The insurance component of Vietnam’s GDP is quite small - less than 2%. Compare this to Korea’s insurance market, which constitutes 14% of the country’s GDP. But this only means there is so much more room for growth. The local industry will not only grow in tandem with GDP growth – it will grow as a proportion of total GDP, and especially if it grows its proportion of GDP, this means exponential growth for some time. In addition, the number of significant infrastructure projects currently underway and projected - power plants, bridges, tunnels and urban mass rail means increasing insurance opportunities for service providers. In addition, new and existing energy exploration and production facilities will be quite interesting to brokers and specialty insurers. The shipbuilding industry is just beginning to take off and it is expected that Vietnam will soon become a major supplier of mid-sized commercial container vessels.

As for the general lines insurers, the insurance market for SMEs and private individuals is virtually untapped. Once the public have a greater understanding of insurance, the growth will be phenomenal.

The growth of the middle class is very encouraging and will provide continuing opportunities. Just consider - when the middle class of Vietnam's population reaches 20% of the overall population it will be about the size of the total population of Australia.

The effect will be drawn out over many years, but will be profound, in terms of variety and vibrancy. In fact, we are already beginning to see that in the form of the Harley Davidson – while previously, the maximum size for motorcycles was 125cc, now there are brand new Harley Davidsons appearing on our streets, which while they may not be best for local street safety or overall fuel conservation, nevertheless signifies the choices before the consumer.

It is only a matter of time before you will be able to obtain any kind of insurance product available worldwide in the local market. Lack of knowledge and protectionist measures have muted the development of the market, but I anticipate that changing in the years to come - we are likely to see a wide diversity of insurance products.

Insurance buyers sometimes have their priorities misplaced - they are far too eager to squeeze premiums without properly understanding the risk exposures and then finding the most comprehensive and suitable cover for them.

There are huge gaps in the level of knowledge in the industry, even among individuals within organisations who carry the mantle for risk management and insurance. The countless number of times I’ve been asked, when initiating a conversation on insurance, “how much does it cost?” is a clear testimony of this. Risk management professionals simply do not know the difference between a fire-only-policy versus a risk-all-policy versus a business interruption cover. Bridging this gap is critical, and JLT as well as other insurance service providers have a big role to play in evoking change in the coming years.

For many years since the "Doi Moi" or new opening, Vietnam was quite protectionist. The local market was able to keep 100% of the pie for quite a long time. But putting things into perspective, the nutrient value of a 100% share of a 5-inch pizza is still considerably less than a 50% share of a 12-inch pizza. Within a very short time of opening the life insurance market to the international market, the Bao Viet share went down yet the premium income grew tremendously. History shows that allowing organisations that are financially competent and technically competent to do business always helps the economy and the local industry.

There are many things that regulators are doing to develop the industry. They are making decisions with respect to license applications very quickly, which certainly is positive from the point of view of the consumer. In addition, they are working on a cooperation agreement with foreign insurance institutes, which will help them standardize education practices. Lastly, I believe they are also considering professional qualifications for people who wish to be involved as agents and brokers.

My wish list would include:

• Regulators can work to standardise wordings. While this may sound anti-competitive, the market needs a standard that is common and easily understood. The market can then be free to compete on price.
• Regulators can mandate that proper underwriting applications are completed to ensure proper risk assessments. Unfortunately, today underwriters are often asked to quote a fire rate with no other information than say “it’s a 20-storey building in district 1.” The market has gone from the stability of a monopoly to roaring competition among more than 10 Property and Casualty insurers. In the rush to secure business quickly, brokers, agents and insurers themselves have become sloppy in terms of proper underwriting. For example, they may know that a typical building rate in the centre of the city (District 1) would be say 0.06% They will then go ahead and quote something near that amount without any hard underwriting information. The broker should be obtaining proper risk information and the underwriter should be demanding this.

JLT has been conducting training for local insurance companies, local brokers and insurance buyers in the interest of introducing into the local market international practice standards. We have been inculcating the need for properly arranged insurance and risk management programmes. The sophistication of the business requires that our education and training efforts be focused on a very select group of people, who will in turn facilitate the transfer of knowledge to the industry at large. This is a slow and gradual process but the recent WTO entry can only hasten the wheels of change in this respect. JLT will continue to be actively involved in this process.