Non-life insurance firms suffer losses while sector booms
Non-life insurance firms suffer losses while sector booms
While the non-life insurance sector recorded strong growth in 2012, most of the businesses in the sector reported losses.
The non-life insurance market collected VND22.8 trillion (US$1.08 billion) in fees, a year on year growth over 10 per cent. But 17 out of 29 non-life insurers reported a collective loss of VND161.9 billion ($5.5 million).
According to the Ministry of Finance's Insurance Management and Supervisory Department director Trinh Thanh Hoan, the problem was due to unhealthy competitiveness and unsustainable development.
He said that if all the businesses were inspected, mistakes would likely be revealed in all of them.
Trinh Quang Tuyen, chairman of the Viet Nam Insurance Association, agreed, saying that the cooperation between the businesses was weak and they often tried to steal each other's customers.
"If they do not change, they will continue losing out," said Tuyen.
Under the Insurance Law, insurance commissions are paid only to agents and brokers. But in order to increase sales, businesses gave a portion of their commissions to customers to get them to buy insurance.
In some branches, customers received incentives that amounted to more than employees' salary.
The desire to get as many clients as possible means that many agents and brokers do not check their clients carefully enough, so compensation ends up totaling more than profits.
Do Thi Kim Lien, former CEO of AAA Insurance, told local newspapers about a recent vehicle insurance case in which her company paid VND1 trillion ($47 million) in compensation for over 10,000 accidents.
Since the amount was so large, she questioned whether they were real accidents or tricks played by clever garages. Her staff was unable to uncover the truth.
Another reason for the loss was that most of the insurance companies earned their profit from financial investments, which did not do well this year.
Director Hoan told the conference that the department was working on a draft decree for sanctions against violations, adding that "a billion dong penalty might not affect an enterprise, but an individual violator would see a penalty of millions as a real problem".
Inspections of insurance businesses would also continue, said deputy director Phung Ngoc Khanh.
To promote a better environment for insurance businesses, the conference also urged agencies and businesses to implement more training to improve the quality of their staff
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