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There are some who feel confused about all the offers made under a life insurance package, which has also led to a serious decline in consumer confidence in life insurance across the country.
Small market share
In the year 1996, Life Insurance was first introduced in the Vietnamese market with the first contract created by Bao Viet Life. Until now, Vietnam's life insurance market has also had the participation of many foreign enterprises. All life insurance businesses see vast potential in the Vietnamese market. This is not a wrong assessment. Vietnam currently has about 100 million population and the middle class is growing rapidly. However, from a market point of view, harnessing this potential is really not as simple.
According to statistics, up to now, there are only about 11 million people participating in life insurance in the country. To maintain these 11 million customers, life insurance companies face many difficulties. More than five years ago, many life insurance companies made many customers feel harassed by constant phone calls inviting them to attend conferences, and parties and buy insurance products. At that time, the life insurance consulting profession was very much in trend and many people did not need a degree to work in it. All that was necessary was the ability to communicate fluently and convince customers. Any graduate without a job could be trained and become a consultant of a life insurance company that then harassed customers over the phone to buy life insurance schemes.
A few years ago, such phone calls abated, and life insurance companies switched to shaking hands with banks to sell products. This is still apparent today. Many customers are forced to buy life insurance when borrowing money from banks. Till now many customers panic when a savings deposit is turned into a life insurance policy, the most obvious being the life insurance contract with Manulife. With sales consultants, there is a lot of insecurity for buyers because many consultants lack knowledge and only care about profits. They give misleading advice to buyers and ignore the key points of life insurance.
It is also because of such offensive ways that in the last one or two years, the rate of new participation and maintenance of life insurance products is at risk of decreasing to very low. According to data on Vietnam's insurance market in 2022 from the Vietnam Insurance Association, the number of newly exploited life insurance policies reached 3.4 million, a decrease of about 4.2 percent compared to the number of new mining contracts in 2021. In the first quarter of 2023, the new insurance premium revenue of life insurers only increased by 3 percent, which is a very low growth rate in the last few years. In terms of contract retention rate, products sold through banks are rated by many businesses as having a very low retention rate. These numbers are raising the question of how businesses can account for 15 percent of the population participating in life insurance by 2025 as forecast.
Lack of faith
Currently, life insurance has two main types, namely, traditional life insurance which is for the sole purpose of insurance, and life insurance for investment. In particular, life insurance and investment products are being promoted by companies and have proved to be quite popular with customers. The evidence was seen in 2022 when investment-linked product lines continued to be the main products bringing the largest portion of premium revenue of about 85 percent of life insurance premiums. But problems also follow this. When thinking of investment, most consultants only think of profit and the interest rate that the insurance buyer gets. The buyer being easily influenced by these factors goes for product purchasing and forgets a lot of other important factors, one of which is being cared for by many people in the contract term.
When Ms. Ngọc Lan, an actress by profession, spoke in tears about her 74-year life insurance contract, she received a lot of criticism from most people in the industry and was accused of being ignorant and lazy as she did not read the contract carefully. But in reality, life insurance contracts are very long, with a lot of technical terms that make it difficult for buyers to understand them all. This is why we need a consultant. But many consultants have little knowledge and usually only need to have the contract signed, so they give misleading advice.
However, the role of life insurance enterprises cannot be ignored. Before consulting customers, the consultants must be trained and tested. These questions should be answered by life insurers for consumers. There have been many stories of buyers being pitted by consultants and their stories are continuously posted on social media.
Confidence among people is gradually falling now, causing many people on social networks to express their opinion that it is better to leave money in a safe or deposit it in a bank than to buy life insurance products. If the whole society lacks faith in life insurance what will happen is unpredictable. Only know that up to now, the rate of ownership of life insurance contracts in Vietnam compared to many countries in the region and the world is very modest. Vietnam has only about 11 percent of the population with life insurance, the Philippines has 38 percent, Malaysia has 50 percent, Singapore has 80 percent, and the US has 90 percent.
After the incident of actress Ngọc Lan, the Department of Insurance Supervisory Authority, under the Ministry of Finance, has sent a document to life insurance enterprises on strengthening control over their operations. However, perhaps the Ministry of Finance needs to have tight control and insist on more transparency to regain the trust of customers in the future.
