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This interview with Matthew Mohr, FSA, chief strategy officer & chief risk officer at Sun Life Vietnam, explores recent developments in Vietnam’s insurance market. It also looks at the current condition of the market and potential opportunities and challenges in the future.
Tell us about yourself.
First off, I was born and raised in Canada. I graduated from the University of Alberta (with a Bachelor of Science specializing in actuarial science) before moving to Toronto to start work at a Canadian-based multinational life insurer, Sun Life. I worked for Sun Life for close to five years in Canada before transferring to Asia to work in the Hong Kong office. I now have been with Sun Life in Asia for almost 10 years, working in Hong Kong, Vietnam and Malaysia in a variety of actuarial roles, including previously as chief actuary for the Vietnam business.
Tell us about your current role.
Currently, I am the chief strategy officer & chief risk officer at Sun Life Vietnam. In this role, I oversee the marketing, client experience, actuarial, strategy, product solutions and risk functions. Compared to my previous role as chief actuary & chief risk officer, my current role has provided more opportunities to develop in areas outside of traditional actuarial practice, which I greatly enjoy.
What motivates you to move across the globe?
I am motivated by my desire to continually expand and develop both professionally and personally. The ability to relocate between countries for work provides professional growth opportunities given the diversity of roles available. It also allows for the exploration of a new country on a personal level—the chance to experience the people, culture, cuisine and more!
How has the insurance market in Vietnam developed over the years?
I first came to Vietnam in 2013 and have witnessed tremendous growth in the insurance industry since then. Life insurance penetration has increased from 0.7% of gross domestic product (GDP) in 2013 to 2.1% of GDP in 2020, which amounts to a compound annual growth rate (CAGR) of 28% over the period.
In the last couple of years, as government bond yields have continued to remain at near-record lows, we have seen the emergence of investment-linked products (ILP) with underlying funds that often include equity exposure. Traditional (par and non-par) products, which were the dominant products in 2013, have been overthrown by the more flexible universal life (UL) products and ILP, which now comprise the majority of sales. This trend has been enabled by the corresponding maturation of the equity markets and stock exchange in the country over the same period. ILP sales have increased from just 11% of the market in 2019 to almost 30% in 2021.
Who are the major players in the Vietnamese insurance market?
Unlike the non-life (general) insurance market, which has many local players, the life insurance market is dominated by foreign insurers. Out of the 17 life insurers in Vietnam, only one (Bao Viet) is 100% locally owned. The top five insurers in the country include many familiar international names: Manulife, Prudential, Dai-ichi and AIA (along with local player Bao Viet).
The life insurance market in Vietnam is competitive, and the number of companies in the market has remained stable, with 15 to 20 players for the last several years. While there have been new entrants into the market recently, the industry also has seen consolidation with some existing insurers acquiring competitors.
What does the demographic for insurance buyers look like in Vietnam today?
Like other Southeast Asian countries, Vietnam has a rapidly emerging middle class as the country continues to develop at a fast pace. Although the population is starting to age more quickly, the median age is only 32 years old. The average insurance buyer generally fits with this median demographic—although we are seeing an increase in interest from the younger generation (those in their 20s).
Have you observed any interesting trends recently?
Due to the COVID-19 pandemic, we are seeing increased demand for health insurance as people see the benefit of having insurance as protection. There is an opportunity for insurers to meet this essential customer need with relevant and affordable (health) insurance solutions.
We also are seeing many insurers in the Vietnamese market making increasingly large investments in digital technologies. Almost all companies now provide their advisers with tools to submit policies digitally (as opposed to by paper), and some of the top companies are achieving close to 100% digital submission. Others have launched speedy underwriting and claims functionality supported by advanced analytics to further improve these client touchpoints.
What are some of the ongoing challenges you have encountered when developing new products in Vietnam?
Low government bond yields have created difficulties for product design and development, making it hard for certain types of traditional products to be profitable. As a result, the market has shifted to offer UL products. Most of these UL products have minimum interest rate guarantees, which have been lowered as bond yields have decreased. Outside of government bonds, there are other investable asset classes with higher yields, including corporate bonds, but the market is still developing and supply is somewhat limited.
In addition, there are local requirements to obtain pre-approval from the regulator before launching new products. While this helps provide consistency and ensure that product requirements adhere to regulations, this requirement can lengthen the time to market in the product development cycle, which can limit an insurer’s ability to react quickly to changing client needs.
Speaking of the regulator, are there any recent changes in regulation that are impacting the insurance market in Vietnam?
There are significant regulatory changes set to take place at the start of 2023 with the introduction of the revised insurance law. The exact details of the law are still being finalized, but the current draft strikes a healthy balance between providing flexibility for insurers to operate effectively while ensuring policyholders are adequately protected.
In addition, the industry has plans to modernize its reporting standards, with International Financial Reporting Standard (IFRS) 17 adoption scheduled for implementation in 2026 and a risk-based capital (RBC) framework planned for rollout in 2028 (five years after the effective date of the revised insurance law).
How do you anticipate the landscape of Vietnam’s life insurance industry will evolve? Do you expect rapid growth?
Despite the significant historical growth of life insurance in Vietnam, there is still great potential for future growth. Life insurance penetration of 2.1% of GDP is still well below the global average of 3.4%. At the same time, outside of short-term impacts from COVID-19, the country’s economic growth has been strong, averaging 6% to 7% over the last decade—and similar growth rates are expected for the next several years.
Bancassurance (insurers establishing exclusive distribution partnerships with banks) also has fueled growth in the life insurance space. Traditionally, the market has been dominated by tied-agency force sales, but there has been a dramatic shift toward bancassurance in recent years. In 2016, bancassurance sales accounted for just 9% of total insurance sales, but that percentage increased to 30% in 2020, which amounts to a 69% CAGR for bancassurance sales over the period.
What are the potential challenges Vietnam’s insurance industry could face in the future?
Overall, the future of the life insurance industry in Vietnam is bright. However, it certainly is not without its challenges. As the market matures, client expectations and demands will increase, which will require insurers to adapt to meet these growing expectations. This likely will require increased policyholder disclosures and may lead to margin compression as competition increases.
There also are challenges in the investment space that are becoming more apparent for insurers as their balance sheets grow: the historically low government bonds yields combined with still developing corporate bond and equity markets (concentrated heavily in financial and real estate companies). Consequently, there are limited investment options available for insurers to achieve attractive yields.
Do you have any general words of advice for aspiring actuaries in Vietnam or those who are thinking about moving to Vietnam (or the Southeast Asia market in general)?
For actuaries currently outside of Vietnam and Southeast Asia, I highly recommend considering an actuarial role in the region. The pace of growth in the region (GDP growth of 6% to 7% a year, combined with average insurance growth of 28% a year in Vietnam) often allows for fast-paced and dynamic roles with potential for career advancement. Unlike established markets, there is often more room for exploration and experimentation to capitalize on growth opportunities.
Outside of the career opportunities, the culture, people, cuisine, weather and attractions in the region are unlike any other place in the world!
Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries or the respective authors’ employers.
Copyright © 2022 by the Society of Actuaries, Schaumburg, Illinois.