Vietnam’s insurance sector is in rough waters, long-term growth on the horizon

Consumer confidence loss will persist for at least the next three years.

A consumer confidence crisis has emerged in Vietnam's insurance sector over the past year, particularly in the bancassurance channel, with accusations of miss-selling, according to a Jefferies Asia Report.

The crisis, characterised by industry-wide accusations, is anticipated to have a lasting impact on sales growth as consumer confidence weakens. 

The expectation is that this loss of confidence will persist for at least the next three years.

Vietnam’s insurance market is currently dominated by overseas entities, including the three largest Pan-Asian life insurers—Manulife, Prudential, and AIA. 

Although the market is concentrated, with the top five insurers holding a 77% share, it remains relatively open to foreign participation, presenting opportunities for the industry's recovery and sustained growth beyond the immediate crisis.

While the long-term growth outlook remains promising, with low industry penetration, the near-term forecast has significantly deteriorated, and sales are expected to decline.

ALSO READ: Insurance is key to protect Vietnam’s SME’s – WTW

Accusations of miss-selling, particularly in the bancassurance channel, involve bank staff persuading customers to purchase life insurance investment products under the guise of similar risk profiles to deposits but with higher fees and commissions. 

The issue, notably affecting policies sold through Saigon Commercial Bank and Manulife, has led to a surge in complaints and refunds.

Prudential Vietnam, the third-largest life insurer in the country, also faces exposure, with reports of customers being compelled to buy life insurance as a precondition for loans or having their savings deposits switched into life insurance without their knowledge.

AIA, with limited disclosures, appears to have 3% of its annualised new premiums coming from Vietnam. 

Despite the short-term challenges, the long-term growth potential for Vietnam's insurance industry remains exceptional, driven by low industry penetration, a growing middle class, and a significant health protection gap.