Motor vehicle insurance market shrinks due to several challenges
Factors affecting revenue included market weakness and industry-wide product and service restructuring to reduce high compensation payouts.
Revenue from motor vehicle insurance is substantial, but it is showing a downward trend.
The domestic motor vehicle insurance market is experiencing active involvement from major players like the Post - Telecommunication Joint-Stock Insurance Corporation (PTI), Bảo Minh Insurance Corporation (BMI), BIDV Insurance Corporation (BIC), Vietnam National Aviation Insurance JSC (AIC), Military Insurance Corporation (MIC), PetroVietnam Insurance Corporation (PVI), and Petrolimex Insurance Corporation (PJICO).
These renowned names dominate the market for vehicle insurance.
Financial reports indicate that motor vehicle insurance plays a significant role in the overall revenue generation for these businesses.
In the first half of 2024, the financial reports of PTI show a 28.7 per cent decrease in direct motor vehicle insurance premiums, amounting to VNĐ859.5 billion (US$34.8 million), representing 40 per cent of total direct premium revenue.
PTI paid out VNĐ482.7 billion (56 per cent of revenue) for motor vehicle insurance claims.
AIC also saw an 8.3 per cent increase in motor vehicle insurance premiums to VNĐ891.5 billion, comprising 64.4 per cent of the total premium revenue in the first six months of the year. The company disbursed VNĐ390 billion (43.7 per cent of revenue) for motor vehicle insurance claims.
Similarly, BIC increased 10.5 per cent in motor vehicle insurance revenue to VNĐ483 billion, contributing 17.3 per cent to the total premium revenue of nearly VNĐ2.8 trillion. It allocated VNĐ206 billion (42.6 per cent of revenue) for motor vehicle insurance compensation.
During the period, MIC posted VNĐ890 billion in motor vehicle insurance revenue, making up 35 per cent of its total premiums. The company allocated VNĐ471 billion (53 per cent of revenue) for motor vehicle insurance claims.
Persistent challenges
Data from the Insurance Association of Việt Nam (IAV) showed that in June, the motor vehicle insurance market reached over VNĐ8.93 trillion, accounting for 22.9 per cent of the market revenue.
Compulsory civil liability insurance of motor vehicle owners hit VNĐ2.26 trillion, up 2.9 per cent, while voluntary motor vehicle insurance revenue reached nearly VNĐ6.7 trillion, a 0.7 per cent increase.
Despite being a significant revenue stream for insurers, motor vehicle insurance faces challenges due to a sharp decline in the automotive market's purchasing power, affecting insurance amounts and premiums in 2023 compared to the previous year.
A top non-life insurance company representative revealed that motor vehicle insurance revenue hit 90 per cent of the yearly target, growing by 4 per cent.
While this increase seems modest compared to previous years, it still surpasses the market's overall growth, which saw a 2 per cent decline in motor vehicle insurance.
In 2023, motor vehicle insurance saw its first stagnant year in a while after a robust 12.45 per cent growth in 2022. Factors affecting revenue included market weakness and industry-wide product and service restructuring to reduce high compensation payouts.
Renewing old insurance contracts helped stabilise premium revenue for a top six market share insurer, despite new policy sales declining. This revenue decline in motor vehicle insurance in 2023 was largely due to industry-wide restructuring efforts.
High compensation rates in 2022 prompted insurers to shift focus towards balancing finances and payouts.
Some even raised premiums and refined customer selection strategies to optimise operations, moving away from purely revenue-driven approaches. This shift significantly impacted motor vehicle insurance revenue over the past year.
PTI, a former top three non-life insurer in Việt Nam, long dominated the motor vehicle insurance sector. However, in 2023, it underwent a major restructuring of high-revenue, low-profit areas like health and motor vehicle insurance.
PTI saw a 10 per cent decline in motor vehicle insurance revenue in the first quarter of 2023 compared to the previous year.
A representative from a top ten company in the industry said that relying on motor vehicle insurance for growth was a common strategy among non-life insurers, but it often yielded only short-term gains, prompting companies to pause for restructuring.
Forecasts for the 2024 motor vehicle insurance market present challenges. Ongoing restructuring of low-profit, high-compensation areas continues, while the automotive market remains sluggish.
Decree 67/2023/ND-CP permitting insurers to cut mandatory explosion and fire insurance premiums by up to 25 per cent will heighten competition, especially in the fiercely competitive motor vehicle insurance sector. — VNS
