officer, Le Huong Ly, emphasized the importance of transparency and AI in ensuring customers receive all relevant information about their insurance options.

Dr. Nguyen Thanh Vinh of the National Economics University suggested that the industry focus on institutional customers, such as businesses using employee welfare funds to purchase insurance for their employees. This approach could reduce acquisition costs and lead to more sustainable policies while the market needs low-premium products.