Motor vehicle insurance market – big but inaccessible
Motor vehicle insurance market – big but inaccessible
Insurers have continuously cut the motor vehicle insurance premiums down to scramble for clients which has resulted in the very low profits from the business.
Only 29 percent of motorbikes insured
Though the motor vehicle insurance market is believed to have great potentials, because taking motor vehicle insurance policies is compulsory for all drivers, insurers still cannot fully exploit the market.
Analysts have every reason when saying that the motor vehicle insurance market is a big cake: there are more than 2 million cars and 37 million motorcycles in circulation now, while taking insurance policies is compulsory for all the owners.
According to the Ministry of Transport and the Association of Vietnamese Insurers (AVI), only 90 percent of the cars and 29 percent of motorbikes have been insured. In the first six months of the year, insurers got the revenue of VND3.484 trillion from the car physical damage insurance premiums, VND882 billion from compulsory insurance premiums.
The revenue from motor vehicle insurance sector reportedly reached VND5.010 trillion in the first nine months of the year, higher than any other insurance business types.
However, if noting that the car sale has prospered (59,197 cars were registered in the first nine months of 2013), and that the car market was once frozen in 2011 and 2012, the reported growth is still “modest.”
Buy 1, get 1
The motor vehicle insurance market has become bustling these days, when a lot of insurance agents advertise big sale promotion campaigns, promising “attractive insurance premiums” and “high responsibility” to clients.
A lot of mobile insurance agents have been seen on the streets of Nguyen Xien, Le Van Luong, Le Duc Tho and the Thang Long bridge pier, which invite people to take insurance policies at “surprisingly low prices” or “buy 1 and get 1 free.”
The insurance agents all provide the third-party insurance policy, but at different “prices.” An agent reportedly offered compulsory insurance policy at VND35,000 only for one year, while the nominal premium written down on paper is VND66,000 as stipulated by the Ministry of Finance. The other agents charged VND40,000-50,000 on average.
Especially, clients would get discounts if they take 2-year insurance policies, just VND70,000-75,000 for every insurance certificate.
Nguyen Thu Trang in Nam Trung Yen residential quarter said she has paid VND90,000 for two insurance certificates, though the insurance premium on the paper showed VND66,000 for each.
“When I asked about the premiums, I was told that I could enjoy the price reduction during the sale promotion campaign,” she said. “They reassured me that the compensation level will be unchanged in case of accidents.”
Under the current regulations set by the Ministry of Finance, insurers must provide compulsory insurance policies at exactly VND66,000, of which VND60,000 is for the insurance premium and the other VND6,000 for VAT.
The ministry also stipulates that insurers can offer the commission of 20 percent at maximum to insurance agents. As such, the motorbike insurance premiums must not be lower than VND54,000 for one year.
Some analysts believe that even if insurers provide insurance policies at below the minimum levels, they would still be able to make profit. In most of accident cases, involved parties would not claim for compensation if the damages are too serious. Vietnamese tend to negotiate about the compensation themselves instead of spending time to contacting insurers.
vietnamnet
