Opportunities for ‘unique’ insurance products

23-Oct-2021 Intellasia | Dau tu Chung khoan | 5:02 AM Print This Post

In Vietnam, there are not many insurance products developed on technology platforms. There are currently no regulations to encourage the application of new tehcnolgies in insurance business. Life insurance and health insurance products must all be approved by the Minsitry of Finance before being deployed, which has caused difficulties. Therefore, when the revised Law on Insurance Business is passed (effective from July 2023), insurance companies will hold the initiative and be flexible in providing products to the market.

Nguyen Ngoc Thanh, general director of F.I.S Vietnam, said that in the sharing economy, insurance is always based on the needs and the time of use. There will be a boom of insurance products that meet the needs of customers if insurers are allowed to design the products.

At that time, there will be products developed based on user information, designed based on customer data such as data about vehicles, housing and wearable devices. For example, the premium of motor vehicle insurance is determined based on safe driving history and driving habits. The data that insurers use such as auto insurance will be the basis of premium pricing and customers should be aware of this. Risk valuation can be designed to suit the needs and risk levels of each customer, and that will affect the insurance premiums and the reserve of the insurer.

In addition, there will be products personalised on customers’ needs. They can be temporary for a short time, activated at any time, such as only insuring the car when it is in use.

Information from insurance companies showed that even a small and insignificant change to the product must be approved by the Ministry of Finance before implementation. This requires more administrative procedures, reduces competitiveness and adaptability as well as reduces the dynamism and creativity of the business, particularly in the process of testing new products and services.

The importance is to create opportunities for growth.

By the end of 2020, there were about 1,300 insurance products in the market (including about 850 products deployed by non-life insurers and about 450 products deployed by life insurers. However, since the insurance products were designed mainly based on the reference data of reinsurers or foreign insurance markets, the quality of products and services thus is not high and not accurately reflect the risks of the Vietnam’s insurance market.

In the report submitted to the National Assembly, the Ministry of Finance mentioned that the fact that insurance products are designed based on different databases and different ways makes it difficult to compare and creates burden to the management authorities and businesses when conducting product approval.

On the business side, leader of an insurance company said that the new regulation in the revised Law on Insurance Business will promote the approval of simple insurance products which apply modern technologies, reducing administrative procedures and increasing the information transparency of the insurer.

The leader said that “It will be an opportunity for a series of new and unique products with technology applications, such as renters insurance, drinkers insurance, etc. which are being launched in many Asian countries”. He added that Asia is the promising land of insurance technology products and business models, and Vietnam should also aim for this.

Sharing similar view, leader of Petrolimex Joint Stock Insurance Company (PJICO) also said that the new legal framework will make insurance companies no longer afraid and hesitant in applying technology to develop insurance products and services, because the investment cost for technology is often not small, while there can be great risks and effective results need time to be verified.

Talking more on this issue, general director of F.I.S Vietnam said that in the past, it was difficult for units operating in the field of information technology to cooperate with insurance companies to jointly develop products and services, but when the law is more open, insurers will have more confidence in investing in technology, creating opportunities to offer low-cost, short-term insurance products that target niche needs.

“Many insurance products have high practicality, such as renters insurance for homeowners participating in the sharing economy model, or insurance for online buyers which brings many benefits to both suppliers and buyers in the context when e-commerce transactions gain high growth rate of about 35 percent per annum, as at present,” said Thanh.

From a customer’s perspective, Nguyen Thanh Tam (Hoan Kiem district, Hanoi), who often goes abroad and uses niche products such as flight delay insurance, said that for these products, the convenience or low fee are necessary condition, and the sufficient condition is to ensure that the “immediate claim” is fully valid. According to Tam, in the countries that she visited, insurance payments are made very quick, and in some cases, they even do not require the buyers to make the claim. For example, when a customer buying travel insurance from an airline of the host country, if the flight is cancelled, the compensation will immediately appear in the customer’s bank account’” said Tam. She added that in order to this, domestic insurance companies must apply technology in all stages of insurance business activities, from marketing, product introduction, contract issuance, to appraisal and acceptance of insurance, settlement of insurance benefits and payment of fees, etc.


Category: Finance, Vietnam

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